LOAN AND SECURITY AGREEMENT
BANKBOSTON RETAIL FINANCE INC.
AGENT
AND
BANCBOSTON XXXXXXXXX XXXXXXXX, INC.,
SYNDICATION AGENT
FOR THE LENDERS REFERENCED HEREIN
LECHTERS, INC.,
LEAD BORROWER
FOR THE BORROWERS REFERENCED HEREIN
NOVEMBER 30, 1999
TABLE OF CONTENTS
ARTICLE I-DEFINITIONS..........................................................1
ARTICLE II-THE REVOLVING CREDIT...............................................33
2.1 Establishment of Revolving Credit..................................33
2.2 Advances in Excess of Borrowing Base................................34
2.3 Risks of Value of Collateral........................................35
2.4 Loan Requests.......................................................35
2.5 Making of Loans Under Revolving Credit..............................37
2.6 SwingLine Loans.....................................................38
2.7 The Loan Account....................................................38
2.8 The Revolving Credit Notes..........................................40
2.9 Payment of The Loan Account.........................................40
2.10 Interest Rates......................................................41
2.11 Agent's Fee.........................................................43
2.12 Underwriting Fee....................................................43
2.13 Line (Unused) Fee...................................................43
2.14 Early Termination Fee...............................................43
2.15 Concerning Fees.....................................................44
2.16 Agent's and Lenders' Discretion.....................................44
2.17 Procedures For Issuance of L/C's....................................45
2.18 Fees For L/C's......................................................46
2.19 Concerning L/C's....................................................47
2.20 Changed Circumstances...............................................49
2.21 Increased Costs/Taxes...............................................51
2.22 Lenders' Commitments................................................53
2.23. Concerning Joint and Several Liability of the Borrowers.............54
2.24. Lechters, Inc. as Lead Borrower.....................................58
ARTICLE III-CONDITIONS PRECEDENT..............................................58
3.1. Corporate Due Diligence.............................................59
3.2. Opinion.............................................................59
3.3. Additional Documents................................................59
3.4. Officers' Certificates..............................................60
3.5. Representations and Warranties......................................60
3.6. Minimum Excess Availability.........................................60
3.7. All Fees and Expenses Paid..........................................60
3.8. No Event of Default.................................................60
3.9. No Adverse Change...................................................60
3.10. DELIVERY OF NOTICES.................................................61
ARTICLE IV-GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES..................61
4.1. Payment and Performance of Liabilities..............................61
4.2. Due Organization -Corporate Authorization -No Conflicts.............61
4.3. Trade Names.........................................................63
4.4. Infrastructure......................................................63
4.5. Year 2000 Compliance................................................64
4.6. Locations...........................................................64
4.7. Title to Assets.....................................................66
4.8. Indebtedness........................................................67
4.9 Repayment of 5.00% Notes............................................68
4.10. Insurance Policies..................................................68
4.11. Licenses............................................................69
4.12. Leases..............................................................69
4.13. Requirements of Law.................................................70
4.14. Maintain Collateral.................................................70
4.15. Pay Taxes...........................................................71
4.16. No Margin Stock.....................................................72
4.17. ERISA...............................................................73
4.18. Hazardous Materials.................................................73
4.19. Litigation..........................................................74
4.20. Dividends, Investments, Repurchases and Debt Retirement.............74
4.21. Loans...............................................................77
4.22. Protection of Assets................................................78
4.23. Line of Business....................................................78
4.24. Affiliate Transactions..............................................78
4.25. Additional Assurances...............................................78
4.26. Adequacy of Disclosure..............................................79
4.27 No Restrictions on Liabilities......................................80
4.28 Other Covenants.....................................................80
ARTICLE V-FINANCIAL REPORTING AND PERFORMANCE COVENANTS.......................80
5.1. Maintain Records....................................................81
5.2. Access to Records...................................................81
5.3. Immediate Notice to Agent...........................................82
5.4. Borrowing Base Certificate..........................................84
5.5. Monthly Collateral Reports..........................................84
5.6. Monthly Financial Reports...........................................84
5.7. Quarterly Financial Reports.........................................85
5.8 Annual Reports......................................................85
5.9. Officers' Certificates..............................................85
5.10. Inventories, Appraisals, and Audits.................................86
5.11. Additional Financial Information....................................87
5.12. Financial Performance Covenants.....................................87
ARTICLE VI-USE AND COLLECTION OF COLLATERAL...................................88
6.1. Use of Inventory Collateral.........................................88
6.2. Inventory Quality...................................................89
6.3. Adjustments and Allowances..........................................89
6.4. Validity of Accounts................................................89
6.5. Notification to Account Debtors.....................................89
ARTICLE VII-CASH MANAGEMENT; PAYMENT OF LIABILITIES...........................89
7.1. Depository Accounts.................................................89
7.2. Credit Card Receipts................................................90
7.3. The Concentration, Blocked, and Operating Accounts..................91
7.4. Proceeds and Collection of Accounts.................................91
7.5. Payment of Liabilities..............................................93
7.6. The Operating Account...............................................94
ARTICLE VIII-GRANT OF SECURITY INTEREST.......................................94
8.1. Grant of Security Interest..........................................94
8.2. Extent and Duration of Security Interest............................95
ARTICLE IX-AGENT AS BORROWERS' ATTORNEY-IN-FACT...............................95
9.1. Appointment as Attorney-In-Fact.....................................95
9.2. No Obligation to Act................................................96
ARTICLE X-EVENTS OF DEFAULT...................................................97
10.1. Failure to Pay Revolving Credit.....................................97
10.2. Failure To Make Other Payments......................................97
10.3. Failure to Perform Covenant or Liability (No Grace Period)..........97
10.4. Failure to Perform Covenant or Liability (Grace Period).............98
10.5. Misrepresentation...................................................98
10.6. Acceleration of Other Debt; Breach of Lease.........................98
10.7. Default Under Other Agreements......................................99
10.8. Uninsured Casualty Loss.............................................99
10.9. Judgment. Restraint of Business....................................99
10.10. Business Failure....................................................99
10.11. Bankruptcy.........................................................100
10.12. Indictment; Forfeiture.............................................100
10.13 Foreign Proceeding.................................................101
10.14. Challenge to Loan Documents........................................101
10.15. CHANGE IN CONTROL............... .................................101
ARTICLE XI-RIGHTS AND REMEDIES UPON DEFAULT..................................101
11.1. Rights of Enforcement..............................................102
11.2. Sale of Collateral.................................................102
11.3. Occupation of Business Location....................................103
11.4. Grant of Nonexclusive License......................................104
11.5. Assembly of Collateral.............................................104
11.6. Rights and Remedies................................................104
ARTICLE XII-NOTICES..........................................................105
12.1. Notice Addresses...................................................105
12.2. Notice Given.......................................................105
ARTICLE XIII-REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS.....................106
13.1. Revolving Credit Funding Procedures................................106
13.2 SwingLine Loans....................................................106
13.3 Agent's Covering of Fundings.......................................107
13.4 Ordinary Course Distributions: Revolving Credit...................109
ARTICLE XIV-TERM.............................................................111
14.1 Acceleration Notices...............................................111
14.2 Acceleration.......................................................111
14.3 Initiation of Liquidation..........................................111
14.4 Actions At and Following Initiation of Liquidation.................111
14.5 Agent's Conduct of Liquidation.....................................112
14.6 Distribution of Liquidation Proceeds...............................112
14.7 Relative Priorities To Proceeds of Liquidation.....................113
ARTICLE XV-THE AGENT.........................................................113
15.1 Appointment of Agent...............................................113
15.2 Responsibilities of Agent..........................................114
15.3 Concerning Distributions By the Agent..............................115
15.4 Dispute Resolution.................................................116
15.5 Distributions of Notices and of Documents..........................116
15.6 Confidential Information...........................................117
15.7 Reliance by Agent..................................................117
15.8 Non-Reliance on Agent and Other Lenders............................117
15.9 Indemnification....................................................118
15.10 Resignations of Agent..............................................119
ARTICLE XVI-ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS................120
16.1 Administration of Credit Facilities................................120
16.2 Actions Requiring Consent or Direction of Majority Lenders.........121
16.3 Actions Requiring Consent or Direction of SuperMajority Lenders....121
16.4 Intentionally Deleted..............................................121
16.5 Actions Requiring or Directed By Unanimous Consent.................121
16.6 Actions Requiring SwingLine Lender Consent.........................123
16.7 Actions Requiring Agent's Consent..................................123
16.8 Miscellaneous Actions..............................................123
16.9 Nonconsenting Lenders..............................................124
ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS..................................125
17.1 Assignments and Assumptions........................................125
17.2 Participations.....................................................127
17.3 Pledges To Federal Reserve Banks...................................128
ARTICLE XVIII-TERM...........................................................128
18.1. Termination of Revolving Credit....................................128
18.2. Effect of Termination..............................................128
ARTICLE XIX-GENERAL..........................................................128
19.1. Protection of Collateral...........................................128
19.2. Successors and Assigns.............................................129
19.3. Severability.......................................................129
19.4. Amendments; Course of Dealing......................................129
19.5. Power of Attorney..................................................130
19.6. Application of Proceeds............................................131
19.7. Costs and Expenses of Agent and Of Lenders.........................131
19.8. Copies and Facsimiles..............................................132
19.9 New York Law.......................................................132
19.10. Consent to Jurisdiction............................................132
19.11 Indemnification....................................................133
19.12 Rules of Construction..............................................134
19.13. Intent.............................................................135
19.14. Right of Set-Off...................................................136
19.15. Maximum Interest Rate..............................................136
19.16. Waivers............................................................136
EXHIBITS
A .............................. Schedule of Borrowers
B .............................. Schedule of Lenders' Commitments
1 ...............................Additional Uses for Local Disbursement Accounts
2.4(b) ..........................Notice of Loan Request Form
2.6(c) ..........................SwingLine Note
2.8 .............................Revolving Credit Note
3.3 .............................Form of Pledge Agreement
4.2 .............................Related Entities
4.3 .............................Trade Names
4.5 .............................Year 2000 Compliance
4.6(a) ..........................Locations, Leases, and Landlords
4.6(c)(1) .......................Form of Landlord Waiver
4.6(c)(2) .......................Locations Requiring Landlord Waivers
4.7 .............................Encumbrances
4.8 .............................Indebtedness
4.10 ............................Insurance Policies
4.12 ............................Capital Leases
4.15 ............................Taxes
4.19 ............................Litigation
5.4 .............................Borrowing Base Certificate
5.5 .............................Monthly Collateral Reports
5.11(c) .........................Business Plan
7.1 .............................DDA's.
7.2 .............................Credit Card Arrangements
7.3(a)(ii) ......................Blocked Accounts
7.4(b)(i) .......................DDA Accounts; Minimum Required Balances
17.1 ............................Form Assignment and Acceptance
LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
AGENT
November 30, 1999
THIS AGREEMENT is made among
BANKBOSTON RETAIL FINANCE INC., (in such capacity, herein the
"AGENT") a Delaware corporation with offices at 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, as agent for the benefit of the "Lenders", on a Pro Rata
basis, based upon each Lender's Commitment Percentage, who are, at present,
those financial institutions identified on the signature pages of this Agreement
and who in the future shall include those Persons (if any) who become "LENDERS"
in accordance with the provisions of Section 2.22(c) below;
BANCBOSTON XXXXXXXXX XXXXXXXX, INC., a Massachusetts corporation
with offices at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 in its capacity
as syndication agent for the Lenders;
Each of the corporations described on Exhibit A of this Agreement
(collectively the "Borrowers" and except in the case of Lechters, Inc., the
"Subsidiaries", and each individually, a "BORROWER" and except in the case of
Lechters, Inc., a "Subsidiary"), each of which has its principal executive
offices at Xxx Xxxx Xxx Xxxxxx, Xxxxxxxx, XX 00000;
and
LECHTERS, INC., a New Jersey corporation with its principal
executive offices at Xxx Xxxx Xxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (the "LEAD
BORROWER" and the "PARENT", as well as a "Borrower")
in consideration of the mutual covenants contained herein and benefits to
be derived herefrom,
WITNESSETH:
ARTICLE I - DEFINITIONS:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
- 1 -
"5.00% NOTES": The Parent's 5.00% Convertible Subordinated Debentures due
September 27, 2001.
"ACCELERATION": With respect to any indebtedness, its becoming due
and payable prior to its stated maturity. Derivations of the word
"Acceleration" (such as "Accelerate") are used with like meaning
in this Agreement.
"ACCELERATION NOTICE": Written notice from the SuperMajority Lenders,
as provided in Section 14.1. The Agent shall provide copies of
any Acceleration notice to each Lender.
"ACCEPTABLE CASH COLLATERAL": Cash or any Permitted Investment held by
BankBoston, N.A. in a restricted cash collateral, treasury or
securities account, as appropriate.
"ACCEPTABLE CREDIT CARD RECEIVABLES": Those Accounts that from time
to time are due and owing to each Borrower on a non-recourse
basis from major credit card processors that are acceptable to
the Agent, which processors include, without limitation, Visa,
MasterCard, Discover and American Express.
"ACCEPTABLE IN-TRANSIT INVENTORY": That portion of the Borrowers'
Inventory (without duplication as to Acceptable L/C Inventory),
title to which has passed to a Borrower and
which has been shipped from a foreign location
to one of the Borrowers' warehouses provided that
(a) Such Inventory is of such types, character,
qualities and quantities as the Agent in its discretion from
time to time determines to be Acceptable Inventory;
(b) The documents which relate to such shipment name the Agent
as consignee of the subject inventory and the Agent has control
over the documents
- 2 -
which evidence ownership of the subject Inventory (such as by
providing a Customs Brokers Agreement to the Agent); and
(c) Such Inventory has not yet been delivered to one of
Borrowers' warehouses and has been in transit from the
applicable foreign location for no more than 45 calendar days.
"ACCEPTABLE INVENTORY": Such of the Borrowers' Inventory, at such
locations, and of such types, character, qualities and
quantities, as the Agent in its sole discretion from time to time
determines to be acceptable Collateral for Borrowing Base
purposes, including Acceptable L/C Inventory and Acceptable
In-Transit Inventory, as to which the Agent has a perfected
security interest that is prior and superior to all claims and
Encumbrances (other than Permitted Encumbrances, subject to the
Agent's right to establish Reserves therefor). Without limiting
the foregoing, "Acceptable Inventory" shall not include: (i) any
non-merchandise Inventory (such as labels, bags and purchasing
materials) and (ii) damaged goods, return to vendor merchandise,
packages, consigned inventory and other similar categories.
"ACCEPTABLE L/C INVENTORY": That portion of the Borrower's Inventory
(without duplication as to Acceptable In-Transit Inventory), the
purchase of which is supported by a documentary L/C then having
an expiry within sixty (60) days, provided that
(a) Such Inventory is of such types, character,
qualities and quantities as the Agent in its discretion from time
to time determines to be Acceptable Inventory; and
(b) The documentary L/C supporting such purchase
names the Agent as consignee of the subject Inventory and the
Agent has control over the documents which evidence ownership of
the subject Inventory (such as by providing a Customs Brokers
Agreement to the Agent).
- 3 -
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without
limitation, "accounts" as defined in the UCC, and also all:
accounts, accounts receivable, credit card receivables, notes,
drafts, acceptances, and other forms of obligations and
receivables and rights to payment for credit extended and for
goods sold or leased, or services rendered, whether or not yet
earned by performance; all "contract rights" as formerly defined
in the UCC; all Inventory which gave rise thereto, and all rights
associated with such Inventory, including the right of stoppage
in transit; and all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"AFFILIATE": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other; or
(b) one has, directly or indirectly, the right, under ordinary
circumstances, to elect a majority of the directors (or other
body or Person who has those powers customarily vested in a board
of directors of a corporation); or (c) the same third Person
holds, directly or indirectly, not less than Twenty Five percent
(25%) of their respective capital stock, beneficial interests,
partnership interests or other equity interests; or has directly
or indirectly the right to elect the majority of directors of
both such parties..
"AGENT": Defined in the Preamble.
"AGENT'S COVER": The amount which the Agent makes available to the
Borrowers, as provided in Section 13.3(c)(i), below, on behalf of
a Lender that was obligated to provide such amount to the Agent
in accordance with this Agreement.
- 4 -
"AGENT'S FEE":Defined in Section 2.11.
"AGENT'S RIGHTS AND REMEDIES": Defined in Section 11.6.
"ASSIGNING LENDER": Defined in Section 17.1(a).
"ASSIGNMENT AND ACCEPTANCE":Defined in Section 17.1(b).
"AVAILABILITY": Defined in Section 2.1(b)(i).
"AVAILABILITY RESERVES": Such reserves as the Agent from time to
time determines in the Agent's discretion as being appropriate to
reflect the impediments to the Agent's ability to realize upon
the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to)
reserves based on the following:
(i) Rent for (x) up to three (3) months (based on the
"base" rent under the applicable lease) for any
Borrower location in a Landlord State for which a
landlord's waiver or subordination (in form
acceptable to the Agent) has not been provided to
the Agent; (y) any location for which rent is past
due, any grace period has passed and a notice of
rent default has been received by the Borrower,
provided, that such reserves shall not exceed the
amount of rent that is past due for said location;
and (z) any location at any time upon the
occurrence and continuance of an Event of Default.
(ii) In-store customer credits, which shall initially be
50% of that amount reflected on the Borrowers'
Consolidated general ledger.
(iii) Gift Certificates, which shall initially be 50% of
that amount reflected as such on the Borrowers'
Consolidated general ledger.
- 5 -
(iv) Frequent Shopper Programs , which shall initially
be zero.
(v) Layaways and Customer Deposits, which shall
initially be zero.
(vi) Taxes and other governmental charges as estimated
or calculated by the Agent with reasonable
particularity and notice to the Lead Borrower),
including ad valorem, personal property, and other
taxes which will have priority over the security
interests of the Agent in the Collateral, which
initially shall be zero.
(vii) L/C Landing Costs.
(viii)Year 2000 compliance based upon a good faith
estimate by the Agent of the impairment to the
Collateral by reason of the failure of the Borrower
to be substantially Year 2000 Compliant, which
initially shall be zero.
(ix) Payables (based upon payables which are past the
Borrowers' normal trade terms).
"BANKRUPTCY CODE": Title 11 U.S.C., as amended from time to time.
"BBRF": BankBoston Retail Finance Inc. and any successor thereof.
"BASE": The Base Rate announced from time to time by BankBoston, N.A.
(or any successor in interest to BankBoston, N.A.). In the event
that said bank (or any such successor) ceases to announce such a
rate, "Base" shall refer to that rate or index announced or
published from time to time as the Agent, in good faith,
designates as the functional equivalent to said Base Rate. Any
change in Base shall be effective, for purposes of the
calculation of interest due hereunder, when such change is made
effective generally by the bank on the basis of whose rate
or index Base is being set. In all events, interest that is
determined by reference to Base (or any successor to Base) shall
be calculated on a 360 day year and actual days elapsed.
- 6 -
"BASE MARGIN":Until a Base rate pricing adjustment pursuant to Section
2.10(e) is applicable: zero (0) percent; thereafter as determined
pursuant to the applicable section of the Margin Pricing Grid set
forth in Section 2.10(e).
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at
the Base Margin Rate.
"BASE MARGIN RATE ": The aggregate of Base plus the Base Margin per
annum.
"BLOCKED ACCOUNT": A DDA that conforms with the requirements of Section
7.1(b)(i), and initially as specified in Section 7.3(a)(ii).
"BLOCKED ACCOUNT AGREEMENT":A tri-party agreement in a form acceptable
to the Agent, among the Lead Borrower, the Agent and a depository
institution at which the Lead Borrower maintains one or more
DDAs, providing for the Agent's dominion and control over such
DDAs upon notice by the Agent to such depository institution of
the occurrence of a Cash Management Condition.
"BORROWER": Defined in the Preamble.
"BORROWING BASE": Defined in Section 2.1(b)(ii).
"BUSINESS DAY": Any day (with any references herein to time of
day requirements meaning such times based on Eastern time) other
than (a) a Saturday or Sunday; (b) any day on which banks in
Boston, Massachusetts generally are not open to the general
public for the purpose of conducting commercial banking business;
or (c) a day on which the Agent is not open to the general public
to conduct business.
- 7 -
"BUSINESS PLAN": The Borrowers' business plan annexed hereto as
EXHIBIT 5.11(c) and any revision, amendment, or update of such
business plan, provided such revision, amendment or update has
been accepted in writing by the Agent.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities for leaseholds, leasehold improvements, real
property, furniture and equipment, to the extent such
expenditures must be capitalized in accordance with GAAP, and net
of amounts reimbursed by Landlords.
"CAPITAL EXPENDITURE CAP": Defined in Section 5.12(b).
"CAPITAL LEASE": Any lease which must be capitalized in accordance
with GAAP.
"CASH MANAGEMENT CONDITION":Either (or both) of the following:
(a) A Suspension Event has occurred and is continuing
and the Agent has elected to notify the Lead Borrower that a Cash
Management Condition has occurred.
(b) Availability shall have been less than $15
Million for a period of three (3) or more consecutive Business
Days.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as amended)
or by any Person (other than any shareholder currently holding or
controlling 20% or more of the issued and outstanding capital
stock of the Parent, and any members of such shareholder's
immediate family, or any trust or other entity established
by such shareholder or shareholder's family member or members
for estate or tax planning purposes or any group of
Persons of which such shareholder's family members, trust
or other entity has a controlling interest) of beneficial
ownership (within the meaning of Rule 13d-3 of the SEC)
of 50% or more of the issued and outstanding capital
- 8 -
stock of the Parent having the right, under
ordinary circumstances, to vote for the election of directors of
the Parent.
(b) More than half of the persons who were directors
of the Parent on the first day of any period consisting of Twelve
(12) consecutive calendar months (the first of such Twelve (12)
month periods commencing with the first day of the month in which
this Agreement was executed) cease (for any reason other than
death, disability or retirement) to be directors of the Parent,
and the board of directors as thereafter constituted is not
acceptable to Agent.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Defined in Section 8.1.
"COLLATERAL REPORTS":Defined in Section 5.5.
"COMMITMENT" Subject to Section 16.1(d) (which provides for Permissible
Overloans) with respect to each Lender, such Lender's "DOLLAR
COMMITMENT" and "COMMITMENT PERCENTAGE" as set forth on Schedule
B to this Agreement or assigned to such Lender in accordance with
Section 17.1 (which provides for Assignments and Assumption of
Commitments), and "Commitment" shall, collectively, mean the
aggregate amount of the Dollar Commitments of all Lenders, the
maximum amount of which shall not exceed $120,000,000.00.
"CONCENTRATION ACCOUNT": The deposit account established by the
Agent over which the Agent has sole dominion and control and into
which, following the occurrence of a Cash Management Condition,
all contents of the Blocked Accounts shall be transferred on a
daily basis, as provided in Sections 7.3 and 7.4 of this
Agreement.
"CONSENT": Actual consent given by the Lender from
whom such consent is sought; or the passage of
seven (7) Business Days from the receipt by a Lender of written
- 9 -
notice from the Agent of a proposed course of action to be
followed by the Agent without the Agent having received
from such Lender written notice of that Lender's objection to
such course of action, provided that the Agent may rely on such
passage of time as consent by a Lender only if the Agent's
notice specifically states that consent will be deemed to have
been given if no objection is received within such time period.
"CONSOLIDATED": When used to modify a financial term, test, statement,
or report, refers to the application or preparation of such
term, test, statement, or report (as applicable) based upon
the consolidation, in accordance with GAAP, of the
financial condition or operating results of the corporations
which constitute the Parent and its Subsidiaries.
"COST":The lower of
(a) the calculated cost of Inventory purchases, as
determined from invoices received by the Borrowers and reflected
in the Borrowers' Consolidated purchase journal or stock ledger,
based upon the Borrowers' accounting practices in effect on the
date on which this Agreement was executed; and
(b) the cost equivalent of the lowest ticketed or
promoted price at which the subject Inventory is offered to the
public, after all xxxx-xxxxx (whether or not such price is then
reflected on the Borrowers' accounting system), determined in
accordance with the retail method of accounting and reflecting
the Borrowers' historic business practices.
"Cost" does not include inventory capitalization costs or other
non-purchase price charges (such as outbound freight to the store
location) used in the Borrowers' calculation of cost of goods sold.
"COSTS OF COLLECTION": Includes, without limitation, all reasonable
fees and reasonable out-of-pocket expenses of the
Agent's attorneys, and all reasonable out-of-pocket
costs incurred by the Agent including, without limitation,
- 10 -
reasonable out-of-pocket costs and expenses associated
with travel on behalf of the Agent, which costs and expenses are
directly or indirectly related to or in respect of the
Agent's: administration and management of the Liabilities;
negotiation, documentation, interpretation and amendment of any
Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or any of the
Agent's rights and remedies against or in respect of any
guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection
with such efforts). Following the occurrence of any Event of
Default, "Costs of Collection" also includes all reasonable
fees and reasonable out-of-pocket expenses of counsel for the
Lenders it being understood that Costs of Collection for the
Lenders shall be limited to the reasonable fees of a single
counsel for all Lenders.
"CREDIT CARD ADVANCE RATE": Eighty percent (80%).
"CUSTOMS BROKERS AGREEMENT":A tri-party agreement in form satisfactory
to the Agent, among the Lead Borrower or any Borrower, a customs
broker and the Agent, in which the customs broker acknowledges
that the Agent has control over the documents evidencing
ownership of the subject Inventory and agrees, upon notice from
the Agent, to hold and dispose of the subject Inventory solely as
directed by the Agent.
"DDA": Any checking or other demand deposit account maintained by any of
the Borrowers, other than a Local Disbursement Account.
"DELINQUENT LENDER": Defined in Section 13.3(c).
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
"DOCUMENTS": Has the meaning given that term in the UCC.
- 11 -
"DOCUMENTS OF TITLE":Has the meaning given that term in Section 1-201
(15) of the UCC.
"DOLLAR COMMITMENT": As set forth in the definition of "Commitment"
above.
"EARLY TERMINATION FEE": Defined in Section 2.14.
"EBITDA": The Borrowers' Consolidated earnings (excluding
extraordinary gains and gains from the sale of assets other than
in the ordinary course of business) before interest, taxes,
depreciation, amortization and other non-cash charges, each as
determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE": A bank, insurance company, or company engaged
in the business of making commercial loans having a combined
capital and surplus in excess of $300,000,000.00, or any
Affiliate of any Lender.
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Any of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind (including
any agreement to grant any of the foregoing); the interest of a
lessor under a Capital Lease; a conditional sale or other title
retention agreement; a sale of accounts receivable or chattel
paper; or any other arrangement pursuant to which any Person is
entitled to any preference or priority with respect to the
property, assets, income or profits of another Person or which
constitutes an interest in property to secure an obligation,
regardless of whether consensual or non-consensual or whether
arising by way of agreement, operation of law, legal process or
otherwise.
- 12 -
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"END DATE": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of all Lenders to make loans
and advances and to provide other financial accommodations to the
Borrowers hereunder shall have been irrevocably terminated.
"ENVIRONMENTAL LAWS":All of the following:
(a) Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in respect
to environmental protection matters, including, without
limitation, Hazardous Materials, as are now or hereafter in
effect.
(b) The common law relating to damage to Persons or
property from Hazardous Materials.
"EQUIPMENT": Includes, without limitation, "equipment" as
defined in the UCC, and also all motor vehicles, rolling stock,
machinery, office equipment, plant equipment, tools, dies, molds,
store fixtures, furniture, and other tangible goods, property,
and assets which are used and/or were purchased for use in the
operation or furtherance of the Borrowers' business, and any and
all accessions or additions thereto, and substitutions therefor.
"ERISA":The Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE": Any Person that is (i) under common control with the
Borrowers within the meaning of Section 4001 of ERISA or (ii) is
part of a group including the Borrowers or the Parent and that
would be treated as a single employer under Section 414(b) or (c)
of the Internal Revenue Code of 1986, as amended.
- 13 -
"EURODOLLAR BUSINESS DAY": Any day that is both a Business Day and
a day on which the principal market in Eurodollars in which
BankBoston, N.A. or its successors participate is open for
dealings in United States Dollar deposits.
"EURODOLLAR LOAN": Any Revolving Credit Loan bearing interest at a
Eurodollar Rate.
"EURODOLLAR MARGIN": Until a Eurodollar pricing adjustment pursuant to
Section 2.10(e) is applicable: 175 basis points; thereafter as
determined pursuant to the applicable section of the Margin
Pricing Grid.
"EURODOLLAR OFFER RATE": With respect to any Eurodollar Loan, the
rate of interest (rounded upwards, if necessary, to the next
1/100 of 1%) determined by the Agent to be the highest prevailing
rate per annum at which deposits in U.S. Dollars are offered to
BankBoston, N.A., by first-class banks in the Eurodollar market
in which BankBoston, N.A. participates, at or about 10:00 AM
(Boston Time) two (2) Eurodollar Business Days before the first
day of the Interest Period for such Eurodollar Loan, for a
deposit in approximately the amount of such Eurodollar Loan, for
a period of time approximately equal to such Interest Period.
"EURODOLLAR RATE": The rate per annum (calculated on a 360 day year and
actual days elapsed) equal to the Eurodollar Offer Rate plus the
Eurodollar Margin provided that, in the event that it is
determined by the Agent that any Lender may be subject to the
Reserve Percentage, the "Eurodollar Rate" shall mean, with
respect to any Eurodollar Loans then outstanding (from the date
on which that Reserve Percentage first became applicable to such
Eurodollar Loans), and with respect to all Eurodollar Loans
thereafter made for as long as the Reserve Percentage shall be
applicable to a Lender, an interest rate per annum equal to the
sum of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
- 14 -
Eurodollar Offer Rate
1 minus Reserve Percentage
(b) is the applicable Eurodollar Margin.
"EVENTSOF DEFAULT": Defined in Article 10. Each reference herein to an
"Event of Default" is to an Event of Default that has occurred
and is continuing and has not been duly waived by the requisite
Lenders or by the Agent, as applicable (as to which due waiver,
see Section 16.2 through 16.7). In the event of such due waiver,
the so-called Event of Default shall be deemed never to have
occurred (other than with respect to any Costs of Collection for
which the Borrowers are obligated to reimburse the Agent or the
Lenders, unless such reimbursement obligation has also been duly
waived).
"FIXTURES": Has the meaning given that term in the UCC.
"GAAP":Principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors
(or successors) in effect and applicable to the accounting period
in respect of which reference to GAAP is being made, provided,
however, that in the event of a Material Accounting Change,
unless otherwise specifically agreed to by the Lenders, (a) the
Lead Borrower's compliance with the financial performance
covenant imposed pursuant to Section 5.12 hereof (if applicable)
shall be determined as if such Material Accounting Change had not
taken place and (b) the Lead Borrower shall include, with its
monthly, quarterly and annual financial statements a schedule,
certified by its chief financial officer, on which the effect of
such Material Accounting Change on such statements shall be
described.
"GENERAL INTANGIBLES": Includes, without limitation, "general
intangibles" as defined in the UCC; and also all: rights to
payment for credit extended; deposits; amounts due to the
Borrowers; credit memoranda in favor of the Borrowers;
- 15 -
warranty claims; tax refunds and abatements; insurance refunds
and premium rebates; all means and vehicles of investment
or hedging, including, without limitation, options, warrants,
and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; payments under
any settlement or other agreement; literary rights; rights
to performance; royalties; license and/or franchise fees; rights
of admission; licenses; franchises; license agreements, including
all rights of the Borrowers to enforce the foregoing; permits,
certificates of convenience and necessity, and similar rights
granted by any governmental authority; patents, patent
applications, patents pending, and other intellectual property;
internet addresses and domain names; developmental ideas and
concepts; proprietary processes; blueprints, drawings,
designs, diagrams, plans, reports, and charts; catalogs;
manuals; technical data; computer software programs (including
the source and object codes therefor and related documentation),
computer records, databases, rights of access to computer record
service bureaus, service bureau computer contracts, and
computer data; tapes, disks, semi-conductor chips and printouts;
trade secrets, copyrights, copyrightable materials, copyright
registrations and applications, mask work rights and interests,
and derivative works and interests; user, technical reference,
and other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; registrations
and applications for registration of the foregoing; and all
other intangible property of the Borrower in the nature of
intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts
or ideas, and any matter related to, or connected with,
the design, development, manufacture, sale, marketing, leasing,
or use of any or all property produced, sold, or leased, by
the Borrowers or credit extended or services performed, by the
Borrowers, whether intended for an individual customer or the
general business of the Borrowers, or used or useful in
connection with research and development by the Borrowers.
"GOODS": Has the meaning given that term in the UCC.
- 16 -
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products that are
defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.
"INDEBTEDNESS": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) Money borrowed (including any indebtedness which
is non-recourse to the credit of such Person but which is secured
by an Encumbrance on any asset of such Person) whether or not
evidenced by a promissory note, bond, debenture or other written
obligation to pay;
(b) Any letter of credit or acceptance transaction,
including, without limitation, the Stated Amount of all
outstanding letters of credit and acceptances issued for the
account of such Person, and (without duplication) any amounts for
which such Person would be obligated to provide reimbursement or
for which such person is liable in connection with a letter of
credit or acceptance transaction;
(c) The provision of recourse in connection with the
sale or discount of accounts receivable or chattel paper of such
Person;
(d) On account of recourse or repayment obligations
with respect to deposits or advances.
(e) As lessee under Capital Leases. "Indebtedness"
also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or not
such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which such Person may be
liable on account of any obligation of another Person.
- 17 -
(z) The Indebtedness of a partnership or joint
venture in which such Person is a general partner or joint
venturer, for which indebtedness such Person is liable.
"INDEMNIFIED PERSON":Defined in Section 19.11.
"INSTRUMENTS":Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
(a) Each Base Margin Loan: the first Business day of
each month, the Termination Date, and the End Date.
(b) Each Eurodollar Loan: (i) having an Interest
Period of one, two or three months, the last day of the Interest
Period relating thereto, the Termination Date and the End Date;
(ii) having an Interest Period of six months, the last day of the
third month of such Interest Period, the last day of such
Interest Period, the Termination Date and the End Date.
"INTEREST PERIOD": (a) With respect to each Eurodollar Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of, or conversion to, such
Eurodollar Loan and ending on the day that corresponds
numerically to such date, one, two, three or six months
thereafter, as the Lead Borrower may elect by notice to the
Agent.
(b) The setting of Interest Periods is in all
instances subject to the following:
(i) Any Interest Period for a
Eurodollar Loan which would otherwise end on a day
that is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business
Day, unless that succeeding Eurodollar Business
Day is in the next calendar month, in
which event such Interest Period shall end on
- 18 -
the last Eurodollar Business Day of the month
during which the Interest Period ends.
(i) Subject to Subsections (iii) and
(iv) below, any Interest Period applicable to a
Eurodollar Loan that begins on a day for which
there is no numerically corresponding day in the
calendar month during which such Interest Period
ends shall end on the last Eurodollar Business Day
of the month during which that Interest Period
ends.
(ii) Any Interest Period that would
otherwise end after the Termination Date shall end
on the Termination Date.
(iv) No Interest Period applicable to a
Eurodollar Loan may be less than one (1) month.
(iii) There shall be no more than six (6)
Interest Periods applicable to Eurodollar Loans in
effect at any one time.
"INVENTORY": Includes, without limitation, "inventory" as defined in the
UCC and also all: packaging, advertising, and shipping materials
related to any of the foregoing, and all names or marks affixed
or to be affixed thereto for identifying or selling the same;
Goods held for sale or lease or furnished or to be furnished
under a contract or contracts of sale or service by the
Borrowers, or used or consumed or to be used or consumed in the
Borrowers' business; Goods in transit; returned, repossessed and
rejected Goods; and all Documents (whether or not negotiable)
which represent any of the foregoing.
"INVENTORY ADVANCE RATE": The following percentages during the periods
of each calendar year indicated in the chart below:
PERIOD PERCENTAGE
January 1 - August 31 72%
September 1 - December 31 78%
- 19 -
"INVENTORY RESERVES":Such reserves as may be established from time to
time by the Agent in the Agent's reasonable discretion (using a
methodology disclosed to and after consultation with, the Lead
Borrower) with respect to the determination of the
merchantability, at Retail, of the Acceptable Inventory, or which
reflect such other factors as affect the market value of the
Acceptable Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited
to) reserves based on the following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given number
of days).
(ii) Seasonality.
(iii) Shrinkage (including any amount required to
bring Inventory in line with Borrowers'
historical stock ledger shrinkage reserve,
to the extent that the Borrowers' stock
ledger shrinkage reserve is lower than its
last 12 months historical stock ledger
shrinkage reserve).
(iv) Change in Inventory character.
(v) Change in Inventory composition
(vi) Change in Inventory mix.
(vii) Markdown (both permanent and point of
sale).
(viii) Retail markdowns and markups inconsistent
with prior period practice and performance;
industry standards; the Business Plan; or
advertising calendar and planned advertising
events.
(ix) Return to Vendors. (x) Damage.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": The issuer of any L/C.
- 20 -
"LANDLORD STATE": Initially Washington, Virginia, and Pennsylvania,
and such other states in which a landlord's claim for rent has
priority over the Security Interests of the Agent in the
Collateral.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of any Borrower and any acceptance made on
account of such letter of credit.
"L/C LANDING COSTS": To the extent not included in the Stated Amount
of an L/C, customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" the Inventory, the
purchase of which is supported by such L/C.
"LEASE": Any lease or other agreement, no matter how styled
or structured, pursuant to which any Borrower is entitled to the
use or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of the Borrowers as lessee under any
Lease.
"LENDERS": Defined in the Preamble to this Agreement.
"LIABILITIES" (in the singular, "LIABILITY"): Includes, without
limitation, all and each of the following arising under the Loan
Documents, whether now existing or hereafter arising:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrowers to the Agent or to any
Lender, of every kind, nature, and description.
(b) Each obligation to repay any loan,
advance, indebtedness, note, obligation, overdraft, or
amount now or hereafter owing by the Borrowers to the
Agent or any Lender (including all future advances
whether or not made pursuant to a commitment by the Agent
or any Lender), whether or not any of such are
- 21 -
liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any
other type, nature, or description, or by reason of any cause of
action which the Agent or any Lender may hold against the
Borrowers.
(c) All notes and other obligations of the Borrowers
now or hereafter assigned to or held by the Agent or any Lender,
of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts
which may be charged by the Agent or any Lender to the Borrowers
and/or which may be due from the Borrowers to the Agent or any
Lender from time to time.
(e) All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
Borrowers and the Agent or any Lender or instrument furnished by
the Borrowers to the Agent or any Lender (including, without
limitation, Costs of Collection, reasonable attorneys' fees, and
all court and litigation costs and expenses).
(f) Any and all covenants of the Borrowers to or with
the Agent or any Lender and any and all obligations of the
Borrowers to act or to refrain from acting in accordance with any
agreement between the Borrowers and the Agent or any Lender or
instrument furnished by the Borrowers to the Agent or any Lender.
(g) Each of the foregoing as if each reference to the
"Agent or any Lender " therein were to each Affiliate of the
Agent.
"LINE (UNUSED) FEE": Defined in Section 2.13.
"LIQUIDATION":The exercise, by the Agent, of those rights accorded to
the Agent under the Loan Documents as a creditor of the Borrowers
following and on account of Acceleration looking towards the
realization of the Collateral. Derivations of the word
"Liquidation" (such as "Liquidate") are used with like meaning in
this Agreement.
- 22 -
"LOAN ACCOUNT": Defined in Section 2.7.
"LOAN CEILING": The aggregate amount of the Dollar Commitment of all
Lenders, which shall equal One Hundred and Twenty Million Dollars
($120,000,000).
"LOAN DOCUMENTS": This Agreement, each instrument and document
executed and/or delivered as contemplated by Article 3, below,
and each other instrument or document from time to time executed
and/or delivered in connection with the arrangements contemplated
hereby with the Agent or any Lender or any Affiliate of the Agent
or any Lender, including, without limitation, any transaction
which arises out of any cash management, depository, investment,
letter of credit, interest rate protection provided by the Agent
or any Lender or any Affiliate of the Agent or any Lender, or in
connection with any transaction of the Borrowers or any Borrower
with the Agent or any Affiliate of the Agent, as each may be
amended from time to time.
"LOAN TO COLLATERAL RESERVES": Reserves set so that the amount made
available under the Borrowing Base on account of Acceptable
Inventory does not exceed in the aggregate the Net Liquidation
Value multiplied by 85%.
"LOCAL DISBURSEMENT ACCOUNT": A deposit account maintained by a
Borrower, into which amounts may be transferred from the
Operating Account for use solely (i) as a source of xxxxx cash;
(ii) to make payroll payments; or (iii) to make other
disbursements that are identified on EXHIBIT 1 hereto.
"MAJORITY LENDERS": Lenders (other than Delinquent Lenders) holding 51%
or more of the Dollar Commitments (other than Dollar Commitments
held by Delinquent Lenders).
- 23 -
"MARGIN PRICING GRID": Provides for monthly adjustment to the interest
rate to be charged on Revolving Credit Loans based on
Availability and is shown in Section 2.10(e).
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' fiscal year most
recently completed prior to the execution of this Agreement, if
such change has a material effect on the Borrowers' financial
condition or operating results, as reflected on financial
statements and reports prepared by or for the Borrowers, when
compared with such condition or results as if such change had not
taken place, or where preparation of the Borrowers' statements
and reports in compliance with such change results in the breach
of a financial performance covenant imposed pursuant to Section
5.12 (if applicable), where such a breach would not have occurred
if such change had not taken place or visa versa.
"MATERIAL ADVERSE CHANGE": Any event, fact, circumstance, change in, or
effect on, the business of any Borrower, which individually or in
the aggregate or on a cumulative basis with any other events,
facts, circumstances, changes in, or effects on, the Borrowers or
the Collateral, taken as a whole, which:
(a) Would reasonably be expected to materially
adversely affect the ability of the Borrowers taken as a whole to
(i) operate or conduct their business in the aggregate in all
material respects in the manner in which such business is
currently operated or conducted or in which such business
(meaning primarily the retail sale of housewares, and items for
the home and related concepts) might be viably conducted by
expansion into additional, or by transition into other, venues or
mediums, or (ii) to perform their obligations under the Loan
Documents.
(b) Would reasonably be expected to have a material
adverse effect on the value, enforceability, or collectability of
the Collateral.
- 24 -
"MATERIAL ADVERSE EFFECT": A result, consequence, or outcome which
constitutes a Material Adverse Change.
"MATURITY DATE": November 30, 2003, or if such day is not a Business
Day, the next succeeding Business Day.
"NET LIQUIDATION VALUE": The product of (a) the Cost of
Acceptable Inventory (net of Inventory Reserves) multiplied by
(b) the percentage of such Cost estimated to be realizable in a
Liquidation thereof, as determined by the then most recent
appraisal of the Borrowers' Inventory undertaken at the request
of the Agent.
"NOMINEE": A business entity (such as a corporation or limited
partnership) formed by the Agent to own or manage any Post
Foreclosure Asset.
"NONCONSENTING LENDER": Defined in Section 16.9(a).
"OPERATING ACCOUNT": Defined in Section 7.3(a)(iii).
"PARTICIPANT": Defined in Section 19.14, hereof.
"PERMISSIBLE OVERLOANS": Revolving Credit Loans hereunder which
aggregate not more than 5% of the Loan Ceiling in effect on the
date of this Agreement, where such loans are either (a)
Protective Advances or (b) made when Availability equals zero and
are not extant for more than sixty (60) days absent the consent
of SuperMajority Lenders pursuant to Section 16.3 hereof;
provided however, in no event shall the making of any Permissible
Overloan cause the Loan Ceiling to be exceeded.
"PERMITTED ENCUMBRANCES": The following:
(a) Encumbrances in favor of the Agent.
- 25 -
(b) Those Encumbrances (if any) listed on EXHIBIT
4.7, annexed hereto.
(c) Liens securing the payment of taxes, either not
yet overdue or the validity of which is being contested as
permitted by Section 4.15(d); non-consensual statutory liens
(other than liens securing the payment of taxes) arising in the
ordinary course of Borrowers' business to the extent such liens
secure (i) indebtedness that is not overdue, (ii) indebtedness
relating to claims or liabilities which are fully insured and
being defended at the sole cost and expense and at the sole risk
of the insurer or are being contested by the Borrowers in good
faith by appropriate proceedings diligently pursued, in each
instance prior to the commencement of foreclosure or other
similar proceedings and provided that adequate reserves therefor
have been set aside on the Borrowers' books (provided, however,
that the inclusion of any of the foregoing as "Permitted
Encumbrances" shall not affect their respective relative
priorities vis a vis the security interests created herein), or
(iii) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of real property.
(d) Deposits under workmen's compensation,
unemployment insurance and social security laws, or to secure the
performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds arising in the ordinary course
of business.
(e) Landlord's liens arising by operation of law
where waivers have not been obtained.
(f) Purchase money security interests or capitalized
equipment leases on any property acquired or held by the
Borrowers in the ordinary course of business and securing
Indebtedness incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such property; provided
however that (i) any such Encumbrance attaches to such property
concurrently with or within twenty (20) days after the
acquisition thereof, (ii) such Encumbrance attaches solely to the
property so acquired in such transaction and (iii) the
- 26 -
principal amount of the Indebtedness secured thereby does not
exceed 100% of the cost of such property.
"PERMITTED INVESTMENT": An investment which fulfills any of the
following numbered criteria:
(1) Debt entitled to the full faith and credit
of the United States with maturities not to exceed one
hundred and eighty-one (181) days.
(2) Banker's acceptances accepted, savings
accounts made available, repurchase agreements entered
into, and certificates of deposit issued by the Agent or
any bank whose most senior debt has been assigned an
investment grade credit rating by a nationally recognized
credit rating service.
(3) Commercial paper rated A-1/P-1.
(4) Money market accounts or funds within the
meaning of Rule 2a-7 of the Investment Company Act of
1940, in effect as of the date of this Agreement.
(5) Such other investments as may be approved
in writing by Agent in its discretion.
"PERMITTED REPURCHASES OR DEBT RETIREMENT": Defined in Section 4.20(b).
"PERSON": Any natural person, corporation, limited liability company,
trust, partnership, joint venture, or other enterprise or entity.
"POST FORECLOSURE ASSET": All or any part of the Collateral, ownership
of which has been acquired by the Agent or a Nominee on account
of the Agent "bidding in" on behalf of the Lenders at a
foreclosure of Collateral as part of a Liquidation.
"PRO-RATA": With respect to any Lender, a fraction (expressed
as a percentage), the numerator of which shall be the amount
of such Lender's Dollar Commitment and the denominator of which
shall be the aggregate amount of all of the Lenders'
- 27 -
Dollar Commitments, as adjusted from time to time in accordance
with the provisions of Section 11.13 hereof, provided that, if
the Commitments have been terminated, the numerator shall be
the unpaid amount of such Lender's Revolving Credit Loans and
its interest in L/C exposure and the denominator shall be the
aggregate amount of all unpaid Revolving Credit Loans and L/C
exposure.
"PROCEEDS": Includes, without limitation, "proceeds" as defined in the
UCC, and proceeds of all Collateral.
"PROTECTIVE ADVANCES": The aggregate of Revolving Credit Loans
and expenditures and incurrence of obligations by the Agent which
are made or undertaken in the Agent's reasonable discretion to
protect or preserve the Collateral and the Agent's rights upon
default or otherwise, or which the Agent determines in its
reasonable discretion are appropriate to facilitate a
Liquidation.
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips
and receipts arising from the sale of the Collateral.
"RECEIVABLES COLLATERAL": Any rights to payment with respect to any of
the Collateral.
"REGISTER": Defined in Section 17.1(f).
"RELATED ENTITY": Any Person (other than a natural person) which is
a parent, Subsidiary, or Affiliate of any Borrower; could have
such enterprise's tax returns or financial statements
consolidated with any Borrower's; could be a member of the same
controlled group of corporations (within the meaning of Section
1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as
amended from time to time) of which any Borrower is a member or
controls or is controlled by any Borrower or by any Affiliate of
any Borrower.
- 28 -
"REQUIREMENT OF LAW":As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims jurisdiction
over such Person, or any property of such Person, or of any other
Person for whose conduct such Person would be responsible.
(b) Such Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and
(c) Such Person's by-laws and/or other
instruments which deal with corporate or similar governance, as
applicable.
"RESERVE PERCENTAGE":The decimal equivalent of that rate applicable to a
Lender under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the
maximum reserve requirement of that Lender with respect to
"Eurocurrency liabilities" as defined in such regulations. The
Reserve Percentage applicable to a particular Eurodollar Loan
shall be based upon that in effect during the subject Interest
Period, with changes in the Reserve Percentage which take effect
during such Interest Period to take effect (and to consequently
change any interest rate determined with reference to the Reserve
Percentage) if and when such change is applicable to such loans.
"RESERVES": All Availability Reserves and Inventory Reserves, if any.
"RETAIL": The current ticket price aggregated by SKU of a
Borrower's Acceptable Inventory, as reflected in the Borrowers'
Consolidated stock ledger, except that to the extent that
Acceptable Inventory is not reflected in the stock ledger,
"Retail" shall be determined using such non stock ledger
inventory systems of the
- 29 -
Borrowers as the Agent shall deem adequate for such purpose
in its reasonable discretion.
"REVOLVING CREDIT": Is defined in Section 2.1.
"REVOLVING CREDIT LOAN": A particular loan or advance made or
continued pursuant to the Revolving Credit.
"REVOLVING CREDIT NOTE": Defined in Section 2.8.
"SEC": The United States Securities and Exchange Commission, or any
successor thereto.
"STATED AMOUNT": The maximum amount for which an L/C may be honored,
less any amounts already drawn thereunder.
SUBSIDIARY" or "SUBSIDIARIES": (a) Any corporation or limited
liability company of which more than fifty percent (50%) of the
issued and outstanding securities having ordinary voting power
for the election of directors or membership interests is owned or
controlled, directly or indirectly, by a Person and/or by one or
more of its Subsidiaries, and (b) any partnership in which a
Person and/or one or more Subsidiaries of such Person shall have
a general partnership interest or any other interest (whether in
the form of voting or participation in profits or capital
contribution), in each case, of more than fifty percent (50%).
"SUPERMAJORITY LENDERS": Lenders (other than Delinquent Lenders)
holding 66-2/3% or more of the total Dollar Commitments (other
than Dollar Commitments held by a Delinquent Lender).
- 30 -
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) except in the case of
the events described in Sections 10.4 and 10.7, would become an
Event of Default if any requisite notice were given by the Agent
and/or any requisite period of time were to run and such
occurrence, circumstance, or state of facts were not absolutely
cured within any applicable grace period.
"SWINGLINE": The facility described in Section 2.6 pursuant to which the
SwingLine Lender may advance SwingLine Loans to the Borrowers
aggregating up to the SwingLine Loan Ceiling.
"SWINGLINE LENDER": BBRF.
"SWINGLINE LOAN CEILING": Ten Million Dollars ($10 Million).
"SWINGLINE LOANS": Revolving Credit Loans advanced under the SwingLine
by the SwingLine Lender and defined in Section 2.6(a).
"SWINGLINE NOTE": As defined in Section 2.6(c).
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10.11 hereof; or (c)
the date set as the Termination Date in a notice by the Agent to
the Lead Borrower on account of the occurrence of any Event of
Default other than as described in Section 10.11 hereof.
"TRANSFER": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve
Board, or as otherwise may be agreed to from time to time by the
Agent making such Transfer and the respective Lender.
Transfers by the Agent to all Lenders or to
any Person who becomes a Lender pursuant to Section 17.1,
shall be effected pursuant to wire instructions
- 31 -
given by the respective Lenders or by such Person
to, and agreed to by, the Agent or as otherwise mutually agreed.
Wire transfers to the Agent shall be in accordance with
the following wire instructions:
BankBoston, N.A.
ABA No. 01100390
Acct Name: BankBoston Retail Finance Inc.
Acct No.: 53039952
Reference: Lechters, Inc.
Wire instructions may be changed in the same manner that Notice
Addresses may be changed, except that no change of the wire
instructions for Transfers to any Lender shall be effective
without the Consent of the Agent.
"UCC": The Uniform Commercial Code , as presently in effect in the
State of New York as used herein in the context of any
definitions; otherwise, as in effect from time to time in the
State of New York.
"UNANIMOUS CONSENT": The consent of all Lenders other than Delinquent
Lenders.
"UNDERWRITING FEE": Is defined in Section 2.12.
"YEAR 2000 COMPLIANT": The ability of computer applications,
imbedded microchips, and other systems and subsystems to properly
recognize certain dates prior to, on, and after December 31, 1999
and perform their intended function without any adverse effect on
account of their treating any date prior to, on, or after
December 31, 1999 other than as the specific date in question.
- 32 -
ARTICLE II - THE REVOLVING CREDIT:
2.1 Establishment of Revolving Credit.
(a) The Lenders hereby establish a revolving line of credit
(the "REVOLVING CREDIT") in the Borrowers' favor pursuant to which each Lender,
subject to, and in accordance with, this Agreement, acting through the Agent,
shall make loans and advances and otherwise provide financial accommodations to
and for the account of the Borrowers as provided herein, in each instance equal
to that Lender's Commitment Percentage of Availability, up to the maximum amount
of that Lender's Dollar Commitment. The amount available for borrowing under the
Revolving Credit shall be determined by the Agent by reference to Availability,
as determined by the Agent from time to time.
(b) As used herein, the following terms have the following
meanings:
(i) "AVAILABILITY" refers at any time to the result of
applying the following formula:
(A) Borrowing Base.
Minus
(B) The then unpaid principal balance of the
Loan Account.
Minus
(C) The then Stated Amount of all L/C's.
(ii) "BORROWING BASE" refers at any time to the lesser
of 2.1(b)(ii)(A) or 2.1(b)(ii)(B), where:
(A) is the Loan Ceiling.
(B) is the result of applying the following
formula:
(I) The product of the Credit Card
Advance Rate multiplied by the
aggregate face amount of Acceptable
Credit Card Receivables.
Plus
- 33 -
(II) The product of the Inventory Advance
Rate multiplied by the Cost of
Acceptable Inventory (Net of
Inventory Reserves).
Plus
(III) The product of Ninety-Five percent
(95%) multiplied by Acceptable Cash
Collateral.
Minus
(IV) The then aggregate of the
Availability Reserves.
Minus
(V) The Loan to Collateral Reserves.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 5.4 hereof.
(d) The proceeds of borrowings under the Revolving Credit
shall be used
(i) to retire the Lead Borrower's existing revolving
credit facility;
(ii) for on-going working capital requirements of the
Borrowers;
(iii)for Permitted Repurchases and Debt Retirement;
and
(iv) for general corporate purposes and in all cases to
the extent permitted by this Agreement.
2.2 Advances in Excess of Borrowing Base.
(a) No Lender has any obligation to make any loan or
advance, or otherwise to provide any credit for the benefit of the Borrowers to
the extent that the balance of the Loan Account would as a result thereof exceed
the Borrowing Base.
(b) The Lenders' obligations among themselves are subject to
Section 13.3(a) (which relates to each Lender's making amounts available to the
Agent) and to Sections 16.1(d) and 16.3(a) (which relate to Permissible
Overloans),
(c) The Lenders' providing of credit in excess of their
obligations under this Agreement on any one occasion does not affect the
Liabilities of the Borrowers hereunder nor shall it obligate the Lenders to do
so on any other occasion.
- 34 -
2.3 Risks of Value of Collateral. The Agent's reference to
a given asset in connection with the making of loans, credits, and advances and
the providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Lender relative to the actual value of the
asset in question. All risks concerning the collectability of the Receivables
Collateral and the merchantability of the Borrowers' Inventory are and remain
the Borrowers'. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Agent or by any
Lender in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit.
2.4 Loan Requests.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, provided that:
(i) The Borrowing Base shall not be exceeded; and
(ii) The Revolving Credit has not been suspended as
provided in Section 2.4 (h).
(b) Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan by giving the Agent written or
telephone notice (confirmed writing in the form of EXHIBIT 2.4(B) as follows:
(i) If such Revolving Credit Loan is to be a Base
Margin Loan (which shall include the conversion of a Eurodollar Loan):
By 11:30 A.M. on the Business Day on which such Revolving Credit Loan is
to be made. Base Margin Loans requested by the Borrower, other than
those resulting from the conversion of a Eurodollar Loan, shall not be
less than $10,000.00.
(ii) If such Revolving Credit Loan is to be Eurodollar
Loan (which shall include the continuation of, or the conversion of a
Base Margin Loan to, a Eurodollar Loan): By 1:00 P.M. on the third
Eurodollar Business Day prior to the first day of the Interest Period
being requested. Eurodollar Loans shall each be not less than $1,000,000
and in increments of $500,000 in excess of such minimum.
- 35 -
(iii) Any Eurodollar Loan which matures while an Event of
Default is extant may be converted, at the option of the Agent, to a
Base Margin Loan notwithstanding any notice from the Borrower that such
loan is to be continued as a Eurodollar Loan.
(c) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the next Business Day or Eurodollar Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Agent.
(d) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of a Borrower as provided in Section 2.17.
(e) The Agent may rely on any request for a loan or advance
or other financial accommodation under the Revolving Credit which the Agent, in
good faith, believes to have been made by a Person duly authorized to act on
behalf of the Lead Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that Person's
authority to act as may be reasonably satisfactory to the Agent.
(f) A request by the Lead Borrower for a loan or advance or
other financial accommodation under the Revolving Credit shall be irrevocable
and shall constitute certification by each Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no Material Adverse Change in the
Borrowers' Consolidated financial condition from the most recent
financial information furnished Agent pursuant to this Agreement.
(ii) Each Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) All or a portion of any loan or advance so requested
will be set aside or adequate reserves will otherwise be established by
the Borrowers to the extent necessary to pay when due all of the
Borrowers' obligations for sales tax on account of sales since the then
most recent borrowing pursuant to the Revolving Credit.
- 36 -
(iv) Each representation which is made herein or in any of
the Loan Documents is then true and complete as of and as if made on the
date of such request (unless such representation relates to an earlier
date, in which event such representation shall be true as of such
earlier date).
(v) No Suspension Event is then continuing.
(g) During the continuance of any Suspension Event, neither
the Agent on behalf of the Lenders nor the Swingline Lender shall be obligated
to make any loans or advances, to provide any financial accommodation hereunder,
to issue any L/C, or to accept any request of the Lead Borrower that any
Eurodollar Loan be made or any Base Margin Loan be converted to a Eurodollar
Loan.
2.5 Making of Loans Under Revolving Credit.
(a) A loan or advance under the Revolving Credit shall be
made by the transfer of the proceeds of such loan or advance to the Operating
Account or as otherwise instructed by the Lead Borrower.
(b) A loan or advance shall be deemed to have been made
under the Revolving Credit (and the Borrowers shall be indebted to the Lenders
for the amount thereof immediately) upon the Agent's initiation of the transfer
of the proceeds of such loan or advance in accordance with the Lead Borrower's
instructions or the charging of the amount of such loan to the Loan Account (in
all other circumstances).
(c) There shall not be any recourse to or liability of the
Agent or any Lender (except to the extent caused by the gross negligence or
willful misconduct of the Agent or any Lender as determined by a court of
competent jurisdiction), on account of:
(i) Any delay in the making of any loan or advance
requested under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan or advance
constituting collected funds.
(iii) Any delay in the receipt, and/or any loss,
of funds which constitute a loan or advance under the
Revolving Credit, the wire transfer of which was properly
- 37 -
initiated by the Agent in accordance with wire instructions provided to
the Agent by the Lead Borrower.
2.6 SwingLine Loans
(a) For ease of administration, Base Margin Loans may be
made by the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in
accordance with the procedures set forth in this Agreement for the making of
loans and advances under the Revolving Credit. The unpaid principal balance of
the SwingLine Loans shall not at any one time be in excess of the SwingLine Loan
Ceiling (which SwingLine Loan Ceiling is subject to amendments from time to
time, by reasonable advance written notice by the Agent to the Lead Borrower).
(b) The aggregate unpaid principal balance of SwingLine
Loans shall bear interest as if the same were loans and advances under the
Revolving Credit.
(c) The obligation to repay SwingLine Loans shall be
evidenced by a Note (the "SWINGLINE NOTE")in the form of EXHIBIT 2.6(C), annexed
hereto, executed by the Lead Borrower on behalf of itself and the other
Borrowers and payable to the SwingLine Lender. Neither the original nor a copy
of the SwingLine Note shall be required, however, to establish or prove any
Liability with respect to the SwingLine Loans. Upon the Lead Borrower being
provided with an affidavit (which shall include an indemnity reasonably
satisfactory to the Lead Borrower) from the Agent to the effect that the
SwingLine Note has been lost, mutilated, or destroyed, the Lead Borrower shall
on behalf of itself and the other Borrowers execute a replacement thereof and
deliver such replacement to the SwingLine Lender.
(d) For all purposes of this Loan Agreement, the SwingLine
Loans and the Lead Borrower's obligations to the SwingLine Lender constitute and
are secured as "Liabilities".
(e) SwingLine Loans may be subject to periodic settlement
with the Lenders as provided in Section 13.2 of this Loan Agreement.
2.7 The Loan Account.
(a) An account ("LOAN ACCOUNT") shall be opened on the books
of the Agent. A record may be kept in the Loan Account of all loans made under
or pursuant to this Agreement and of all payments thereon.
- 38 -
(b) The Agent may also keep a record (either in the Loan
Account or elsewhere, as the Agent may from time to time elect) of all interest,
fees, service charges, costs, expenses, and any other amounts owed the Agent,
the SwingLine Lender and each Lender on account of the Liabilities and of all
credits against all such amounts so owed.
(c) All credits against the Liabilities shall be conditional
upon receipt of final payment to the Agent for the Account of each Lender of the
amounts so credited. The amount of any item credited against the Liabilities
which is charged back against Agent or any Lender for any reason or is not
finally paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrowers are obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments which will be due
and payable between the date of such determination and the first day of the then
next succeeding month as having been advanced under the Revolving Credit,
whether or not such amounts are then due and payable.
(e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrowers pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in the Borrowing Base being exceeded. Such action
on the part of the Agent shall not constitute a waiver of the Agent's rights or
the Borrowers' obligations under Section 2.9(b). Any amount which is added to
the principal balance of the Loan Account as provided in this Section 2.7(e)
shall bear interest , subject to Section 2.10(d), at the Base Margin Rate.
(f) Any statement rendered by the Agent or any Lender to the
Borrowers concerning the Liabilities shall, in the absence of manifest
error, be considered correct and accepted by the Borrowers and shall
be conclusively binding upon the Borrowers unless the Lead Borrower
provides the Agent with written objection thereto within thirty (30) days
from the mailing of such statement, which written objection shall
indicate, with particularity, the reason for such objection. In the absence
of manifest error, the Loan Account and the Agent's books and
- 39 -
records concerning the loan arrangement contemplated herein and the Liabilities
shall be prima facie evidence of the items described therein.
2.8 The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2.8,
annexed hereto, executed by the Lead Borrower on behalf of itself and the other
Borrowers, one payable to each Lender. Neither the original nor a copy of any
Revolving Credit Note shall be required, however, to establish or prove any
Liability. In the event that any Revolving Credit Note is ever lost, mutilated,
or destroyed, the Lead Borrower shall execute a replacement thereof on behalf of
itself and the other Borrowers and deliver such replacement to the Agent.
2.9 Payment of The Loan Account.
(a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Such payments shall be applied first to Base Margin Loans and only then to
Eurodollar Loans.
(b) The Borrowers, upon notice or demand from the Agent or
any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base. Such payments shall be applied first to Base Margin Loans and
only then to Eurodollar Loans.
(c) Unless otherwise instructed by the Lead Borrower, the
Agent shall endeavor to cause those application of payments (if any), pursuant
to Sections 2.9(a) and 2.9(b) against Eurodollar Loans then outstanding in such
manner as results in the least cost to the Borrowers, but shall not have any
affirmative obligation to do so nor any liability on account of its failure to
do so. The Lead Borrower may request the Agent to defer the application of a
payment to a Eurodollar Loan until the end of the applicable Eurodollar Interest
Period and to hold the funds allocated for such payment as interim cash
collateral. In no event shall action or inaction by the Agent excuse the
Borrowers from any indemnification obligation under Section 2.9(e) unless such
action or inaction resulted from the Agent's gross negligence or willful
misconduct.
- 40 -
(d) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other Liabilities on the Termination Date.
(e) Upon the written request of the Agent, the Borrowers
shall indemnify each Lender and hold each Lender harmless from and against any
loss, cost or expense (including loss of anticipated profits) which such Lender
may sustain or incur (including, without limitation, by virtue of acceleration
after the occurrence of any Event of Default) as a consequence of the following:
(i) Default by the Borrowers in payment of the
principal amount of or any interest on any Eurodollar Loan as and when
due and payable, including any such loss or expense arising from
interest or fees payable by such Lender to lenders of funds obtained by
it in order to maintain its Eurodollar Loans.
(ii) Default by the Borrowers in making a borrowing or
conversion after the Lead Borrower has given (or is deemed to have
given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Eurodollar Loan or
the conversion of any such Loan to a Base Margin Loan on a day that is
not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Lender to lenders of funds
obtained by it in order to maintain any such Loans as "breakage fees".
2.10 Interest Rates.
(a) Each Revolving Credit Loan or advance hereunder shall
bear interest at the Base Margin Rate (determined based on a 360 day year and
actual days elapsed) unless it is made as, or is converted to, a Eurodollar Loan
pursuant to Section 2.4 hereof..
(b) Each Revolving Credit Loan which consists of a
Eurodollar Loan shall bear interest at the applicable Eurodollar Rate
(determined based on a 360 day year and actual days elapsed), as adjusted
pursuant to Section 2.10(e), below.
- 41 -
(c) The Lead Borrower shall not select, renew, or convert
any interest rate for a Revolving Credit Loan such that, in addition to interest
at the Base Margin Rate, there are more than Six (6) Eurodollar Rates applicable
to the Revolving Credit Loans at any one time.
(d) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears on the applicable Interest Payment Date
therefor. Following the occurrence of any Event of Default (and whether or not
the Agent exercises the Agent's rights on account thereof), all Revolving Credit
Loans shall bear interest, at the option of the Agent or at the direction of the
SuperMajority Lenders, at a rate which is the aggregate, in the case of Base
Margin Loans, of the then applicable Base Margin Rate plus two percent (2%) per
annum, and in the case of Eurodollar Loans, the then applicable Eurodollar Rate
plus two percent (2%) per annum.
(e) Commencing with the first day of the fiscal month after
the Agent's receipt of the Borrowers' annual financial statement for the
Borrowers' Fiscal Year 1999, the Eurodollar Margin and the Base Margin shall be
reset monthly, on the first day of each month, based upon the Margin Pricing
Grid set forth below. If during any thirty (30) day period ending with the last
day of a given month, Availability on any five (5) consecutive Business Days
falls, in the case of Tier III Loans, below $35 Million, or in the case of Tier
II Loans, below $15 Million, the Eurodollar Margin and the Base Margin shall be
adjusted downward commencing the first day of the following month. The
Eurodollar Margin and the Base Margin shall be reset upward on the first day of
a given month only if during the immediately preceding thirty (30) day period,
in the case of Loans priced at Tier II, Availability is $35 Million or more, and
in the case of Loans priced at Tier I, Availability is $15 Million or more.
MARGIN PRICING GRID
TIER MINIMUM AVAILABILITY, FOR PRECEDING MONTH EURODOLLAR MARGIN BASE MARGIN
(BASIS POINTS) (PERCENTAGE)
I $15 Million or less 225 0.50
II More than $15 Million, but less than $35 200 0.25
Million
III $35 Million or more 175 0
- 42 -
2.11 Agent's Fee. In addition to any other fee or expense paid by the
Borrowers on account of the Revolving Credit, the Borrowers shall pay the Agent
an AGENT'S FEE as provided in a separate fee letter of even date herewith from
the Agent to the Borrowers.
2.12 Underwriting Fee. In addition to any other fee or expense paid by
the Borrowers on account of the Revolving Credit, the Borrowers shall pay the
Agent an UNDERWRITING FEE as provided in a separate fee letter of even date from
the Agent to the Borrowers.
2.13 Line (Unused) Fee. In addition to any other fee by the Borrower on
account of the Revolving Credit, the Borrower shall pay the Agent for the
Pro-Rata benefit of the Lenders a LINE (UNUSED) FEE in arrears, on the first
Business Day of each calendar quarter (and on the Termination Date). The Line
(Unused) Fee shall be equal to three tenths of one percent (0.30%) per annum of
the average difference, during the quarter just ended (or such shorter period as
may pertain to the first such payment and to the payment being made on the
Termination Date as to which no Line (Unused) Fee shall previously have been
paid, between:
(a) the Loan Ceiling
and
(b) the aggregate of
(i) the unpaid principal balance of the Loan Account.
Plus
(ii) the Stated Amount of all then outstanding L/C's.
2.14 Early Termination Fee. In the event that the Termination Date
occurs, for any reason, prior to November 30, 2000, the Borrower shall pay the
Agent, for the Pro-Rata benefit of the Lenders, as an EARLY TERMINATION FEE an
amount equal to one half of one percent (0.5%) of the Loan Ceiling in effect as
of the date of this Agreement.
- 43 -
2.15 Concerning Fees. The Borrowers shall not be entitled to any credit,
rebate or repayment of the Agent's Fee, Underwriting Fee, Line (Unused) Fee,
Early Termination Fee, or other fee previously earned by the Agent or any Lender
pursuant to this Agreement, notwithstanding any termination of this Agreement or
suspension or termination of the Agent's and any Lender's respective obligation
to make loans and advances hereunder.
2.16 Agent's and Lenders' Discretion.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
reasonable exercise of its judgment, in good faith (which shall be rebuttably
presumed), based upon that Person's consideration of any such factor as that
Person, taking into account information of which that Person then has actual
knowledge, believes:
(i) Would reasonably be expected to affect the value
of the Collateral, the enforceability of the Agent's security and
collateral interests therein, or the amount which the Agent would likely
realize therefrom (taking into account delays which may possibly be
encountered in the Agent's realizing upon the Collateral and likely
Costs of Collection);
(ii) Indicates that any report or financial information
delivered to the Agent or any Lender by or on behalf of the Borrowers is
incomplete, inaccurate, or misleading in any material manner or was not
prepared in accordance with the requirements of this Agreement;
(iii) Reasonably suggests that the Borrowers will become
the subject of a bankruptcy or insolvency proceeding; or
(iv) Constitutes a Suspension Event.
(b) In the exercise of such judgment, the Agent also may
take into account any of the following factors:
(i) Those included in, or tested by, the definitions
of "Acceptable Inventory," "Acceptable L/C Inventory," "Acceptable
In-Transit Inventory," "Retail," and "Cost";
- 44 -
(ii) Changes to the current financial and business
climate of the industry in which the Borrowers compete (having regard
for the Borrowers' position in that industry);
(iii) Changes to general macroeconomic conditions which
have a material effect on the Borrowers' cost structure;
(iv) Changes reflecting seasonality with respect to the
Borrowers' Inventory and patterns of retail sales; and
(v) Changes in such other factors as the Agent
determines to have a material bearing on credit risks associated with
the providing of loans and financial accommodations to the Borrowers.
(c) The burden of establishing the failure of the Agent or
any Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers'.
2.17 Procedures For Issuance of L/C's.
(a) The Lead Borrower on behalf of itself and the other
Borrowers may request that the Agent cause the issuance of L/C's for the account
of the Borrowers. Each such request shall be made in such a manner as may from
time to time be acceptable to the Agent.
(b) The Agent will endeavor to cause the issuance of any L/C
so requested by the Lead Borrower, provided that , at the time that the request
is made, the Revolving Credit has not been suspended as provided in Section
2.4(g) and:
(i) The aggregate Stated Amount of all L/C's then
outstanding (giving effect to the L/C whose issuance is requested), does
not exceed Thirty Million Dollars ($30,000,000.00);
(ii) The expiry of the requested L/C is not later than
the earlier of thirty (30) days prior to the Maturity Date or the
following:
(A) For standby L/C's: One (1) year from
initial issuance.
(B) For documentary L/C's: One hundred eighty
(180) days from issuance; and
(iii) The Borrowing Base would not be exceeded upon the
issuance of the requested L/C.
- 45 -
(c) The Lead Borrower shall execute such documentation to
apply for and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of,
the Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue an
L/C; or
(ii) Any action or inaction of an Issuer on account of
or in respect to, any L/C unless the Issuer is the Agent or Lender and
such action or inaction is determined by a court of competent
jurisdiction to constitute gross negligence or willful misconduct.
(e) The Borrowers shall reimburse the Issuer for the amount
of any drawing honored under an L/C on the same day on which such drawing is
honored. The Agent, without the request of the Lead Borrower, may advance under
the Revolving Credit (and charge to the Loan Account) the amount of any draws
honored under any L/C and any other amount for which the Lead Borrower, the
Issuer, or any Lender becomes obligated on account of, or in respect to, any
L/C, other than any such amounts incurred as a result of the gross negligence or
willful misconduct of the Issuer or such Lender, as the case may be. Such
advance shall be made whether or not a Suspension Event is then continuing or
such advance would result in Borrowing Base's being exceeded. Such action shall
not constitute a waiver of the Agent's rights under Section 2.9(b) hereof.
2.18 Fees For L/C's.
(a) The Lead Borrower on behalf of itself and the other
Borrowers shall pay to the Agent for the account of the Lenders, on account of
each L/C procured by the Agent, a fee, as follows:
(i) For each standby L/C: The then applicable
Eurodollar Margin less twenty-five (25) basis points, per annum, of the
Stated Amount of such standby L/C, payable quarterly in arrears, on the
first day of each of the Lead Borrower's fiscal quarters.
(ii) For each documentary L/C's: One and one-quarter
percent (1.25%) per annum of the weighted average of the Stated Amount
of such documentary L/C outstanding at any time during
the period since the then most recent payment of such fee,
- 46 -
payable quarterly in arrears,
on the first day of each of the Lead Borrower's fiscal quarters, and on
the End Date.
(iii) Notwithstanding Subsections (i) and (ii), above,
following the occurrence of any Event of Default (and whether or not the
Agent exercises the Agent's rights on account thereof), the above fees,
at the option of the Agent or the direction of the SuperMajority
Lenders, shall be two percent (2%) per annum above the applicable rates
above.
(b) In addition to the fees to be paid as provided in
Subsection 2.18(a), above, the Lead Borrower shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, all issuance, processing,
negotiation, amendment, and administrative fees and other amounts charged by the
Issuer on account of, or in respect to, any L/C.
2.19 Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or
any advising, negotiating, or paying bank with respect to any L/C shall
be responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to any Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing, the falsification, or the legal effect
of, any documents called for under any L/C if such documents appear to
be in order.
(b) The Issuer may honor, as complying with the terms of
any L/C and of any drawing thereunder, any drafts or other documents otherwise
in order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.
(c) Unless the Lead Borrower on behalf of itself and
the other Borrowers otherwise instructs any Issuer, in the particular instance,
the Lead Borrower hereby authorizes such Issuer to:
(i) Select an advising bank;
(ii) Select a paying bank; and
- 47 -
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrowers. The Issuer shall have
discharged the Issuer's obligations under any L/C or drawing thereunder which
includes payment instructions if the Issuer initiates the method of payment
called for thereby (or initiates any other commercially reasonable and
comparable method). None of the Agent, any Lender, or the Issuer shall have any
responsibility for any inaccuracy, interruption, error, or delay in transmission
or delivery by post, telegraph or cable, or for any inaccuracy of translation,
to the extent not caused by them.
(e) The Agent's, each Lender's, and the Issuer's rights,
powers, privileges and immunities specified in or arising under this Agreement
are in addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrowers, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or
regulation, or any directive of any administrative or governmental authority
(whether or not having the force of law), or in the interpretation thereof
by any court or administrative or governmental authority charged with the
administration thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Agent, any Lender or any Issuer has an obligation to lend or to fund
drawings under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section 2.19(g)(i) or 2.19(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining any
L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the
aggregate of such cost increases resulting from such events),
then, upon demand by the Agent and delivery by the Agent to
the Lead Borrower of a certificate of an officer of such Issuer
- 48 -
describing such change in law, executive order, regulation, directive, or
interpretation thereof, its effect on such Issuer, and the basis for determining
such increased costs and their allocation, the Lead Borrower shall immediately
pay to the Agent, from time to time as specified by the Agent, such amounts as
shall be sufficient to compensate such Issuer for such increased cost. Any
Issuer's determination of costs incurred under Section 2.19(g)(i) or
2.19(g)(ii), above, and the allocation, if any, of such costs among the Lead
Borrower and other letter of credit customers of such Issuer, if done in good
faith and made on an equitable basis and in accordance with such officer's
certificate, shall, in the absence of manifest error, be conclusive and binding
on the Borrowers.
(h) The obligations of the Lead Borrower on behalf of itself
and the other Borrowers under this Agreement with respect to L/C's are absolute,
unconditional, and irrevocable and shall be performed strictly in accordance
with the terms hereof under all circumstances whatsoever including, without
limitation, the following:
(i) Any lack of validity or enforceability or restriction,
restraint, or stay in the enforcement of this Agreement, any L/C, or any other
agreement or instrument relating thereto;
(ii) Any amendment or waiver of, or consent to the departure
from, any L/C;
(iii) The existence of any claim, set-off, defense, or other
right which the Lead Borrower may have at any time against the beneficiary of
any L/C; and
(iv) Any good faith honoring of a drawing under any L/C, which
drawing possibly could have been dishonored based upon a strict construction of
the terms of the L/C.
2.20 Changed Circumstances.
(a) The Agent may give the Lead Borrower notice that:
(i) The Agent shall have determined in good faith (which
determination shall be final and conclusive) on any day
on which the Eurodollar rate would otherwise be set, that
by reason of changes arising after the date of this Agreement
- 49 -
affecting the principal market in Eurodollars in which BankBoston, N.A.
participates, adequate and fair means do not exist for ascertaining such
rate; or
(ii) The Agent shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) The continuation of, or conversion of any
Revolving Credit Loan to, a Eurodollar Loan has been made
impracticable or unlawful by the occurrence of a contingency that
materially and adversely affects the applicable market or
compliance by the Agent or any Lender in good faith with any
applicable law or governmental regulation, guideline or order or
interpretation or change thereof by any governmental authority
charged with the interpretation or administration thereof or with
any request or directive of any such governmental authority
(whether or not having the force of law); or
(B) The indices on which the interest rates
for Eurodollar Loans are based shall no longer represent the
effective cost to the Agent or any Lender for U.S. dollar
deposits in the interbank market for deposits in which it
regularly participates.
(b) In the event that the Agent gives the Lead Borrower notice of
an occurrence described in Section 2.20(a), then, until the Agent notifies the
Lead Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Agent and of each Lender to
make Eurodollar Loans of the type affected by such changed circumstances
or to permit the Lead Borrower to select the affected interest rate as
otherwise applicable to any Revolving Credit Loans shall be suspended.
(ii) Any notice which the Lead Borrower shall have given
the Agent with respect to any Eurodollar Loan, the time for action with
respect to which has not occurred prior to the Agent's having given
notice pursuant to Section 2.20(a), shall be deemed at the option of the
Agent not to have been given.
(iii) Subject to the provisions of Section 2.9(e), the
Lead Borrower may (and, with respect to any event described in Section
2.20(a)(ii), shall)
(A) cancel the relevant borrowing or conversion
notice on the same date the Lead Borrower was notified of such event;
and
(B) prepay or cause to be prepaid any then affected
Eurodollar Loans.
- 50 -
2.21 Increased Costs/Taxes.
(a) If, as a result of any changes, arising after the date
of this Agreement, in any requirement of law, or of the interpretation or
application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:
(i) subjects any Lender to any taxes or changes the
basis of taxation, or increases any existing taxes, on payments of
principal, interest or other amounts payable by the Borrowers to the
Agent or any Lender under this Agreement except for taxes on the Agent
or any Lender's overall net income or capital imposed by the
jurisdiction in which the Agent or that Lender's principal or lending
offices are located, or subjects any Lender to any stamp or documentary
taxes and any other excise or property taxes or charges or similar
levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document;
(ii) imposes, modifies or deems applicable any reserve,
cash margin, special deposit or similar requirements against assets held
by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(iii) imposes on any Lender any other condition with
respect to any Loan Document; or
(iv) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in such
Lender's reasonable opinion, is to increase the cost to that
Lender of making or maintaining any loan, advance or financial
- 51 -
accommodation or to reduce the income receivable by such Lender in respect
of any loan, advance or financial accommodation by an amount which such Lender
deems to be material, then upon the Agent's giving written notice thereof, from
time to time, to the Lead Borrower (such notice to set out in reasonable detail
the facts giving rise to and a summary calculation of such increased cost or
reduced income), the Lead Borrower on behalf of itself and the other Borrowers
shall forthwith pay to the Agent, for the benefit of such Lender, upon receipt
of such notice, that amount which shall compensate the subject Lender for such
additional cost or reduction in income. Each Lender agrees, with respect to the
provisions of this Section 2.21, to treat the Borrowers in a manner
substantially similar to its other similarly situated customers
(b) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Lead Borrower or the Agent (but only so long as such
Lender remains lawfully able to do so), shall provide the Lead Borrower and the
Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate,
or any successor form prescribed by the Internal Revenue Service, certifying
that such Lender is entitled to benefits under an income tax treaty to which the
United States is a party that reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (iii) any
other for or certificate required by any governmental authority (including
any certificate required by Sections 871(h) and 881(c) of the Internal Revenue
Code), certifying that such Lender is entitled to an exemption from or a
reduced rate of tax on payments pursuant to this Agreement or any of the other
Loan Documents.
(c) For any period with respect to which a Lender has
failed to provide the Borrowers and the Agent with the appropriate form
pursuant to Section 2.21(b) (unless such failure is due to a change in treaty,
law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 2.21 (a) with respect to
taxes imposed by or within the United States; provided, however,
that should a Lender that is otherwise exempt from or subject
to a reduced rate of withholding tax become subject to taxes because
of its failure to deliver a form required hereunder, the Borrowers
- 52 -
shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such taxes.
(d) If the Borrowers are required to pay additional
amounts to or for the account of any Lender or Agent pursuant to
Section 2.21(a), then such Lender or the Agent will agree to use reasonable
efforts to change the jurisdiction of its applicable lending office (meaning
the office by which Revolving Credit Loans from such Lender are made and
maintained) so as to eliminate or reduce any such additional payment which may
thereafter accrue.
2.22 Lenders' Commitments.
(a) The obligations of each Lender are several and not
joint. No Lender shall have any obligation to the Borrowers to make any loan or
advance under the Revolving Credit in excess of the lesser of:
(i) that Lender's Commitment Percentage of the subject
loan or advance or of Availability; and
(ii) that Lender's unused Dollar Commitment
(b) No Lender shall have any liability to any Borrower
on account of the failure of any other Lender to provide any loan or advance
under the Revolving Credit nor any obligation to make up any shortfall which
may be created by such failure.
(c) The Dollar Commitments, Commitment Percentages,
and identities of the Lenders (but not the overall Commitment) may be changed,
from time to time by the reallocation or assignment of Dollar Commitments
and Commitment Percentages amongst the Lenders or with other Persons who
determine to become "Lenders", provided, however,
(i) Unless an Event of Default has occurred (in which
event, no consent of the Lead Borrower is required) any assignment to a
Person not then a Lender shall be in an amount not less than $10,000,000
and shall be subject to the prior consent of the Lead Borrower (not to
be unreasonably withheld), which consent will be deemed given unless the
Lead Borrower provides the Agent with written objection not more than
five (5) Business Days after the Agent shall have given the Lead
Borrower written notice of such proposed assignment).
- 53 -
(ii) Any such assignment or reallocation shall be on a
pro-rata basis such that the ratio (expressed as a percentage) of the
Dollar Commitment reallocated or assigned to any Person to the overall
Dollar Commitments equals the Commitment Percentage assigned or
reallocated to such Person.
(d) Upon written notice given the Lead Borrower from
time to time by the Agent, of any assignment or allocation referenced in
Section 2.22(c):
(i) The Lead Borrower, on behalf of itself and the
other Borrowers, shall execute one or more replacement Revolving Credit
Notes to reflect such changed Dollar Commitments, Commitment
Percentages, and Lenders and shall deliver such replacement Revolving
Credit Notes to the Agent (which promptly thereafter shall cancel and
deliver to the Lead Borrower the Revolving Credit Notes so replaced),
provided however, that in the event a Revolving Credit Note is to be
exchanged following its acceleration or the entry of an order for relief
under the Bankruptcy Code with respect to the Borrowers, the Agent, in
lieu of causing the Lead Borrower, on behalf of itself and the other
Borrowers, to execute one or more new Revolving Credit Notes, may issue
a certificate confirming the resulting Dollar Commitments and Commitment
Percentages.
(ii) Such change shall be effective from the effective
date specified in such written notice and any Person added as a Lender
shall have all rights and privileges of a Lender hereunder thereafter as
if such Person had been a signatory to this Agreement and any other Loan
Document to which the Lenders are signatories and any person removed as
a Lender shall thereafter be relieved of any obligations or
responsibilities of a Lender hereunder and thereunder.
2.23 Concerning Joint and Several Liability of the Borrowers.
(a) Each Borrower is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under this
Agreement and the Loan Documents, for the mutual benefit, directly and
indirectly, of each Borrower and in consideration of the undertakings of each
other Borrower to accept joint and several liability for the Liabilities.
- 54 -
(b) Each Borrower, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but as a
co-debtor, joint and several liability with the other Borrowers, with respect
to the payment and performance of all Liabilities, it being the intention of
the parties that all the Liabilities shall be the joint and several
Liabilities of each of the Borrowers without preferences or distinction.
(c) If and to the extent that any of the Borrowers fail
to make any payment with respect to any of the Liabilities as and when due or
to perform any of the Liabilities in accordance with the terms thereof, then
in each such event the other Borrowers will make such payment with respect to,
or perform, such Liability.
(d) The Liabilities of each Borrower under this
Agreement constitute full recourse Liabilities of such Borrowers enforceable
against such Borrowers to the full extent of its properties and assets,
irrespective of the validity, regularity, or enforceability of this
Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each Borrower other than the Lead Borrower hereby (without prejudice
to its status as Borrower and for the purposes of providing for the eventuality
that, contrary to the terms of this Agreement, it is held by a court or
arbitrator to be a guarantor) waives notice of acceptance of its joint and
several liability, notice of any Revolving Credit Loans made under this
Agreement, notice of any action at any time taken or omitted by the Agent or the
Lenders under or in respect of any of the Liabilities, and generally, to the
extent permitted by applicable law, all demands, notices and other formalities
of every kind in connection with this Agreement.
(f) Each Borrower other than the Lead Borrower hereby
(without prejudice to its status as Borrower and for the purposes of providing
for the eventuality that, contrary to the terms of this Agreement,
it is held by a court or arbitrator to be a guarantor)
assents to, and waives notice of, any extension or postponement
of the time for the payment of any of the Liabilities, the
acceptance of any payment of any of the Liabilities, the
acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by the Agent or the Lenders
at any time or times in respect of any default by any other
Borrower in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by the Agent or the Lenders in respect of any of the Liabilities, and
- 55 -
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Liabilities or the addition,
substitution or release, in whole or in part, of any other Borrower. Without
limiting the generality of the foregoing, each Borrower other than the Lead
Borrower (without prejudice to its status as Borrower and for the purposes of
providing for the eventuality that, contrary to the terms of this Agreement, it
is held by a court or arbitrator to be a guarantor) assents to any other action
or delay in acting or failure to act on the part of the Agent or the Lenders
with respect to the failure by the other Borrowers to comply with any of its
respective Liabilities, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might afford grounds for
terminating, discharging or relieving any Borrower, in whole or in part, from
any of its Liabilities.
(g) It is the intention of each Borrower that, so long
as any of the Liabilities hereunder remain unsatisfied, the Liabilities of the
Borrowers shall not be discharged except by performance and then only to the
extent of such performance. The Liabilities of any Borrower under this Agreement
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, re-construction or similar proceeding
with respect to any other Borrower. The joint and several liability of the
Borrowers hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any of the Borrowers, the
Agent or any Lender.
(h) The provisions of this Section are made for the
benefit of the Agent and the Lenders and their successors and assigns,
and may be enforced in good faith by them from time to time against any or
all of the Borrowers as often as occasion therefor may arise and without
requirement on the part of the Agent or the Lenders first to marshal any of
their claims or to exercise any of their rights against any other Borrower
or to exhaust any remedies available to them against any other Borrower or to
resort to any other source or means of obtaining payment of any of the
Liabilities hereunder or to elect any other remedy. The provisions of this
Section shall remain in effect until all of the Liabilities shall have been
paid in full or otherwise fully satisfied. Without prejudice to the status of
any Borrower as Borrower, and for the purposes of providing for the eventuality
that, contrary to the terms of this Agreement, it is held by a court or
- 56 -
arbitrator that any Borrower other than the Lead Borrower is a guarantor, each
Borrower, other the Lead Borrower, hereby agrees that, if at any time, any
payment, or any part thereof, made in respect of any of the Liabilities, is
rescinded or must otherwise be restored or returned by the Agent or any
Lenders upon the insolvency, bankruptcy or reorganization, of any of the
Borrowers, or otherwise, the provisions of this Section will forthwith be
reinstated in effect, as though such payment had not been made.
- 57 -
2.24 Lechters, Inc. as Lead Borrower. The Borrowers for their
convenience have appointed the Lead Borrower as their agent for the purposes of
entering into the loan arrangements contemplated hereby, requesting advances,
making representations, warranties and certifications, and distributing proceeds
of loans and generally taking such other action as is reasonably necessary to
administer the Revolving Credit on behalf of the Borrowers. Each Borrower
authorizes the Lead Borrower to execute and deliver, on each Borrower's behalf
and stead, the Revolving Credit Notes to each Lender, the SwingLine Note to the
SwingLine Lender, this Agreement and the other Loan Documents to evidence the
Liabilities of the Borrowers to the Lenders and to the Agent, as well as to
execute such additional documents as the Agent may require to further evidence
the Revolving Credit or the granting of security interests in the Collateral as
contemplated by this Agreement, and for such purposes, each Borrower appoints
the Lead Borrower as its attorney-in-fact to do all things consistent with the
foregoing. Any document executed by the Lead Borrower in connection herewith or
in furtherance of the Borrowers' undertakings hereunder, shall be binding upon
each Borrower as if such Borrower had executed such document, and neither the
Agent nor the Lenders shall have any responsibility to inquire as to the Lead
Borrower's authority to act on behalf of the other Borrowers. The authority of
the Lead Borrower to act on behalf of and to bind each Borrower, shall continue
unless and until the Agent's actual receipt of written notice of the termination
of such authority, which notice is signed by the respective President or other
appropriate corporate officer of any of the Borrowers revoking such authority,
and which notice shall be effective only as to loans, advances or other
accommodations made more than thirty (30) days following the Agent's receipt of
such notice. In recognition of the role of the Lead Borrower, the Agent and the
Lenders agree to communicate with, and send notices to, only the Lead Borrower
in connection with or relating to the Loan Documents.
ARTICLE III - CONDITIONS PRECEDENT:
As a condition to the effectiveness of this Agreement, the establishment
of the Revolving Credit, the procurement of any L/C hereunder, and the making of
the first loan under the Revolving Credit, each of the documents respectively
described in Sections 3.1 through and including 3.4 (each in form and
substance satisfactory to the Agent and the Lenders) shall have
- 58 -
been delivered to the Agent, and the conditions respectively described in
Sections 3.5 through and including 3.10, shall have been satisfied:
3.1. Corporate Due Diligence.
(a) A Certificate of corporate good standing with
respect to each Borrower issued by the Secretary of State of the State in
which that Borrower was organized.
(b) Certificates of qualification to do business as a
foreign corporation for any Borrowers issued by the Secretary of State of each
State in which such Borrower's conduct of business or ownership of assets
requires such qualification.
(c) A certificate of each Borrower's respective
Secretary as to the due adoption and continued effectiveness of, each corporate
resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents, such certificate to set forth the text of each such resolution in an
attachment thereto.
3.2. Opinion. An opinion of counsel to the Borrowers in form and
substance satisfactory to the Agent.
3.3. Additional Documents. Such additional instruments and documents
as the Agent or its counsel reasonably may require or request, including the
following:
(a) Those documents required to be provided pursuant to
Section 7.1 (which relates to deposit accounts) and 7.2 (which relates to credit
card accounts).
(b) Pledges by each of the Borrowers of the capital
stock of any other Borrower which the pledgor Borrower holds, including a
pledge by the Parent of the stock it holds in all of its Subsidiaries, in the
form of Exhibit 3.3(1).
(c) Revolving Credit Notes, payable to each Lender in
the amount of such Lender's Dollar Commitment, and the SwingLine Note, payable
to the SwingLine Lender , in the amount of the SwingLine Loan Ceiling.
- 59 -
3.4. Officers' Certificates. Certificates executed by the President,
Chief Executive Officer or the Chief Financial Officer of the Lead Borrower and
stating that the representations and warranties made by the Borrowers to the
Agent and the Lenders in the Loan Documents are true and complete as of the date
of such certificate, and that no event has occurred which is or which, solely
with the giving of notice or passage of time (or both), would be an Event of
Default.
3.5. Representations and Warranties. Each of the representations made by
or on behalf of the Borrowers in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrowers shall be true and complete as of the date as of which
such representation or warranty was made.
3.6. Minimum Excess Availability. After giving effect to the first loan
under the Revolving Credit, any charges to the Loan Account made in connection
with the establishment of the credit facility contemplated hereby, and L/C's to
be issued at, or immediately subsequent to, such establishment, Availability
shall be not less than $100 Million, which amount shall include for the purposes
of this Section 3.6, cash and marketable securities.
3.7. All Fees and Expenses Paid. All fees due at or immediately after
the first loan under the Revolving Credit and all costs and expenses incurred by
the Agent in connection with the establishment of the credit facility
contemplated hereby (including the fees and expenses of counsel to the Agent)
shall have been paid.
3.8. No Event of Default. No Event of Default shall then be continuing.
3.9. No Adverse Change. No event shall have occurred or failed to occur,
which occurrence or failure has had or would have a Materially Adverse Effect
upon the Borrower's financial condition when compared with such financial
condition at October 2, 1999.
- 60 -
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head office in Boston, Massachusetts, except
for such documents as are executed and delivered to the Agent at the closing of
the transaction contemplated hereby. Under no circumstances will this Agreement
take effect until executed and accepted by the Agent at such head office.
3.10. Delivery of Notices. The (Borrowers) shall have complied with the
provisions of Sections 7.1(b) and 7.2(b), below.
ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Borrowers, in addition to all other
representations, warranties, and covenants made by the Borrowers in any other
Loan Document, represent, warrant, and covenant as follows:
4.1. Payment and Performance of Liabilities. The Borrowers shall, and
hereby authorize the Lead Borrower on their behalf to pay each Liability when
due (or when demanded if payable on demand) and shall promptly, punctually, and
faithfully perform each other Liability.
4.2. Due Organization - Corporate Authorization - No Conflicts.
(a) Each Borrower presently is and shall (except as
otherwise permitted by this Agreement in connection with (i) permitted
store closings, (ii) restructurings of the manner in which the Borrowers carry
on their business, and (iii) mergers between or among Related Entities)
hereafter remain in good standing as a corporation organized under the laws
of the State of its incorporation indicated in EXHIBIT 4.2 to this Agreement
and shall hereafter remain duly qualified and in good standing in every other
State in which, by reason of the nature or location of that Borrower's assets
or operation of that Borrower's business, such qualification is necessary.
(b) Each Related Entity is listed on EXHIBIT 4.2,
annexed hereto. Each Related Entity is and shall (except as
otherwise permitted by Agreement (i) in connection with
- 61 -
permitted store closings, (ii) restructurings of the manner in which they
carry on their business, and (iii) mergers between or among Related Entities)
hereafter remain in good standing in the State in which incorporated and is and
shall hereafter remain duly qualified as a foreign corporation in every other
State in which, by reason of that entity's assets or the operation of such
entity's business, such qualification is necessary. The Lead Borrower shall
provide the Agent with prior written notice of any entity's becoming or ceasing
to be a Related Entity.
(c) No Borrower shall change State of incorporation
without prior notification to Agent.
(d) Each Borrower has all requisite corporate power
to execute and deliver all Loan Documents to which it is a party and has and
will hereafter, subject to Section 4.2(a), retain all requisite corporate power
to perform all Liabilities.
(e) The execution and delivery of each Loan Document by
each Borrower, or by the Lead Borrower on behalf of each Borrower that is a
party thereto, such Borrower's consummation of the transactions contemplated
by such Loan Document (including, without limitation, the creation of security
interests by such Borrower as contemplated hereby), such Borrower's performance
under such Loan Document, the borrowings hereunder, and the use of the proceeds
thereof:
(i) Have been duly authorized by all necessary
corporate action on the part of such Borrower;
(ii) Do not, and will not, contravene in any material
respect any Requirement of Law or obligation of such Borrower; and
(iii) Will not result in the creation or imposition of, or
the obligation to create or impose, any Encumbrance upon any assets of
such Borrower pursuant to any Requirement of Law or obligation of such
Borrower, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and
delivered by the Lead Borrower on behalf of itself and the other Borrowers
and are the legal, valid and binding obligations of the Borrowers, enforceable
against the Borrowers in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, or other laws relating
to or affecting generally the enforcement of creditors' rights or by general
- 62 -
principles of equity (regardless of whether such principles are considered in a
proceeding at law or in equity).
4.3. Trade Names.
(a) EXHIBIT 4.3, annexed hereto, is a listing of:
(i) All names under which each Borrower has ever
conducted its business and
(ii) All entities and/or persons with whom each Borrower
ever consolidated or merged, or from whom each Borrower ever acquired in
a single transaction or in a series of related transactions
substantially all of such entity's or person's assets.
(b) No Borrower will change its name or conduct its
business under any name not listed on EXHIBIT 4.3 or conduct its business in a
state in which that Borrower does not presently conduct its business except:
(i) upon not less than ten (10) days subsequent
written notice (with reasonable particularity) to the Agent; and
(ii) in compliance with all other provisions of this
Agreement.
4.4. Infrastructure.
(a) The Borrowers have and will maintain a sufficient
infrastructure to conduct their business, without experiencing a Material
Adverse Effect.
(b) Each Borrower owns and possesses, or has the right
to use (and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrowers' conduct of the Borrowers' business, except where the failure to
possess such intellectual or proprietary information will not have a Material
Adverse Effect.
(c) The conduct by the Borrowers of the Borrowers'
business does not presently infringe (nor will the Borrowers conduct its
business in the future so as to infringe) the patents, industrial designs,
trademarks, trade names, trade styles, brand names, service marks,
- 63 -
logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person, except where
such infringement does not have a Material Adverse Effect.
4.5. Year 2000 Compliance.
(a) The Borrowers have developed a detailed plan and
timetable with respect to the Borrowers' operations becoming fully Year 2000
Compliant as set forth on EXHIBIT 4.5 and have committed adequate resources to
execute that plan and to meet such timetable. Borrowers shall have implemented,
and shall be fully Year 2000 Complaint consistent with such plan, on or before
December 15, 1999.
(b) Following the Borrowers' operations becoming Year
2000 Compliant, the Borrowers will not suffer or permit their operations
thereafter to cease to be Year 2000 Compliant in any manner which might
reasonably be expected to have a Material Adverse Effect.
4.6. Locations.
(a) TheCollateral, and the books, records, and papers of
Borrowers pertaining thereto, are kept and maintained solely at the Borrowers'
chief executive offices and those locations which are listed on EXHIBIT 4.6(A),
which EXHIBIT includes, with respect to each such location, the name and address
of the landlord on the Lease which covers such location (or an indication that
the Borrowers own the subject location) and of all service bureaus with which
any such records are maintained.
(b) The Borrowers shall not remove any of the
Collateral from such chief executive office or locations listed on EXHIBIT
4.6(A) except to:
(i) accomplish sales, returns, and transfers of
Inventory in the ordinary course of business; or
(ii) move Inventory from one such location to another such
location;
(iii) utilize such of the Collateral as is removed from
such locations in the ordinary course of business (such as motor
vehicles); or
(iv) close or open any store as permitted by Section
4.6(d) (ii) or (iii), respectively.
- 64 -
(c) the Borrowers shall use their reasonable efforts
to provide the Agent with Landlord's Waivers or subordinations, in
substantially the form annexed hereto as Exhibit 4.6(c)(1) for each of
the Borrower's locations in any of the Landlord States, provided that no
Borrower shall be obligated to pay any amount or to grant any concession to a
landlord in order to obtain such Waiver or subordination. The Agent may
establish an Availability Reserve for each of such locations as to which
such a waiver is not so delivered, which Availability Reserve shall be
reduced or eliminated upon delivery of a Waiver for such a location.
(d) The Borrowers will not:
(i) Alter, modify, or amend any Lease in any material
respect in any manner which would have a Material Adverse Effect upon
the liquidation of Inventory.
(ii) Close any location at which any Borrower maintains,
offers for sale, or stores any of the Collateral, provided, that the
Borrowers may make the closures contemplated by the Business Plan, plus
up to thirty (30) additional closures per fiscal year.
(iii) Commit to open or open any new location except (A)
in connection with the relocation of a retail location of a Borrower;
or
(B) the opening of new retail locations;
provided, that each of the following requirements is satisfied:
(I) the Agent shall be provided not
less than ten (10) days prior written notice (with
reasonable detail) of the proposed opening;
(II) Immediately prior to the earliest
day on which the respective Borrower becomes legally
obligated on account of its leasing of the respective new
location, no Event of Default shall occur by reason of
such Borrower's so becoming obligated.
(III) Either:
(1) Such opening is contemplated by
the Business Plan, provided, however, up to
ten (10) additional store openings not contemplated
by the Business Plan shall be permitted in any
fiscal year; or
- 65 -
(2) Availability for the ninety (90)
days prior to such opening was not and
immediately after such opening is not less than $15
Million and on a pro-forma going forward basis for
the twelve (12) month period following such
opening, as reflected in a projection provided to
the Agent no later than seven (7) days prior to
such opening (and prepared based on the same
methodology and with the same assumptions as those
used in the preparation of the Business Plan) will
not be less than $15 Million.
(IV) If the location is in a State
listed on EXHIBIT 4.6(c), the Lead Borrower shall use its
best efforts to provide the Agent with a Landlord's Waiver
or subordination (in the form described in Section 4.6(c))
for such location.
(V) The Borrowers shall be in
compliance with Section 4.25 and shall have executed such
additional financing statements, on account of the subject
new location, as may then be required by Agent.
(e) Except as otherwise disclosed pursuant to, or
permitted by, this Section 4.6 and except for goods in the control of a customs
broker who has entered into a Customs Brokers Agreement, no tangible personal
property of the Borrowers having a cost in excess of $1 Million in the
aggregate is in the care or custody of, or stored or entrusted with, a bailee
or other third party and none having a cost in excess of $1 Million shall
hereafter be placed under such care, custody, storage, or entrustment.
4.7. Title to Assets.
(a) The Borrowers are, and shall hereafter remain, the
owners of the Collateral free and clear of all Encumbrances other than Permitted
Encumbrances.
(b) The Borrowers do not and shall not have possession
of any property on consignment to the Borrowers having a value in excess of $5
Million in the aggregate, at any one time, other than pursuant to a consignment
in respect of which either:
- 66 -
(i) no financing statement has been filed by
consignor or other action taken by consignor under the UCC to perfect or
protect its interest in the consigned goods against the claims of third
party secured creditors; or
(ii) an intercreditor agreement (in a form reasonably
satisfactory to the Agent) between the consignor and the Agent has been
executed.
4.8. Indebtedness.
(a) The Borrowers do not and shall not hereafter have
any Indebtedness with the exceptions of:
(i) Any Indebtedness to the Lenders;
(ii) The Indebtedness (if any) listed on EXHIBIT 4.8;.
(iii) Indebtedness secured by purchase money security
interests not otherwise described in this Section 4.8 and Capital
Leases for the acquisition of Equipment not exceeding $10 Million
outstanding at any one time;
(iv) The 5.00% Notes and any Indebtedness in connection
with the refinancing of the 5.00% Notes as permitted by Section 4.9,
plus, in the event such refinancing is for an amount greater than such
Indebtedness up to an additional $35 Million;
(v) Indebtedness, not to exceed $5,000,000 at any one
time outstanding, which is not otherwise described in this Section
4.8(a) and is not otherwise prohibited by this Agreement; and
(vi) Letters of credit issued by Persons other than the
Lenders secured by Inventory purchased with such letters of credit
(which Inventory shall not constitute Acceptable Inventory so long as
any reimbursement obligation remains with respect to such letters of
credit).
(b) The Borrowers shall not permit more than 20% of that
portion of the aggregate of their Indebtedness for the purchase of goods or
services which is not the subject of reasonable dispute to remain unpaid more
than 45 days beyond then current trade terms provided to the subject Borrower by
the supplier of such goods and services.
- 67 -
4.9 Repayment of 5.00% Notes. No later than sixty (60) days prior
to the stated maturity of the 5.00% Notes, the Parent shall furnish the Agent
with either a pro forma balance sheet showing compliance with Section 4.20
hereof or a commitment or a plan to repay such Notes by refinancing as of the
stated maturity thereof pursuant to terms which are satisfactory to the Agent in
its reasonable discretion with respect to tenor and lien and payment
subordination, as evidenced by its written consent thereto.
4.10. Insurance Policies.
(a) EXHIBIT 4.10 is a schedule of all insurance policies
owned by the Borrowers or under which the Borrowers are the named insured. Each
of such policies that is material is in full force and effect. Neither the
issuer of any such policy nor the Borrowers are in default or violation of any
material policy.
(b) The Borrowers shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be reasonable given
the nature and magnitude of the Borrower's business and customary practices in
such business. The Agent and the Lenders acknowledge that the coverage reflected
on EXHIBIT 4.10 presently satisfies the foregoing requirements, it being
recognized by the Borrowers, the Agent and the Lenders, however, that such
requirements may change hereafter to reflect changing circumstances. All
insurance carried by the Borrowers shall provide for a minimum of thirty (30)
days' written notice of cancellation to the Agent and all such insurance which
covers the Collateral shall include an endorsement in favor of the Agent, which
endorsement shall provide that the insurance, to the extent of the Agent's
interest therein, shall not be impaired or invalidated, in whole or in part, by
reason of any act or neglect of the Borrowers or by the failure of the Borrowers
to comply with any warranty or condition of the policy. In the event of the
failure by the Borrowers to maintain insurance as required herein, the Agent ,
at its option, may obtain such insurance, provided, however, the Agent's
obtaining of such insurance shall not constitute a cure or waiver of any Event
of Default occasioned by the Borrowers' failure to have maintained such
insurance. The Lead Borrower shall furnish to the Agent certificates or other
evidence satisfactory to the Agent regarding the insurance maintained by the
Borrowers.
- 68 -
(c) The Lead Borrower shall advise the Agent of each
claim in excess of $500,000.00 made by any Borrower or group of Borrowers under
any policy of insurance which covers the Collateral and following the occurrence
of an Event of Default will permit the Agent, at the Agent's option in each
instance, to the exclusion of the Borrowers, to conduct the adjustment of each
such claim. The Borrowers hereby appoint the Agent, effective following the
occurrence of an Event of Default, as the Borrowers' attorney in fact to obtain,
adjust, settle, and cancel any insurance described in this Section 4.10 and to
endorse in favor of the Agent any and all drafts and other instruments with
respect to such insurance. The within appointment, being coupled with an
interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Agent . The Agent shall
not be liable on account of any exercise of such power of attorney except for
any exercise that constitutes gross negligence or willful misconduct. Prior to
the occurrence of an Event of Default the Borrowers may use the proceeds of such
insurance to purchase Inventory or in the case of insurance proceeds from fixed
assets, to purchase replacement fixed assets or to retire related purchase money
Indebtedness. Following the occurrence of an Event of Default or in the event
that the Borrowers do not use the proceeds for the above purposes, the Agent may
apply any proceeds of such insurance against the Liabilities, whether or not
such have matured, in the order of application provided for herein.
4.11. Licenses. Each license, distributorship, franchise, and similar
agreement issued to any of the Borrowers, or to which any of the Borrowers is a
party, and which is material to the business of the Borrowers, taken as a whole,
is in full force and effect. No Borrower nor, to the Parent's knowledge, any
other party to any such license or agreement is in default or violation thereof,
where such violation would have a Material Adverse Effect. No Borrower has
received any notice or threat of cancellation of any such license or agreement
where such cancellation would have a Material Adverse Effect.
4.12. Leases. EXHIBIT 4.12 is a schedule of all presently effective
Capital Leases. Exhibit 4.6(a) includes a list of all other presently effective
Leases. Each of such Leases and Capital Leases is in full force and effect.
Neither the Borrowers nor, to the Parent's knowledge, any other party to any
such Leases or Capital Leases is in default or violation of any ten (10) or
- 69 -
more such Leases or Capital Leases and neither the Parent nor the Borrowers
have received any currently pending notice or threats of cancellation of more
than ten (10) such Leases or Capital Leases (or such lesser number where such
default or violation would have a Material Adverse Effect). The Borrowers hereby
authorize the Agent at any time and from time to time to contact any of the
Borrowers' landlords in order to confirm the continued compliance by any
Borrower with the terms and conditions of the Lease(s) between such Borrower and
the relevant landlords and to discuss such issues, concerning the such Borrower
occupancy under such Lease(s), as the Agent may determine.
4.13. Requirements of Law. The Borrowers are in compliance with, and
shall hereafter comply with and use their respective assets in compliance, with
all material Requirements of Law. No Borrower has received any notice of any
material violation of any Requirement of Law, other than any such violations
that have been cured or otherwise remedied.
4.14. Maintain Collateral. Each Borrower shall:
(a) Keep the Collateral under its control in good order
and repair (ordinary reasonable wear and tear and insured casualty excepted);
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral;
(c) Not use any of the Collateral in violation of any
policy of insurance thereon; and
(d) Subject to Section 4.14(e), below, not sell, lease,
or otherwise dispose of any of the Collateral, except for:
(i) The sale of Inventory in the ordinary course of
business;
(ii) The turning over to the Agent of all Receipts
following the occurrence of a Cash Management Condition, as provided
herein; and
(iii) The sale, rollover, reinvestment, or liquidation of
Permitted Investments.
- 70 -
(e) The Borrowers may dispose of Collateral outside of
the ordinary course of business as follows:
(i) The disposal of store related Collateral
consisting of Inventory Equipment, and Fixtures in connection with store
closures permitted pursuant to Section 4.6(d)(ii); and
(ii) The disposal of up to $10 Million Dollars of
obsolete, duplicate or other Inventory (at Cost) and Equipment and
Fixtures (net of accumulated depreciation) in the aggregate during each
calendar year during the term of the Agreement, that is not necessary or
required for the operation of the Borrowers' business, taken as a whole,
exclusive of such amounts referenced in Section 4.14(e)(i), above.
4.15. Pay Taxes.
(a) As of the date of this Agreement, the Borrowers
have received written notice from the Internal Revenue Service that the
Internal Revenue Service has completed its examination of the Borrowers'
federal income tax returns for all tax years through and including the
Borrowers' taxable year referenced on EXHIBIT 4.15, and that all deficiencies,
assessments, and other amounts asserted as a result of such examinations have
been fully paid, settled or otherwise resolved. No agreement is extant which
waives or extends any statute of limitations applicable to the right of the
Internal Revenue Service to assert a deficiency or make any other claim for
or in respect to federal income taxes. Except as set forth on EXHIBIT 4.15,
no issue has been raised in any such examination which, by application of
similar principles, reasonably could be expected to result in the assertion of
a deficiency for any fiscal year open for examination, assessment, or claim by
the Internal Revenue Service.
(b) As of the date of this Agreement, the Borrowers
have paid all state and local income, excise, sales, and other taxes which are
due and for which the Borrowers are liable except, as referenced on
EXHIBIT 4.15, and have filed all returns required with respect to such taxes .
(c) Except as disclosed on EXHIBIT 4.15, there are no
examinations of or with respect to the Borrower presently being conducted by the
Internal Revenue Service or any other taxing authority.
- 71 -
(d) The Borrowers have, and hereafter shall: pay, as
they become due and payable, all taxes and unemployment contributions and
other charges of any kind or nature levied, assessed or claimed against any
Borrower or the Collateral by any person or entity whose claim could
result in an Encumbrance upon any asset of any Borrower or by any governmental
authority; properly exercise any trust responsibilities imposed upon the
Borrowers by reason of withholding from employees' pay or by reason of the
Borrower's receipt of sales tax or other funds for the account of any third
party; timely make all contributions and other payments as may be required
pursuant to any Employee Benefit Plan now or hereafter established by the
Borrowers; and timely file all tax and other returns and other reports with each
governmental authority with which the Borrowers are obligated to file, provided,
however, any Borrower may timely contest in good faith and by appropriate
proceedings any amount of the type described in this Section 4.15(d) which
it is alleged to be obligated to pay, but only if and for so long as no lien is
filed on any of the Collateral with respect to such taxes, and adequate cash
reserves have been set aside for the payment thereof.
(e) At its option, the Agent may, but shall not be
obligated to, pay any taxes, unemployment contributions, and any and all other
charges levied or assessed upon the Borrowers or the Collateral by any person
or entity or governmental authority, and make any contributions or other
payments on account of the any Employee Benefit Plan maintained by the
Borrowers as the Agent, in the Agent's discretion, may deem necessary or
desirable to protect, maintain, preserve, collect, or realize upon any or all of
the Collateral or the value thereof or any right or remedy pertaining thereto,
provided, however, the Agent's making of any such payment shall not constitute
a cure or waiver of any Event of Default occasioned by the Borrowers' failure to
have made such payment.
4.16. No Margin Stock. The Borrowers are not engaged in the business
of extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
- 72 -
carrying any such margin stock other than stock of the Parent, or any Related
Entity or as otherwise expressly permitted in Section 4.20.
4.17. ERISA. Neither the Borrowers nor any ERISA Affiliate shall in any
manner such as would have a Material Adverse Effect, or could result in a lien
being imposed upon any material assets of the Borrowers:
(a) Violate or fail to be in compliance with any
Employee Benefit Plan maintained by the Borrowers,
(b) Fail timely to file all reports and filings required
by ERISA to be filed by the Borrowers;
(c) Engage in any "prohibited transactions" or
"reportable events" (respectively as described in ERISA);
(d) Engage in, or commit, any act that would permit
the imposition of a tax or penalty upon the Borrowers pursuant to ERISA;.
(e) Accumulate any material funding deficiency within
the meaning of ERISA;
(f) Terminate any Employee Benefit Plan in a manner
that would permit a lien to be imposed upon any assets of the Borrowers on
account thereof pursuant to ERISA; or
(g) Incur withdrawal liability under Title IV of ERISA
in connection with any Employee Benefit Plan which is a multiemployer plan
within the meaning of Section 4001(a) of ERISA.
4.18. Hazardous Materials.
(a) The Borrowers have never:
(i) Been legally responsible for any release or
threat of release of any Hazardous Material where such legal
responsibility would have a Material Adverse Effect.
(ii) Received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or
operated by the Borrowers and/or of the incurrence of any
expense or loss in connection with the assessment, containment,
- 73 -
or removal of any release or threat of release of any Hazardous
Material from any such site or vessel, to the extent such release or
incurrence would have a Material Adverse Effect.
(b) Unless their failure to act as set forth in (i) and
(ii) below would not have a Material Adverse Effect, the Borrowers shall (and in
any event shall use their best efforts to):
(i) Dispose of any Hazardous Material only in compliance
with all Environmental Laws; and
(ii) Not store any Hazardous Material on any site or
vessel occupied or operated by the Borrowers and not transport or
arrange for the transport of any Hazardous Material, unless such storage
or transport is in the ordinary course of the Borrowers' business and is
in compliance with all Environmental Laws.
(c) The Lead Borrower shall provide the Agent with
written notice upon obtaining knowledge that any governmental authority or other
Person has incurred any expense or suffered any loss for which the Borrowers
would be liable in connection with the assessment, containment, or removal
of any Hazardous Material, if Borrowers' liability for such expense or loss
would have a Material Adverse Effect.
4.19. Litigation. Except as described in EXHIBIT 4.19, there is not
presently pending or threatened against any Borrower any suit, action,
proceeding, or investigation which, if determined adversely to such Borrower or
the Borrowers, would have a Material Adverse Effect.
4.20. Dividends, Investments, Repurchases and Debt Retirement.
(a) The Borrowers shall not:
(i) Pay any cash dividend or make any other
distribution in respect of any class of the Borrowers' capital stock
other than dividends by the Subsidiaries to the Parent and scheduled
payments of preferred dividends by the Parent.
(ii) Except for Permitted Repurchases, redeem, retire,
purchase, or acquire any of the Parent's capital stock, or any of the
Parent's securities.
(iii) Invest in or purchase any stock or
securities or rights to purchase any stock or securities
of any corporation or other entity other than Permitted
- 74 -
Investments, provided that, the Borrower may invest in Internet and
other ventures that may provide opportunities to expand or improve the
Borrowers' business so long as in the case of such investments:
(A) The Borrowers total investment (which term
shall include loans) in such corporations or other entities does
not exceed $10 million in the aggregate over the term of this
Agreement, subject to the same conditions (with respect to such
investment) as are applicable to Permitted Repurchases or Debt
Retirement below in 4.20(b)(i) (A), (B), and (C).
(B) Any stock issued to the Borrowers by
reason of such investment is pledged to the Agent for the ratable
benefit of the Lenders.
(C) No Inventory of the Borrowers is
commingled with any Inventory of such corporations or entities,
and to the extent that the Borrowers sell any Inventory to such
corporations or entities, such sale or sales are (i) to fulfill
actual customer orders received by such corporation or entities,
(ii) on no more than sixty (60) day payment terms or ninety (90)
day seasonal terms (during the period October 1 through December
31) as the Agent may agree in its sole discretion, (iii) on
arms-length terms and for fair value; (iv) in the aggregate at
any time no more than $2 Million on an open account basis, unless
the Agent in its sole discretion approves authorizes a greater
amount, not to exceed $5 Million; and (v) excluded from the
Borrowing Base, so that the Inventory shipped to such
corporations or entities, shall not be deemed Acceptable
Inventory.
(iv) Merge or consolidate or be merged or consolidated
with or into any other corporation or other entity (other than with any
other Borrower, in which case Business Days prior notice shall be given
to Agent).
(v) Consolidate any of the Borrowers' operations with
those of any other corporation or other entity (other than with any
other Borrower).
(vi) Organize or create any Related Entity, without the
prior written consent of the Agent, which consent shall not be
unreasonably withheld; provided that the Parent may establish additional
Subsidiaries to own and operate store locations and make additional
investments in Subsidiaries, so long as each such Subsidiary becomes a
- 75 -
Borrower or guarantor of the Liabilities and the other conditions set
forth below in clauses (A)-(C) below, are complied with:
(A) The capital stock of such Subsidiary is
pledged to the Agent for the ratable benefit of the Lenders as
additional Collateral for the Liabilities;
(B) Such Subsidiary executes and delivers a
guaranty of the Liabilities or becomes a Borrower; and
(C) Such Subsidiary executes and delivers such
documentation as the Agent may require to grant security and
mortgage interests in such Subsidiary's assets to secure the
Subsidiary's guaranty (or obligation as a Borrower for) the
Liabilities.
(b) Subject to the satisfaction of each of the conditions
included in this Section 4.20(b), the Parent may repurchase its capital stock
(such capital stock purchases not to exceed in the aggregate $10 Million for the
term of this Agreement) and replace, refinance or retire in full or in part the
5.00% Notes (which transactions are referred to herein, as applicable, as
"PERMITTED REPURCHASE OR DEBT RETIREMENT"):
(i) On the date on which such Permitted Repurchase or
Debt Retirement is to be effected:
(A) No Event of Default shall have occurred
and none will occur by reason of the subject Permitted Repurchase
or Debt Retirement;
(B) Availability for the lesser of the number
of days since the date of this Agreement or ninety (90) days
immediately prior to such Permitted Repurchase or Debt Retirement
was not, and immediately after such Permitted Repurchase or Debt
Retirement shall not be, less than $25 Million;
(C) Availability, on a pro forma going forward
basis for 12 months following such Permitted Repurchase or Debt
Retirement, as reflected on a projection provided to the Agent no
later than seven (7) days prior to such Permitted Repurchase or
Debt Retirement (and prepared based on the same methodology and
with the same assumptions as those used in the preparation of the
Business Plan) shall not be less than $25 Million;
- 76 -
(D) Any replacement security for the 5.00%
Notes shall be subordinated junior to the Liabilities on terms
reasonably satisfactory to the Agent;
(E) The terms and conditions of any
replacement security for the 5.00% Notes are reasonably
satisfactory to the Agent. (c) The Borrowers shall not
subordinate any debts or obligations owed to
the Borrowers by any third party to any other debts owed by such third party to
any other Person.
(d) Except as contemplated by this Agreement, the Borrowers
shall not acquire any assets other than in the ordinary course of the Borrowers'
business as conducted at the execution of this Agreement
4.21. Loans. The Borrowers shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, that the foregoing
does not prohibit any of the following:
(a) Advance payments made to the Borrowers' suppliers in the
ordinary course;
(b) Advances to or on behalf of the Borrowers' officers,
with unsecured advances not to exceed in the aggregate at any one time
$1,000,000.00; and with secured advances (on such security as may be reasonably
satisfactory to the Agent) not to exceed in the aggregate at any one time
$2,000,000 provided that Agent's approval of such security shall not be required
where an independent appraisal confirms the fair market of the collateral to be
equal or greater than the amount of such advances.
(c) Advances to or on behalf of the Borrowers' employees,
and salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrowers, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrowers;
(d) Loans to any Related Entity, Affiliate or other venture
permitted pursuant to Section 4.20 (a)(iii) which is not a Borrower, not to
exceed $10 Million in the aggregate when combined with any other
loans or investments permitted pursuant to Section 4.20 (a) (iii)
- 77 -
outstanding at any one time, not otherwise expressly prohibited herein,
provided that no Event of Default shall have occurred and none will occur by
reason of such loan.
4.22. Protection of Assets. The Agent may in its discretion from time to
time discharge any tax or Encumbrance on any of the Collateral, or take any
other action that the Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The Agent
shall not have any obligation to undertake any of the foregoing and shall have
no liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Agent has acted in bad faith or in a grossly negligent manner or has
engaged in willful misconduct. The Borrowers shall pay to the Agent, on demand,
or the Agent, in its discretion, may add to the Loan Account, all amounts paid
or incurred by the Agent pursuant to this section. The obligation of the
Borrowers to pay such amounts is a Liability.
4.23. Line of Business. The Borrowers shall not engage in any business
other than the business in which they are currently engaged or a business
reasonably related thereto (the conduct of which reasonably related business is
reflected in the Business Plan or otherwise permitted by this Agreement).
4.24. Affiliate Transactions. Except as otherwise permitted hereunder,
the Borrowers shall not make any payment, nor give any value to any Related
Entity except in the ordinary course of business or consistent with practices in
effect on October 1, 1999 and not otherwise prohibited under the Loan Documents,
provided that no Event of Default shall have occurred and none will occur by
reason thereof.
4.25. Additional Assurances.
(a) Except as set forth in Exhibit 4.25, the Borrowers are
not the owner of, nor have they any interest in, any property or asset material
or necessary to their business, which immediately upon the satisfaction
of the conditions precedent to the effectiveness of the credit
- 78 -
facility contemplated hereby (Article 3) will be not be subject to a
perfected security or other collateral interest in favor of the Agent (subject
only to Permitted Encumbrances) to secure the Liabilities.
(b) The Borrowers will not hereafter acquire any asset or
any interest in personal property which (if a security interest in such asset or
interest may be perfected by filing under Article 9 of the UCC), is not,
immediately upon such acquisition, subject to such a perfected security or other
collateral interest in favor of the Agent to secure the Liabilities (subject
only to Permitted Encumbrances).
(c) The Borrowers shall execute and deliver to the Agent
such instruments, documents, and papers, and shall do all such things from time
to time hereafter as the Agent may reasonably request: to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; to comply with all applicable statutes and
laws; and to facilitate the collection of the Receivables Collateral. The
Borrowers shall execute all such instruments as may be reasonably required by
the Agent with respect to the recordation and/or perfection of the security
interests created herein.
(d) The Borrowers hereby designate the Agent as and for the
Borrowers' true and lawful attorney, with full power of substitution, to sign
and file, where permitted by law any financing statements in order to perfect or
protect the Agent's security and other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4.25 shall be sufficient for filing to perfect the security
interests granted herein, where permitted by law.
4.26. Adequacy of Disclosure.
(a) All quarterly and annual financial statements furnished
to the Agent and each Lender by the Borrowers have been prepared in accordance
with GAAP consistently applied (and in the case of monthly management
statements, consistent with GAAP methodology and substantially in accordance
with GAAP) and present fairly in all material respects the
Consolidated condition of the Parent and its Subsidiaries at the
date(s) thereof and the Consolidated results of operations and
cash flows of the Parent and its Subsidiaries for the
- 79 -
period(s) covered. There has been no change in the financial condition,
results of operations, or cash flows of the Borrowers since the date(s) of such
financial statements, other than changes in the ordinary course of business,
which changes have not been materially adverse, either individually or in the
aggregate.
(b) The Borrowers do not have any contingent obligations or
obligations under any Lease or Capital Lease which are not noted in the Parent's
Consolidated financial statements and the notes thereto furnished to the Agent
and each Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Agent or any Lender by or on behalf of the Borrowers or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agent and each Lender contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Borrowers which has, or which, in the foreseeable future would reasonably be
expected to have, a Material Adverse Effect.
4.27 No Restrictions on Liabilities. No Borrower shall enter into or
become subject to, directly or indirectly, any agreement prohibiting or
restricting in any manner (including, without limitation, by way of covenant,
representation or event of default) any of the following:
(a) The incurrence, creation or assumption of the
Liabilities or any Encumbrances in favor of the Agent on any property of any
Borrower.
(b) The granting of a security interest, pledge, or
Encumbrance in favor of the Agent and the Lenders on any asset of any Borrower.
4.28 Other Covenants. No Borrower shall indirectly do or cause to be
done any act which, if done directly by such Borrower or Borrowers, would breach
any covenant contained in this Agreement.
ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
- 80 -
5.1. Maintain Records. The Borrowers shall:
(a) At all times, keep proper books of account, in which
full, true, and accurate entries shall be made of all of the Borrowers'
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the financial condition of the Borrowers at the close
of, and the results of their operations for, the fiscal periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article V or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrowers at the close of, and the
results of their operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of their Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Agent and who are of
nationally recognized standing and request such accountants to fully cooperate
with, and be available to, the Agent to discuss the Borrowers' financial
performance, financial condition, operating results, controls, and such other
matters within the scope of the retention of such accountants as may be raised
by the Agent.
(e) Not change their respective fiscal years or taxpayer
identification numbers without giving twenty (20) days notice.
5.2. Access to Records.
(a) The Borrowers shall accord the Agent and the Agent's
representatives access from time to time as the Agent and such representatives
may reasonably require to all properties owned by or over which any Borrower has
control. The Agent and the Agent's representatives shall have the right, and the
Borrowers will permit the Agent and such representatives from time to time as
the Agent and such representatives reasonably may request (in the absence of an
Event of Default, upon reasonable notice and during normal business hours), to
examine, inspect, copy, and make extracts from any and all of the Borrowers'
- 81 -
books, records, electronically stored data, papers, and files. The Borrowers
shall make sufficient copying facilities available to the Agent.
(b) The Borrowers hereby authorize the Agent and the Agent's
representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Borrowers, and agree to direct any service bureau, contractor,
accountant, or other person who maintains such information for the
Borrowers fully to cooperate with the Agent and the Agent's
representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrowers' computer billing companies, collection agencies, and
accountants and to sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Collateral.
5.3. Immediate Notice to Agent.
(a) The Lead Borrower shall provide the Agent with written
notice immediately upon the occurrence of any of the following events, which
written notice shall be reasonably particular as to the facts and circumstances
in respect of which such notice is being given:
(i) Any change in the Parent's Chief Executive Officer
or Chief Financial Officer.
(ii) The completion of any physical count of all or a
material portion of the Borrowers' Inventory (together with a copy of
the results thereof certified by the Lead Borrower).
(iii) Any cessation by the Borrowers of their making
payment to their creditors generally as the Borrowers' debts become due.
(iv) Any failure by the Borrowers to pay rent at any
thirty (30) of the Borrowers' locations at any one time, if such failure
continues for more than fifteen (15) days after any grace period and if
(A) notice of rent default, to the extent required under
- 82 -
any relevant lease, has been received by the Borrowers, and (B) the rent
not paid is not the subject of reasonable dispute as to whether it is
owed.
(v) Any Material Adverse Change in the business,
operations, or financial affairs of the Borrowers.
(vi) The occurrence of any Suspension Event. (vii) Any
intention on the part of the Parent to discharge the
Parent's present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in such
capacity.
(viii) Any litigation which, if determined adversely to
the Borrowers, would reasonably be expected to have a Material Adverse
Effect.
(ix) The occurrence of an event or circumstance with
respect to any Employee Benefit Plan which would reasonably be expected
to have Material Adverse Effect.
(x) Any delay in the Borrowers' meeting the timetable
for their operations becoming Year 2000 Compliant as described on
EXHIBIT 4.5 or maintaining such operations as Year 2000 Compliant,
except where such delay or failure to so maintain would not have a
Material Adverse Effect.
(b) The Lead Borrower shall:
(i) Provide the Agent, when so distributed, with
copies of any materials distributed to the shareholders of the Parent
(qua such shareholders).
(ii) Provide the Agent:
(A) When filed, copies of all filings by the
Parent with the SEC.
(B) When received, copies of all correspondence
from the SEC, other than routine non-substantive general
communications from the SEC.
(iii) Add the Agent as an addressee on all mailing lists
maintained by or for the Borrowers which Agent may request.
(iv) At the request of the Agent, from time to time,
provide the Agent with copies of all advertising (including copies of
all print advertising and duplicate tapes of all video and radio
advertising).
- 83 -
(v) Provide the Agent, when received by the
Borrowers, with a copy of any management letter or similar
communications from any accountant of the Borrowers.
5.4. Borrowing Base Certificate. The Lead Borrower shall provide the
Agent a Borrowing Base Certificate (in the form of EXHIBIT 5.4, as such form may
be revised by agreement of the Lead Borrower and the Agent), reflecting the
Borrowers' condition on the last Business Day of the reporting period
immediately prior to the date when furnished, at the following times:
(a) Within ten (10) Business Days following the end of the
Borrowers' fiscal month.
(b) On any Thursday (or the next Business Day, if that
Thursday is not a Business Day) following any week (Sunday to Saturday) during
which average Availability has been less than $15 Million. Such Borrowing Base
Certificate may be sent to the Agent by facsimile transmission, provided that
the original thereof is forwarded to the Agent on the date of such transmission.
5.5. Monthly Collateral Reports. Monthly, within thirty (30) days of the
end of the previous fiscal month, the Lead Borrower shall provide the Agent with
such Collateral Reports (in the form acceptable to Agent) as are identified on
EXHIBIT 5.5. For the purposes of this Section, the first "previous month" shall
be November, 1999.
5.6 Monthly Financial Reports. Monthly, within thirty (30) days of
the end of the previous fiscal month, the Lead Borrower shall provide the Agent,
in such form as the Agent and the Lead Borrower may agree, original counterparts
of an internally prepared statement of the Borrowers' Consolidated financial
condition for the period ending with the end of the subject month, which
financial statement shall include, at a minimum, a balance sheet, income
statement (on a Consolidated basis), cash flow statement and comparison of same
store sales for the corresponding month of the prior year, as well as
comparisons to the Business Plan.
- 84 -
5.7 Quarterly Financial Reports. Quarterly, within forty-five (45)
days following the end of each of its first three fiscal quarters in each fiscal
year, the Lead Borrower shall provide the Agent a copy of its Report on Form
10-Q filed with the SEC.
5.8 Annual Reports. Annually, within ninety (90) days following the
end of its Fiscal Year, the Lead Borrower shall furnish the Agent with a copy of
its Report on Form 10-K filed with the SEC, and within thirty (30) days of
delivery by Borrower's independant accountants, any so-called management
letters.
5.9 Officers' Certificates. The Lead Borrower shall cause its Chief
Executive Officer, Chief Financial Officer or Vice President of Finance to
certify in connection with the monthly, quarterly, and annual statements to be
furnished pursuant to this Agreement that:
(a) Such statements (other than the monthly statements) were
prepared in accordance with GAAP consistently applied and present fairly the
financial condition of the Borrowers at the close of, and the results of the
Borrowers' operations and cash flows for, the period(s) covered, subject,
however to the following:
(i) usual year end adjustments (this exception shall
not be included in the certificate which accompanies the annual
statement).
(ii) Material Accounting Changes (in which event, such
certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in determining satisfaction of the
financial performance covenant imposed by Section 5.12.
(b) No Suspension Event has occurred or, if such an event
has occurred shall describe, its nature (in reasonable detail) and the steps (if
any) being taken or contemplated by the Borrower to be taken on account thereof.
(c) The Borrowers were in compliance (or had failed to
comply) as of the date of the applicable statement with each of the financial
performance covenants included in Section 5.12 hereof, such certification to be
accompanied by calculations demonstrating such compliance or failure to comply.
- 85 -
5.10 Inventories, Appraisals, and Audits.
(a) The Agent may, at the expense of the Borrowers,
participate in and/or observe, each physical count and/or inventory of so much
of the Collateral as consists of Inventory which is undertaken on behalf of the
Borrowers.
(b) The Borrowers, at their own expense, shall cause each
store location to have not less than one (1) physical inventory in each fiscal
year to be undertaken on a generally annual basis, consistent with current
practice, while this Agreement is in effect (the scheduling of which shall be
subject to the Agent's reasonable discretion), conducted by such inventory
takers as are satisfactory to the Agent and following such methodology as may be
satisfactory to the Agent.
(i) The Lead Borrower shall provide the Agent with a
copy of the preliminary results of each such inventory (as well as of
any other physical inventory undertaken by the Borrowers) within thirty
(30) days following its completion.
(ii) The Lead Borrower shall provide the Agent with a
reconciliation of the results of each such inventory (as well as of any
other physical inventory reconciliation undertaken by the Borrowers) to
the Borrowers' books and records within thirty (30) days following the
completion of such inventory.
(iii) Following the occurrence of an Event of Default, the
Agent may, in its discretion, cause such additional inventories to be
taken as the Agent determines (each at the expense of the Borrowers).
(c) Upon the Agent's request from time to time, the
Borrowers shall permit the Agent to arrange for Inventory appraisals (at the
Borrower's expense) conducted by such appraisers as are satisfactory to the
Agent. Prior to the occurrence of any Event of Default the Agent shall obtain
two (2) appraisals in each twelve (12) month period during which this Agreement
is in effect (the spacing of the scheduling of which appraisals shall be subject
to the Agent's discretion). The Agent, in its discretion, following the
occurrence of an Event of Default, may cause such additional appraisals to be
taken as the Agent determines (each, at the expense of the Borrowers).
(d) The Agent contemplates conducting two (2)
commercial finance audits (at the Borrowers' expense) of the
Borrowers' books and records during any twelve (12) month
- 86 -
period during which this Agreement is in effect.
The Agent, in its discretion, following the occurrence of an Event of Default,
may cause such additional audits to be taken as the Agent determines (at the
expense of the Borrowers).
(e) The Agent contemplates causing not more than two (2)
(so-called) "mystery shopping" visits to all or any of the Borrowers' business
premises during any 12-month period during which this Agreement is in effect,
but following the occurrence of an Event of Default, may cause additional such
visits to be undertaken (in each event, at the Borrowers' expense). The Agent
shall provide the Borrowers with a copy of any non-confidential results of such
mystery shopping.
5.11. Additional Financial Information.
(a) In addition to all other information required to be
provided pursuant to this Article V, the Lead Borrower promptly shall provide
the Agent (and any guarantor of the Liabilities), such other and additional
information concerning the Borrowers, the Collateral, the operation of the
Borrowers' business, and the Borrowers' financial condition, including financial
reports and statements (including supporting schedules), as the Agent may from
time to time reasonably request from the Lead Borrower.
(b) The Lead Borrower may provide the Agent, from time to
time hereafter, with updated projections of the Borrowers' anticipated
performance and operating results.
(c) The Lead Borrower shall, no later than thirty (30) days
following the end of each of the Borrowers' fiscal years, furnish the Agent with
an updated and extended projection which shall extend at least through the end
of the then current fiscal year, as well as with any modifications to the
Business Plan, the initial version of which is annexed hereto as EXHIBIT
5.11(C).
(d) Such updated and extended projections shall be prepared
pursuant to such methodology and shall include such assumptions as are
satisfactory to the Agent.
5.12. Financial Performance Covenants. The Borrowers shall at all times
comply with the financial performance covenants described below.
Compliance with such financial performance covenants shall be
determined as if no Material Accounting Changes had been made
- 87 -
since the date of this Agreement (other than any Material Accounting
Changes specifically taken into account in the setting of such covenants). The
Agent may determine the Borrowers' compliance with such covenants by using
financial reports and statements provided by the Lead Borrower to the Agent or
any Lender (whether or not such financial reports and statements are required to
be furnished pursuant to this Agreement) as well as by reference to interim
financial information provided to, or developed by, the Agent. These covenants
are as follows:
(a) EBITDA:Following the occurrence and during the
continuance of a Cash Management Condition, the Borrowers shall comply with the
following EBITDA covenant: Commencing on the first Business Day of December
1999, and continuing on the first Business Day of each month thereafter, the
Borrowers shall not permit their EBITDA, calculated on a rolling historical
twelve (12) month basis, to be less than zero (0) for any twelve month period up
to and including the twelve month period ending December 31, 2001, and
$5,000,000 for any such twelve month period ending January 31, 2002 and
thereafter.
(b) Capital Expenditures. At no time shall the Borrowers
permit their annual aggregate Capital Expenditures to exceed the Capital
Expenditure Cap of $25,000,000.00 in any fiscal year. The Borrowers shall have
the right to carryover to the next immediately succeeding fiscal year up to
$7,500,000.00 of unused amounts within the Capital Expenditure Cap.
ARTICLE VI - USE AND COLLECTION OF COLLATERAL:
6.1. Use of Inventory Collateral.
(a) The Borrowers shall not engage in any sale of the
Inventory other than for fair consideration in the conduct of the Borrowers'
business in the ordinary course (including but not limited to seasonal and
promotional sales) and shall not engage in sales or other dispositions to
creditors, sales or other dispositions in bulk other than going out of business
sales performed in connection with store closures that are permitted pursuant to
Section 4.14(e).
(b) No sale of Inventory shall be on consignment, approval,
or under any other circumstances such that, with the exception of the Borrowers'
customary return policy applicable to the return of Inventory purchased by the
Borrowers' retail customers in the ordinary course, such Inventory may be
returned to the Borrowers without the consent of the Agent.
- 88 -
6.2. Inventory Quality. All Inventory now owned or hereafter acquired by
the Borrowers are and will be of good and merchantable quality and free from
defects (other than within customary trade tolerances).
6.3. Adjustments and Allowances. The Borrowers may grant such allowances
or other adjustments to the Borrowers' Account Debtors as the Borrowers may
reasonably deem to accord with sound business practice and consistent with the
Borrowers' past practice, provided, however, the authority granted the Borrowers
pursuant to this Section 6.3 may be limited or terminated by the Agent during
the continuation of an Event of Default.
6.4. Validity of Accounts.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrowers represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrowers.
(b) The Borrowers have no knowledge of any material
impairment of the validity or collectability of any of the Accounts and shall
cause the Lead Borrower to notify the Agent of any such fact immediately after
any Borrower becomes aware of any such impairment.
6.5. Notification to Account Debtors. The Agent shall have the right at
any time following the occurrence of a Cash Management Condition (and an Event
of Default has occurred) to notify any of the Borrowers' Account Debtors to make
payment directly to the Agent and to collect all amounts due on account of the
Collateral.
ARTICLE VII - CASH MANAGEMENT; PAYMENT OF LIABILITIES:
7.1. Depository Accounts.
(a) Annexed hereto as EXHIBIT 7.1 is a Schedule of all
present DDA's, which Schedule includes, with respect to each
depository (i) the name and address of that depository; (ii) the
account number(s) of the account(s) maintained with such depository; (iii) a
- 89 -
contact person at such
depository; and (iv) the Borrower and such Borrower's store locations utilizing
such DDA.
(b) The Lead Borrower shall deliver to the Agent, as a
condition to the effectiveness of this Agreement the following:
(i) Notification, executed on behalf of the
Borrowers, to each depository institution with which any DDA is
maintained (other than the Operating Account or any Local Disbursement
Account), in form satisfactory to the Agent, of the Agent's interest in
such DDA, which notice provides that the contents of such DDA shall,
prior to the occurrence of a Cash Management Condition, be directed to
the Blocked Account and following the occurrence of a Cash Management
Condition, be directed to the Concentration Account.
(ii) A Blocked Account Agreement with any depository
institution at which a Blocked Account is maintained.
(c) No Borrower will establish any DDA hereafter (other than
a Local Disbursement Account) unless within 10 days after such establishment,
the Lead Borrower provides a notification, as required by Section 7.1(b)(i)
above, that the contents of such DDA are to be directed into the Blocked Account
and, upon the occurrence of a Cash Management Condition, the Concentration
Account.
7.2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 7.2 is a Schedule which
describes all arrangements to which the Borrowers are parties with respect to
the payment to the Borrowers of the proceeds of all credit card charges for
sales by the Borrowers.
(b) The Borrowers shall deliver to the Agent as a condition
to the effectiveness of this Agreement, notification, executed on behalf of the
Borrowers, to each of the Borrowers' credit card clearinghouses and processors
(in form satisfactory to the Agent), which notification provides that payment of
all credit card charges submitted by the Borrowers to that clearinghouse or
other processor and any other amount payable to the Borrowers by such
clearinghouse or other processor shall, prior to the occurrence of a Cash
- 90 -
Management Condition, be directed to the Blocked Account and, following the
occurrence of a Cash Management Condition, shall be directed to the
Concentration Account or as otherwise designated from time to time by the Agent.
The Borrowers shall not change such direction or designation except upon and
with the prior written consent of the Agent.
7.3. The Concentration, Blocked, and Operating Accounts.
(a) The following deposit accounts shall be established (and
are so referred to herein):
(i) The CONCENTRATION ACCOUNT: At the Agent's
election, either the Blocked Account or an account established by the
Agent with BankBoston, N.A.
(ii) The BLOCKED ACCOUNT: Established by the Borrowers
with Chase Manhattan Bank and the other depository institutions set
forth on Exhibit 7.3(a)(ii) into which deposits must be directed and
from which the Borrowers shall not make disbursements.
(iii) The OPERATING ACCOUNT: Established by the Borrowers
with Chase Manhattan Bank, from which only disbursements may be made and
into which only advances under the Revolving Credit and (prior to the
occurrence of a Cash Management Condition) proceeds from the Blocked
Account, may be deposited .
(b) The contents of each DDA (other than the Operating
Account), the Blocked Account constitute Collateral and Proceeds of Collateral.
Funds in the Concentration Account constitute a payment of Liabilities when
collected to the extent of Liabilities.
(c) The Borrowers shall not establish any Blocked Account
hereafter except upon not less than thirty (30) days prior written notice to the
Agent and the delivery to the Agent of a Blocked Account Agreement with respect
thereto.
(d) The Borrowers shall pay all fees and charges of, and
maintain such minimum balances as may be required by the Agent or by any bank in
which any account is opened as required hereby (even if such account is opened
by the Agent).
7.4. Proceeds and Collection of Accounts
(a) All Receipts constitute Collateral and Proceeds
of Collateral and (other than Receipts from the sale of
Investment Property or Permitted Investments) shall be held in
- 91 -
trust by the Borrowers for the Agent, shall not be commingled with any of
the Borrowers' other funds and shall be deposited and/or transferred prior to
the occurrence of a Cash Management Condition, only to the Blocked Account.
Following the occurrence of a Cash Management Condition, all Receipts shall be
deposited or transferred only to the Concentration Account.
(b) The Borrowers shall cause the ACH or wire transfer to
the Blocked Account or the Concentration Account, as the case may be, no less
frequently than each Business Day (and whether or not there is then an
outstanding balance in the Loan Account) of the following:
(i) The contents of each DDA (other than (A) any
Local Disbursement Account and (B) the Operating Account). Each such
transfer shall be net of any minimum balance, not to exceed the balances
set forth in Exhibit 7.4(b)(i) for each DDA, as may be required to be
maintained in the subject DDA by the bank at which such DDA is
maintained.
(ii) The proceeds of all credit card charges not otherwise
provided for pursuant hereto.
(c) At any time following the occurrence of a Cash
Management Condition and whether or not any Liabilities are then outstanding,
the Borrowers shall undertake the following (and the Agent may give notice to
the bank at which the Blocked Account is maintained to undertake the following):
(i) Cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of then entire
ledger balance of the Blocked Account, net of such minimum balance, as
may be required to be maintained in the Blocked Account by the bank at
which the Blocked Account is maintained.
(ii) Cause to be transferred to the Agent's control, or to
an intermediary subject to a control agreement with the Agent, all cash
(other than on deposit in the Local Disbursement Accounts), Investment
Property and other Permitted Investments.
In the event that, notwithstanding the provisions of this Section 7.4(c), any of
the Borrowers receives or otherwise has dominion and control of any Receipts, or
any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrowers
- 92 -
for the Agent and shall not be commingled with any of the Borrowers' other
funds or deposited in any account of the Borrowers other than as instructed by
the Agent.
7.5. Payment of Liabilities.
(a) On each Business Day following the occurrence and during
the continuance of a Cash Management Condition, the Agent shall apply, towards
the unpaid balance of the Loan Account, the then collected balance of the
Concentration Account (net of fees charged, and of such minimum balances as may
be required by the bank at which the Concentration Account is maintained).
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which deposited,
provided that such deposit is received by the Agent by 2:00 PM on that
Business Day.
(ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on the
Business Day when they are good and collected funds, provided that such
payment is received by the Agent by 2:00PM on that Business Day.
(iii) If a deposit to the Concentration Account (Section
7.5(b)(i)) or payment (Section 7.5(b)(ii)) is not received by the Agent
until after 2:00 PM on a Business Day, such deposit or payment shall be
deemed to have been made at 9:00 AM on the next succeeding Business Day.
(iv) All deposits to the Concentration Account and other
payments to the Agent are subject to clearance and collection.
(c) The Agent shall transfer to the Operating Account any
surplus in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7.5(a) (less those amounts which are to be
netted out, as provided therein) provided, however, in the event that both (i) a
Suspension Event has occurred and (ii) one or more L/C's are then outstanding,
the Agent may establish a funded reserve of up to 105% of the aggregate Stated
Amounts of such L/C's.
- 93 -
7.6. The Operating Account. Except as otherwise specifically provided
in, or permitted by, this Agreement, all checks shall be drawn by the Borrowers
upon, and other disbursements shall be made by the Borrowers solely from, the
Operating Account and the Local Disbursement Accounts..
ARTICLE VIII - GRANT OF SECURITY INTEREST:
8.1. Grant of Security Interest. To secure the Borrowers' prompt,
punctual, and faithful performance and payment of all and each of the
Liabilities, each Borrower hereby grants to the Agent, for the ratable benefit
of the Lenders, a continuing security interest in and to, and assigns to the
Agent, for the ratable benefit of the Lenders, the following, and each item
thereof, whether now owned or now due, or in which that Borrower has an
interest, or hereafter acquired, arising, or to become due, or in which that
Borrower obtains an interest, and all products, Proceeds, substitutions, and
accessions of or to any of the following (all of which, together with any other
property in which the Agent may in the future be granted a security interest, is
referred to herein as the "COLLATERAL"):
(a) All Accounts.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's
business, and all rights of access to such books, records,
and information, and all property in which such books,
records, and information are stored, recorded, and
maintained.
(i) All Investment Property, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance,
deposits, impressed accounts, compensating balances,
money, cash, or other property.
- 94 -
(j) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit
insurance, whether any of such proceeds, refunds, and
premium rebates arise out of any of the foregoing (8.1(a)
through 8.1(i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8.1(a) through 8.1(j),
including the right of stoppage in transit.
8.2. Extent and Duration of Security Interest. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrowers to the Agent and shall continue in
full force and effect until all Liabilities have been paid and/or satisfied in
full, no more Commitments exist and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Agent,
which termination shall not unreasonably be withheld.
ARTICLE IX - AGENT AS BORROWERS' ATTORNEY-IN-FACT:
9.1. Appointment as Attorney-In-Fact. The Borrowers hereby irrevocably
constitutes and appoints the Agent as the Borrowers' true and lawful attorney,
with full power of substitution, effective following Acceleration to convert the
Collateral into cash at the sole risk, cost, and expense of the Borrower, but
for the ratable benefit of the Agent and the Lenders. The rights and powers
granted the Agent by the within appointment include but are not limited to the
right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address to
which the Borrowers' mail is to be sent to such address as the Agent shall
designate; receive and open the Borrowers' mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn
over the balance of such mail either to the Borrowers or to
any trustee in bankruptcy, receiver, assignee for the benefit of
creditors of the Borrowers, or other legal representative of the
- 95 -
Borrowers whom the Agent determines to be the appropriate person to whom to
so turn over such mail.
(c) Endorse the name of the Borrowers in favor of the Agent
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral
(with copies of the foregoing to be made available by Agent to the Lead
Borrower).
(d) Sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the Borrowers' name on any proof of claim in bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the
Borrowers are a beneficiary.
(f) Repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any customer of the Borrowers.
(g) Use, license or transfer any or all General Intangibles
of the Borrower.
9.2. No Obligation to Act. The Agent shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 9.1 herein, but
if the Agent elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of the
reasonable exercise of such power, and shall not be responsible to the Borrowers
for any act or omission to act except for any act or omission to act as to which
there is a final determination made in a judicial proceeding (in which
proceeding the Agent has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly negligent, actual bad faith, constituted willful misconduct or was
commercially unreasonable.
- 96 -
ARTICLE X - EVENTS OF DEFAULT:
The occurrence of any event described in this Article X shall, upon the
passage of any applicable grace or cure period, constitute an "EVENT OF
DEFAULT". Upon the occurrence of any Event of Default described in Section
10.11, any and all Liabilities shall become due and payable without any further
act on the part of the Agent or any Lender. Upon the occurrence of any other
Event of Default, any and all Liabilities shall become immediately due and
payable, at the option of the Agent or at the direction of the SuperMajority
Lenders and upon notice or demand to the Lead Borrower. The occurrence of any
Event of Default shall also constitute, without notice or demand, a default
under all other agreements between the Agent or any Lender and the Borrowers and
instruments, whether such agreements now exist or hereafter arise.
10.1. Failure to Pay Revolving Credit. The failure by the Borrowers to
pay (i) any principal amount when due and (ii) any interest or fees within three
(3) Business Days of when due, under the Revolving Credit.
10.2. Failure To Make Other Payments. The failure by the Borrowers to
pay within five (5) Business Days of when due (or upon demand, if payable on
demand) any payment Liability other than under the Revolving Credit.
10.3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrowers to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 10.1 or Section 10.2 hereof, and included in any of the following
provisions hereof:
Section Relates to :
------------------------------------------
4.3(b) Notice of Name Change
4.6 Location of Collateral
4.7 Title to Assets
4.8 Indebtedness
4.10 Insurance Policies
4.15 Pay taxes
4.20 Dividends, Investments, Repurchases and
Debt Retirement
- 97 -
4.25 Additional Assurances
5.1 Maintain Records
5.2 Access to Records
5.3 Immediate Notice to Agent
5.4 Borrowing Base Certificate
5.10 Inventories, Appraisals, and Audits
5.11 Additional Financial Information
5.12 Financial Performance Covenants
6.1 Use of Collateral
Article VII Cash Management
provided, however, that in the case of a breach of any covenant set forth in
Sections 4.3, 4.6, 4.7, 4.15 and 4.25, no such occurrence (either singly or in
the aggregate) shall be an Event of Default unless it (i) has a Material Adverse
Effect, (ii) result in an impairment, loss or diminution of Collateral of $5
Million or more or (iii) is not cured within ten (10) days written notice from
the Agent as provided in Section 10.4; provided further, however, in the case of
Section 5.4, no such occurrence shall be an Event of Default if cured within
three (3) Business Days.
10.4. Failure to Perform Covenant or Liability (Grace Period). The
failure by the Borrowers, upon ten (10) days written notice by the Agent to the
Lead Borrower, to cure the Borrowers' failure to promptly, punctually and
faithfully perform, discharge, or comply with any covenant or Liability not
described in any of Sections 10.1, 10.2, or 10.3 hereof.
10.5. Misrepresentation. The reasonable determination by the Agent, made
in good faith that any material representation or warranty at any time made by
the Borrowers to the Agent or any Lender, was not true or complete in all
material respects when given.
10.6. Acceleration of Other Debt; Breach of Lease. The occurrence of any
event such that any Indebtedness of the Borrowers in excess of $5,000,000 to any
creditor other than the Agent or any Lender has been accelerated or, without the
consent of such Borrowers twenty (20) Leases are terminated at any given time.
- 98 -
10.7. Default Under Other Agreements. The occurrence of any breach or
default under any agreement between the Agent and the Borrowers (and which does
not constitute a Loan Document), whether such agreement now exists or hereafter
arises (notwithstanding that the Agent may not have exercised its rights upon
default under any such other agreement, instrument or paper), which breach has
not been cured within twenty (20) days or (if more) any applicable cure period.
10.8. Uninsured Casualty Loss. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral,
in excess of $5 Million during any calendar year while this Agreement is in
effect.
10.9. Judgment; Restraint of Business.
(a) The service of process upon the Agent or any Lender or
any Participant seeking to attach, by trustee, mesne, or other process, any of a
Borrower's funds on deposit with, or assets of such Borrower in the possession
of, the Agent or any Lender or such Participant, which is not timely contested
in good faith by such Borrower by appropriate proceedings, or if so contested,
is not dismissed within the applicable appeals period.
(b) The entry of any judgments against any Borrower or group
of Borrowers in excess of $5 Million in the aggregate, which judgment(s) are not
satisfied (if a money judgment), bonded or appealed from (with execution or
similar process stayed) within the applicable appeal period.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Borrower of its business in the ordinary course
which would result in a Material Adverse Effect.
10.10. Business Failure. Any act by, against, or relating to any
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any part
of such Borrower's property, and which, if commenced against such
Borrower, is not timely contested in good faith by such
Borrower by appropriate proceedings, or if so contested, is not
- 99 -
dismissed within sixty (60) days of when filed; the granting of any trust
mortgage or execution of an assignment for the benefit of the creditors of any
Borrower, or the occurrence of any other voluntary or involuntary liquidation or
extension of debt agreement for such Borrower; the offering by or entering into
by any Borrower of any composition, extension, or any other arrangement seeking
relief from or extension of the debts of such Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including any
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of any Borrower of the
liquidation or winding up of all or any part of such Borrower's business or
operations.
10.11. Bankruptcy. The failure by any Borrower to generally pay its
debts as they mature; adjudication of bankruptcy or insolvency relative to any
Borrower; the entry of an order for relief or similar order with respect to any
Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal
bankruptcy law; the filing of any complaint, application, or petition by any
Borrower initiating any matter in which such Borrower is or may be granted any
relief from the debts of that Borrower pursuant to the Bankruptcy Code or any
other insolvency statute or procedure; the filing of any complaint, application,
or petition against any Borrower initiating any matter in which that Borrower is
or may be granted any relief from the debts of such Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure, if such complaint,
application, or petition is not timely contested in good faith by such Borrower
by appropriate proceedings or, if so contested, is not dismissed within sixty
(60) days of when filed.
10.12. Indictment; Forfeiture. The indictment of, or institution of any
legal process or proceeding against, any Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of any
Borrower and/or the imposition of any stay or other order, to the extent such
relief, penalties, remedies, stay or other order would reasonably be expected to
have a Material Adverse Effect.
- 100 -
10.13 Foreign Proceeding. There occurs in relation to any Borrower in
any country or territory in which it carries on business or, to the jurisdiction
of whose courts any of its assets is subject, any event which, in the reasonable
opinion of the Agent, appears to correspond to or to have an effect equivalent
or substantially similar to any of those referenced in Sections 10.9 through and
including 10.12 or any Borrower becomes subject (other than as a creditor or
claimant) in any such country or territory to the operation of any law relating
to bankruptcy, insolvency, or liquidation, to the extent such event or such
Borrower becoming subject to such a law would result in a Material Adverse
Effect.
10.14. Challenge to Loan Documents.
(a) Any challenge in writing by or on behalf of any Borrower
or any guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the material substance of such Loan Document's terms or which seeks to void,
avoid, limit, or otherwise adversely affect any security interest created by or
in any Loan Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable substantially in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any material security interest created by
any Loan Document or which determines any material payment made pursuant thereto
is void or voidable.
10.15. Change in Control. Any Change in Control.
ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies after and during
the occurrence of any Event of Default.
- 101 -
11.1. Rights of Enforcement. The Agent shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which the
Agent shall have all and each of the following rights and remedies after and
during the occurrence of any Event of Default:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral;
(b) To take possession of all or any portion of the
Collateral; (c) To sell, lease, or otherwise dispose of any or
all of the Collateral,
in its then condition or following such preparation or processing as the Agent
deems advisable and with or without the taking of possession of any of the
Collateral;
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral;
(e) To apply the Receivables Collateral or the Proceeds of
the Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities; and
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11.2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be
at public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned, leased, or occupied by any Borrower. The
Agent and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods (all of which other goods shall remain
the sole property of the Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Agent or such
- 102 -
agent or contractor and neither the Borrowers nor any Person claiming under
or in right of the Borrowers shall have any interest therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Agent shall provide the Lead Borrower with such
notice as may be practicable under the circumstances), the Agent shall give the
Lead Borrower at least ten (10) days prior written notice of the date, time, and
place of any proposed public sale, and of the date after which any private sale
or other disposition of the Collateral may be made. The Borrowers agree that
such written notice shall satisfy all requirements for notice to the Borrowers
which are imposed under the UCC or other applicable law with respect to the
exercise of the Agent's rights and remedies upon default.
(d) The Agent and any Lender may, to the extent permitted by
the UCC, purchase the Collateral, or any portion of it at any sale held under
this Article.
(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Agent on credit, the Liabilities shall be deemed to have been
reduced as a result thereof to the extent that payment is finally received
thereon by the Agent.
(f) The Agent shall apply the proceeds of any exercise of
the Agent's Rights and Remedies under this Article 11 towards the Liabilities in
such manner, and with such frequency, as the Agent may reasonably determine.
11.3. Occupation of Business Location. In connection with the Agent's
exercise of the Agent's rights under this Article XI, the Agent may, unless
prohibited by law, enter upon, occupy, and use any premises owned or occupied by
any Borrower, and may, unless prohibit by law, exclude the Borrowers from such
premises or portion thereof as may have been so entered upon, occupied, or used
by the Agent. The Agent shall not be required to remove any of the Collateral
from any such premises upon the Agent's taking possession thereof, and may
render any Collateral unusable to the Borrowers. In no event shall the Agent be
liable to the Borrowers for use or occupancy by the Agent of any premises
pursuant to this Article XI, nor for any charge (such as wages for the
Borrowers' employees and utilities) incurred in connection with the Agent's
exercise of the Agent's Rights and Remedies.
- 103 -
11.4. Grant of Nonexclusive License. Each Borrower hereby grants to the
Agent a royalty free nonexclusive irrevocable license, subject to the terms of
any applicable licensing agreement, with any third party licensor, to use,
apply, and affix any trademark, trade name, logo, or the like in which the
Borrower now or hereafter has rights, such license being with respect to the
Agent's exercise of the rights hereunder, in connection with any sale or other
disposition of Inventory.
11.5. Assembly of Collateral. The Agent may require the Borrowers to
assemble the Collateral and make it available to the Agent at the Borrowers'
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrowers.
11.6. Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Agent hereunder (herein, the " AGENT'S RIGHTS AND REMEDIES")
shall be cumulative and not exclusive of any rights or remedies which it would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agent's Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Agent's
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Agent and any person, at any time,
regarding a particular, limited exercise of the Agent's rights and Remedies
shall preclude any other or further exercise of the Agent's Rights and Remedies.
No waiver by the Agent of any of the Agent's Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it, in
the absence of express provisions in that regard, be deemed a continuing waiver.
All of the Agent's Rights and Remedies and all of the Agent's rights, remedies,
powers, privileges, and discretions under any other agreement or transaction may
be exercised by the Agent at such time or times and in such order of preference
as the Agent in its sole discretion may determine. The Agent's Rights and
Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.
- 104 -
ARTICLE XII - NOTICES:
12.1. Notice Addresses. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given as provided in Section 12.2:
If to the Agent: BankBoston Retail Finance Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xx. Xxxxxxxxx X. Xxxxx,
Managing Director
Fax : 000-000-0000
With a copy to: Stroock & Stroock & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xxxxx X. Xxxxxxxx, Esquire
Fax : 000-000-0000
If to the Borrower: Lechters, Inc.
Xxx Xxxx Xxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention : Xxxxx X. Xxxxxxxx, Chief Financial Officer
Fax : 000-000-0000
With a copy to: Xxxxx Xxxxx, General Counsel
Lechters, Inc.
Xxx Xxxx Xxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Fax: : 000-000-0000
12.2. Notice Given.
(a) Except as otherwise specifically provided herein,
notices shall be deemed made and correspondence received, as follows (all times
being local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
three (3) days following deposit in the United States mail, postage
prepaid.
- 105 -
(ii) By recognized overnight express delivery: the
Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after 9:00
AM and no later than two (2) hours prior to the close of customary
business hours of the recipient, when delivered. Otherwise, at the
opening of the next succeeding Business Day.
(iv) By facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than two (2) hours
prior to the close of customary business hours of the recipient, one (1)
hour after being sent. Otherwise, at the opening of the next succeeding
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or facsimile number for which no due notice
was given shall each be deemed receipt of the notice sent.
ARTICLE XIII - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13.1. Revolving Credit Funding Procedures: Subject to Section 13.2:
(a) The Agent shall advise each of the Lenders by no later
than 2:00PM (Boston Time) on any day on which any Revolving Credit Loan other
than a SwingLine Loan is to be made. Such advice, in each instance, may be by
telephone, provided that any such telephonic advice shall be confirmed in
writing and shall include reference (as applicable) to the interest rate
applicable to the proposed Revolving Credit Loan.
(b) Each Lender, by no later than the end of business on the
day on which the subject Revolving Credit Loan is to be made, subject to that
Lender's Dollar Commitment, shall transfer that Lender's Percentage Commitment
of the requested Revolving Credit Loan to the Agent.
13.2 SwingLine Loans
(a) In the event that, when a Revolving Credit Loan is
requested, the aggregate unpaid balance of the SwingLine Loan is less than the
SwingLine Loan Ceiling, then the SwingLine Lender may advise the Agent that the
SwingLine Lender has determined to include up to the amount of the
requested Revolving Credit Loan as part of the SwingLine Loan.
- 106 -
In such event, the SwingLine Lender shall Transfer the amount of the
requested Revolving Credit Loan to the Agent.
(b) The SwingLine Loan shall be converted to a Revolving
Credit Loan in which all Lenders participate as follows:
(i) Weekly, the SwingLine Lender shall advise the
Agent that the SwingLine Loan is to be converted to a Revolving Credit
Loan in which all Lenders participate.
(ii) At the initiation of a Liquidation, the entire unpaid
principal balance of the SwingLine Loan shall be converted to a
Revolving Credit Loan in which all Lenders participate.
In either such event, the Agent shall advise each Lender of such conversion as
if, and with the same effect as if such conversion were the making of a
Revolving Credit Loan as provided in Section 13.1.
(c) The SwingLine Lender, in separate capacities, may also
be the Agent and a Lender.
(d) The SwingLine Lender, in its capacity as SwingLine
Lender, is not a "Lender" for any of the following purposes:
(i) Except as otherwise specifically provided in the
relevant Section, any distribution pursuant to Section 14.7.
(ii) Determination of whether the requisite Commitment
Percentage has Consented to action requiring such Consent.
13.3 Agent's Covering of Fundings:
(a) Each Lender shall make available to the Agent, as
provided herein, that Lender's Commitment Percentage of the following:
(i) Each Revolving Credit Loan, up to the maximum
amount of that Lender's Dollar Commitment.
(ii) Each L/C Drawing (to the extent that such L/C Drawing
is not "covered" by a Revolving Credit Loan as provided herein).
(b) In all circumstances, the Agent may:
- 107 -
(i) Assume that each Lender timely shall make
available to the Agent that Lender's Commitment Percentage of each
Revolving Credit Loan notice of which is provided pursuant to Section
12.1 and shall make available, to the extent not "covered" by a
Revolving Credit Loan, its Commitment Percentage of each L/C Drawing.
(ii) In reliance upon such assumption, make available the
corresponding amount to the Borrowers.
(iii) Assume that each Lender timely shall pay, and shall
make available, to the Agent all other amounts which that Lender is
obligated to so pay and/or make available hereunder or under any of the
Loan Documents.
(c) In the event that, in reliance upon any of such
assumptions, the Agent makes available advances or pays a Lender's Commitment
Percentage of one or more Revolving Credit Loans, L/C drawings, or any other
amount to be made available hereunder or under any of the Loan Documents, which
amounts a Lender (a "DELINQUENT LENDER") fails to provide to the Agent within
one (1) Business Day of written notice of such failure, then:
(i) The amount which had been made available by the
Agent is an "AGENT'S COVER".
(ii) All interest paid by the Borrowers on account of a
Revolving Credit Loan or coverage of a L/C drawing which relate to an
Agent's Cover shall be retained by the Agent until the Agent's Cover has
been paid with interest by the applicable Delinquent Lender.
(iii) The Delinquent Lender shall pay to the Agent, on
demand, interest (based upon a 360 day year and actual days elapsed) at
a rate equal to the weighted average interest rate paid by the Agent for
federal funds during the period during which such amount remains unpaid,
on the principal balance of the Agent's Cover, from the date of the
making of the Agent's Cover until repaid.
(iv) The Agent shall succeed to all rights to payment to
which the Delinquent Lender otherwise would have been entitled hereunder
in respect of those amounts paid by or in respect of the Borrowers on
account of any Agent's Cover together with interest until it is repaid
by the applicable Delinquent Lender. Such payments shall be deemed made
first towards the amounts in respect of which the Agent's Cover was
- 108 -
provided and only then towards amounts in which the Delinquent Lender is
then participating. For purposes of distributions to be made pursuant to
Section 13.4(a) (which relates to ordinary course distributions) or
Section 14.7 (which relates to distributions of proceeds of a
Liquidation) below, amounts shall be deemed distributable to a
Delinquent Lender (and consequently, to the Agent to the extent to which
the Agent is then entitled) at the highest level of distribution (if
applicable) at which the Delinquent Lender would otherwise have been
entitled to a distribution.
(v) Subject to Subsection 13.3(c)(iv), the Delinquent
Lender shall be entitled to receive any payments from the Borrower which
do not relate to an Agent's Cover.
(d) A Delinquent Lender shall not be relieved, by virtue of
any Agent's Cover or otherwise, of any obligation of such Delinquent Lender
hereunder (all and each of which shall constitute continuing obligations on the
part of any Delinquent Lender).
(e) A Delinquent Lender may cure its status as a Delinquent
Lender by paying the Agent the aggregate of the following:
(i) The Agent's Cover (to the extent not previously
repaid by the Borrower and retained by the Agent in accordance with
Subsection 13.3(c)(iv), above) with respect to that Delinquent Lender.
Plus
(ii) Any interest payable under Subsection 13.3(c)(iii),
above.
Plus
(iii) All such costs and expenses as may be incurred by
the Agent in the enforcement of the Agent's rights against such
Delinquent Lender.
13.4 Ordinary Course Distributions: Revolving Credit This Section 13.4
applies unless the provisions of Section 14.7 (which relates to distributions in
the event of a Liquidation) become operative.
(a) Weekly, on such day as may be set from time to time by
the Agent (or more frequently at the Agent's option) the Agent and each Lender
shall settle up on amounts advanced and payments received under the Revolving
Credit.
- 109 -
(b) The Agent shall distribute to the SwingLine Lender and
to each Lender, their respective Pro-Rata shares of interest payments on the
Revolving Credit Loans when actually received and collected by the Agent
(excluding the one (1) Business Day settlement delay to the extent provided for
in Section 8.6(a), which shall be for the account of the Agent only). For
purposes of calculating interest due to a Lender, that Lender shall be entitled
to receive interest on the actual amount contributed by that Lender towards the
principal balance of the Revolving Credit Loans outstanding during the
applicable period covered by the interest payment made by the Borrowers. Any net
principal reductions to the Revolving Credit Loans received by the Agent in
accordance with the Loan Documents during such period shall not reduce such
actual amount so contributed, for purposes of calculation of interest due to
that Lender, until the Agent has distributed to that Lender its Pro-Rata share
thereof.
(c) The Agent shall distribute fees paid on account of the
Revolving Credit, as follows:
(i) Unused (Line) Fee: Pro-Rata to the Lenders.
(ii) Early Termination Fee: Pro-Rata to the Lenders.
(iii) Underwriting Fee: As provided in separate fee
letter between the Agent
and the Lead Borrower.
(iv) Agency Fee: As provided in separate fee
letter between the Agent
and the Lead Borrower.
(d) No Lender shall have any interest in, or right to
receive any part of the Underwriting Fee or Agent's Fee to be paid by the
Borrowers to the Agent pursuant to the separate fee letters.
(e) Any amount received by the Agent as reimbursement for
any cost or expense (including without limitation, reasonable attorneys' fees)
shall be distributed by the Agent to the Person entitled to such reimbursement
as provided in this Agreement.
(f) Each distribution pursuant to this Section 13.4 is
subject to Section 13.3(c), above (which relates to Delinquent Lenders).
- 110 -
ARTICLE XIV - ACCELERATION AND LIQUIDATION:
14.1 Acceleration Notices
(a) The SuperMajority Lenders may give the Agent an
Acceleration Notice at any time following the occurrence of an Event of Default.
Such notice may be by multiple counterparts, provided that counterparts executed
by the requisite Lenders are received by the Agent within a period of five (5)
consecutive Business Days.
14.2 Acceleration. Unless stayed by judicial or statutory process, the
Agent shall Accelerate the Liabilities under the Loan Documents within a
commercially reasonable time following the Agent's receipt of an Acceleration
Notice from the SuperMajority Lenders, in compliance with Section 14.1(a).
14.3 Initiation of Liquidation Unless stayed by judicial or
statutory process, a Liquidation shall be initiated by the Agent within a
commercially reasonable time following Acceleration of the Liabilities.
14.4 Actions At and Following Initiation of Liquidation (a) At the
initiation of a Liquidation:
(i) The unpaid principal balance of the SwingLine
Loan (if any) shall be converted, pursuant to Section 13.1, to a
Revolving Credit Loan in which all Lenders participate.
(ii) The Agent and the Lenders shall "net out" each
Lender's respective contributions towards the Revolving Credit Loans, so
that each Lender holds that Lender's Revolving Credit Commitment
Percentage of the Revolving Credit Loans and advances.
(b) Following the initiation of a Liquidation, each Lender
shall contribute towards any L/C thereafter honored and not immediately
reimbursed by the Borrower that Lender's Revolving Credit Commitment Percentage
of such honoring.
- 111 -
14.5 Agent's Conduct of Liquidation
(a) Any Liquidation shall be conducted by the Agent with the
advice and assistance of the Lenders.
(b) The Agent may establish one or more Nominees to "bid in"
or otherwise acquire ownership to any Post Foreclosure Asset.
(c) The Agent shall manage the Nominee and manage and
dispose of any Post Foreclosure Assets with a view towards the realization of
the economic benefits of the ownership of the Post Foreclosure Assets and in
such regard, the Agent and/or the Nominee may operate, repair, manage, maintain,
develop, and dispose of any Post Foreclosure Asset in such manner as the Agent
determines is appropriate under the circumstances.
(d) The Agent may decline to undertake or to continue taking
a course of action or to execute an action plan (whether proposed by the Agent
or by any Lender) unless indemnified to the Agent's satisfaction by the Lenders
against any and all liability and expense which may be incurred by the Agent by
reason of taking or continuing to take that course of action or action plan.
(e) The Agent and each Lender shall execute all such
instruments and documents not inconsistent with the provisions of this Agreement
as the Agent and/or the Nominee reasonably may request with respect to the
creation and governance of any Nominee, the conduct of the Liquidation, and the
management and disposition of any Post Foreclosure Asset.
14.6 Distribution of Liquidation Proceeds:
(a) The Agent may establish one or more reasonably funded
reserve accounts into which proceeds of the conduct of any Liquidation may be
deposited in anticipation of future expenses which may be incurred by the Agent
in the exercise of rights as a secured creditor of the Borrowers and prior
claims which the Agent anticipates may need to be paid.
(b) The Agent shall distribute the proceeds of any
Liquidation to itself and the Lenders.
(c) In accordance with the relative priorities set
forth in Section 14.7, each Lender shall, on the written
request of the Agent and/or any Nominee, but not more frequently
- 112 -
than once each month, reimburse the Agent
and/or any Nominee, Pro-Rata, for any cost or expense reasonably incurred by the
Agent and/or the Nominee in the conduct of a Liquidation, if such amount is not
covered out of current proceeds of the Liquidation.
14.7 Relative Priorities To Proceeds of Liquidation The relative
priorities in which the proceeds of a Liquidation are to be applied are as
follows:
(a) First: To the Agent as reimbursement for all Costs
of Collection incurred by the Agent and to
any funded reserve established pursuant to
Section 14.6(a) and on account of payment
of the Agency Fee.
(b) Second: The SwingLine Lender, on account of any
SwingLine loans not converted to
Revolving Credit Loans pursuant to
Section 14.4(a)(i).
(c) Third: The Lenders, Pro-Rata, on account of the
principal balance of Revolving Credit
Loans.
(d) Fourth: The Lenders, Pro-Rata, on account of
accrued interest on the Revolving Credit
Loans.
(e) Fifth: The Lenders, Pro-Rata, on account of all
fees, including without limitation the
Unused (Line) Fee and Early Termination
Fee, and Costs of Collection incurred by
the Lenders.
(f) Sixth: To any other Liabilities under the Loan
Documents.
ARTICLE XV - THE AGENT:
15.1 Appointment of Agent
(a) Each Lender appoints and designates BBRF as the "Agent"
hereunder and under the other Loan Documents.
(b) Each Lender authorizes the Agent:
(i) To execute those of the Loan Documents and all
other instruments relating thereto to which Agent is a party.
- 113 -
(ii) To take such action on behalf of the Lenders and to
exercise all such powers as are expressly delegated to the Agent
hereunder and in the other Loan Documents and all related documents,
together with such other powers as are reasonably incident thereto.
15.2 Responsibilities of Agent
(a) The Agent shall have principal responsibilities for and
primary authority for the administration of the credit facilities contemplated
by the Loan Documents and for all matters for which the Agent is accorded
responsibility under this Agreement, including the conduct of the Liquidation
and the distribution of the proceeds of such Liquidation.
(b) The Agent shall have no duties or responsibilities to,
or any fiduciary relationship with, any Lender except for those expressly set
forth in this Agreement.
(c) Neither the Agent nor any of its affiliates shall be
responsible to any Lender for any of the following:
(i) Any recitals, statements, representations or
warranties made by the Borrowers, or any other person.
(ii) any appraisals or other assessments of the assets of
the Borrowers or of anyone else responsible for or on account of the
Liabilities.
(iii) The value, validity, effectiveness, genuineness,
enforceability, or sufficiency of the Loan Agreement, any other Loan
Documents or any other document referred to or provided for therein.
(iv) Any failure by the Borrowers, or any other person
(other than the Agent) to perform their respective obligations under the
Loan Documents.
(d) The Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the Agent with
reasonable care. No such attorney, accountant, other professional, agent, or
attorney in fact shall be responsible for any action taken or omitted to be
taken by any other such Person.
(e) Neither the Agent, nor any of its directors,
officers, or employees shall be responsible for any action
- 114 -
taken or omitted to be taken by any other of them nor for any action taken
or omitted to be taken in connection herewith, or with respect to the credit
facility contemplated by this Agreement, except for any action taken or omitted
to be taken as to which a final judicial determination has been or is made (in a
proceeding in which such person has had an opportunity to be heard) that such
Person had acted in a grossly negligent manner, in actual bad faith, or in
willful misconduct.
(f) The Agent shall have no responsibility in any event for
more funds than the Agent actually receives and collects.
(g) The Agent, in its separate capacity as Lender, shall
have the same rights and powers hereunder as any other Lender.
15.3 Concerning Distributions By the Agent
(a) The Agent, in its reasonable discretion based upon its
determination of the likelihood that additional payments will be received,
expenses incurred, and/or claims made by third parties to all or a portion of
such proceeds, may delay the distribution of any payment received on account of
the Liabilities.
(b) The Agent may disburse funds prior to determining that
the sums which the Agent expects to receive have been finally and
unconditionally paid to the Agent. If and to the extent that the Agent does
disburse funds and it later becomes apparent that the Agent did not then receive
a payment in an amount equal to the sum paid out, then any Lender to whom the
Agent made the funds available, on demand from the Agent, shall refund to the
Agent the sum paid to that person that exceeds the amount actually received by
the Agent.
(c) If, in the opinion of the Agent, the distribution of any
amount received by the Agent might involve the Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then the Agent may
refrain from making distribution until the Agent's right to make distribution
has bee adjudicated by a court of competent jurisdiction.
(d) The proceeds of any Lender's exercise of any right of,
or in the nature of, set-off shall be deemed, First, to the extent that a Lender
is entitled to any distribution hereunder, to constitute such distribution and
Second, shall be shared with the other Lenders Pro-Rata based upon their
respective contributions to the then principal balance of the Revolving Credit
(and shall be deemed distributions by the Agent hereunder).
- 115 -
(e) Each Lender acknowledges that the crediting of the
Borrowers with the "proceeds" of any transaction in which a Post Foreclosure
Asset is acquired is a non-cash transaction and that, in consequence, no
distribution of such "proceeds" will be made by Agent to any Lender.
(f) In the event that (x) a court of competent jurisdiction
shall adjudge that any amount received and distributed by Agent is to be repaid
or disgorged, or (y) the Lenders, acting by Consent of the SuperMajority
Lenders, determine to effect such repayment or disgorgement, then each Lender to
which any such distribution shall have been made shall repay, to the Agent, that
Lender's Pro-Rata share of the amount so adjudged or determined to be repaid or
disgorged.
15.4 Dispute Resolution: Any dispute among the Lenders and/or the Agent
hereunder, under any of the other Loan Documents, or concerning the
interpretation, administration, or enforcement of the credit facilities
contemplated by this Agreement or the interpretation or administration of any
Loan Document which cannot be resolved amicably shall be resolved in the United
States District Court for the District of Massachusetts, sitting in Boston or in
the Superior Court of Suffolk County, Massachusetts, to the jurisdiction of
which courts all parties hereto hereby submit.
15.5 Distributions of Notices and of Documents The Agent will forward to
each Lender, promptly after the Agent's receipt thereof, a copy of each notice
or other document furnished to the Agent pursuant to the Loan Documents,
including monthly, quarterly, and annual financial statements received from the
Borrower pursuant to Article V of this Agreement, other than any of the
following:
(a) Routine communications associated with requests for
Revolving Credit Loans and/or the issuance of L/C's.
(b) Routine and nonmaterial communications;
(c) Any notice or document required by any of the Loan
Documents to be furnished to the Lenders by the Lead Borrower or any Borrower.
- 116 -
(d) Any notice or document of which the Agent has
knowledge that such notice or document had been forwarded to the Lenders other
than by the Agent.
15.6 Confidential Information:
Each Lender will maintain, as confidential, all of the following:
(a) Proprietary approaches, techniques, and methods of
analysis which are applied by the Agent in the administration of the credit
facility contemplated by the Loan Agreement.
(b) Proprietary forms and formats utilized by the Agent in
providing reports to the Lenders pursuant hereto, which forms or formats are not
of general currency.
(c) Confidential information provided by any Borrower
pursuant to the Loan Documents, other than any information which becomes known
to the general public through sources other than that Lender. Nothing included
herein shall prohibit the disclosure of any such information as may be required
to be provided by judicial process or by regulatory authorities having
jurisdiction over any party to this Agreement.
15.7 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telex, or
facsimile) reasonably believed by the Agent to be genuine and correct and to
have been signed or sent by or on behalf of the proper person or persons, and
upon advice and statements of attorneys, accountants and other experts selected
by the Agent. As to any matters not expressly provided for in this Agreement,
any Loan Document, or in any other document referred to therein, the Agent shall
in all events be fully protected in acting or in refraining from acting, in
accordance with the applicable Consent required by this Agreement. Instructions
given with the requisite Consent shall be binding on all Lenders.
15.8 Non-Reliance on Agent and Other Lenders
(a) Each Lender represents to all other Lenders and to the
Agent that such Lender:
- 117 -
(i) Independently and without reliance on any
representation or act by the Agent or by any other Lender, and based on
such documents and information as that Lender has deemed appropriate,
has made such Lender's own appraisal of the financial condition and
affairs of the Borrowers and decision to enter into this Agreement and
the other Loan Documents.
(ii) Has relied upon that Lender's review of the Loan
Documents and such review of the Loan Documents by counsel to that
Lender as that Lender deemed appropriate under the circumstances.
(b) Each Lender agrees that such Lender, independently and
without reliance upon the Agent or any other Lender, and based upon such
documents and information as such Lender shall deem appropriate at the time,
will continue to make such Lender's own appraisals of the financial condition
and affairs of the Borrowers when determining whether to take or not to take any
discretionary action under this Agreement or any other Loan Document.
(c) The Agent, in the discharge of its duties hereunder,
shall not be required to make inquiry of, or to inspect the properties or books
of, any Person.
(d) Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder (as to which, see Section 15.5), the Agent shall not have any
affirmative duty or responsibility to provide any Lender with any credit or
other information concerning any Person which may come into the possession of
the Agent or any of its Affiliates.
(e) Each Lender shall have reasonable access to all
documents relating to the Agent's performance of the Agent's duties hereunder at
such Lender's request.
15.9 Indemnification. Without limiting the liabilities of the Borrowers
under any of the Loan Documents, each Lender shall indemnity the Agent,
Pro-Rata, for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including reasonable attorneys' fees and expenses and other
out-of-pocket expenditures) which may at any time be imposed on, incurred by, or
asserted against the Agent and in any way relating to or arising out of this
Agreement or any other Loan Document or any documents contemplated by or
- 118 -
referred to therein or the transactions contemplated thereby or the enforcement
of any of the terms hereof or of any other documents, provided, however, that no
Lender shall be liable for any of the foregoing to the extent that any of the
foregoing arises from any action taken or omitted to be taken by the Agent as to
which a final judicial determination has been or is made (in a proceeding in
which the Agent has had an opportunity to be heard) that the Agent had acted in
a grossly negligent manner or in bad faith, or has engaged in willful
misconduct.
15.10 Resignation of Agent
(a) The Agent may resign at any time by giving 60 days prior
written notice thereof to the Lenders and the Lead Borrower. Upon receipt of any
such notice of resignation, the Required Lenders shall have the right to appoint
a successor Agent (provided, that no such consent of the Lead Borrower shall be
requested if an Event of Default has occurred, and provided, further that such
consent shall be deemed given if no written objection is received within seven
days of the Lead Borrower's receipt of notice of such successor). If no
successor Agent shall have been so appointed and shall have accepted such
appointment within 30 days after the giving of notice by the Agent, then the
resigning Agent may appoint a successor Agent, which shall be a financial
institution with an office in the Northeastern United States having a combined
capital and surplus in excess of $500,000,000.00. The consent of the Borrowers
otherwise required by this Section 15.10(a) shall not be required if an Event of
Default has occurred.
(b) Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor shall thereupon succeed to, and
become vested with, all the rights, powers, privileges, and duties of the
(resigning) Agent so replaced, and the (resigning) Agent shall be discharged
from the (resigning) Agent's duties and obligations hereunder, other than on
account of any responsibility for any action taken or omitted to be taken by the
(resigning) Agent as to which a final judicial determination has been or is made
(in a proceeding in which the (resigning) Agent has had an opportunity to be
heard) that such Agent had acted in a grossly negligent manner or in bad faith
or has engaged in willful misconduct.
- 119 -
(c) After the retiring Agent's resignation, the provisions
of this Agreement shall continue in effect for the retiring Agent's benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
ARTICLE XVI - ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS:
16.1 Administration of Credit Facilities
(a) Except as otherwise specifically provided in this
Agreement, the Agent may take any action with respect to the credit facility
contemplated by the Loan Documents as the Agent determines to be appropriate
within its area of responsibility and authority, as set forth in Sections
15.2(b) and 15.2(a), provided, however, the Agent is not under any affirmative
obligation to take any action which it is not required by this Agreement or the
other Loan Documents specifically to so take.
(b) Except as specifically provided in the following
Sections of this Agreement, whenever this Agreement or any other Loan Document
provides that action may be taken or omitted to be taken in the Agent's
discretion, the Agent shall have the sole right to take, or refrain from taking,
such action without, and notwithstanding, any vote of the Lenders:
Actions Described in Section Type of Consent Required
---------------------------- ------------------------
16.2 Majority Lenders
16.3 SuperMajority Lenders
16.5 Unanimous Consent
16.6 Consent of SwingLine Lender
(c) The rights granted to the Lenders in those sections
referenced in Section 16.1(b) shall not otherwise limit or impair the Agent's
exercise of its discretion under the Loan Documents.
(d) The Lenders agree that, subject to Section 16.3(a), any
advance under the Revolving Credit which results in a Permissible Overloan may
be made by the Agent in its discretion without the Consent of the Lenders and
that each Lender shall be bound thereby.
- 120 -
16.2 Actions Requiring Consent or Direction of Majority Lenders. Except
as otherwise provided in this Agreement, the Consent or direction of the
Majority Lenders is required for any amendment, waiver, or modification of any
Loan Document.
16.3 Actions Requiring Consent or Direction of SuperMajority Lenders.
The Consent or direction of the SuperMajority Lenders is required as follows:
(a) To permit a Permissible Overloan to be outstanding for
more than 60 consecutive Business Days or more than twice in any twelve month
period.
(b) If an Event of Default (other than an Event of Default
arising under Section 10.11) shall have occurred and be continuing, the
SuperMajority Lenders may direct the Agent to suspend the Revolving Credit
(including the making of any Permissible Overloans), whereupon, as long as such
Event of Default exists and is continuing, Revolving Credit Loans shall be made
and L/C's shall be issued, amended, or renewed only with Consent of the
SuperMajority Lenders.
(c) If an Event of Default has occurred and not been duly
waived, the SuperMajority Lenders may direct the Agent to:
(i) Give an Acceleration Notice in accordance with
Section 14.1(a); or
(ii) Increase the rate of interest to the default rate
of interest as provided in, and to the extent permitted by, the
Loan Agreement.
16.4 Intentionally Deleted.
16.5 Actions Requiring or Directed By Unanimous Consent. None of the
following may take place except with the written consent of each Lender
adversely affected thereby or with Unanimous Consent.
(a) Any increase in any Lender's Dollar Commitment (other
than by reason of the application of Section 16.9 (which deals with
Nonconsenting Lenders) or Section 17.1 (which deals with assignments and
participations)).
(b) Any decrease in any interest rate or fee payable to the
Lenders on account of the Revolving Credit Loans.
- 121 -
(c) Any extension of the Maturity Date.
(d) Any forgiveness of all or any portion of any payment
Liability. (e) Any release of a material portion of the
Collateral not otherwise
permitted, required or provided for in the Loan Documents.
(f) Any amendment of the definition of the terms "Borrowing
Base", or "Availability" or of any definition of any component thereof, such
that more credit would be available to the Borrowers, based on the same assets,
than would have been available to the Borrowers immediately prior to such
amendment, it being understood, however, that:
(i) The foregoing shall not limit the adjustment by
the Agent of any Reserve in the Agent's administration of the Revolving
Credit as otherwise permitted by this Agreement; and
(ii) The foregoing shall not prevent the Agent, in its
administration of the Revolving Credit, from restoring any component of
the Borrowing Base which had been lowered by the Agent back to the value
of such component as stated in this Agreement or to an intermediate
value.
(g) Any release of any Person obligated on account of the
Liabilities;
(h) The making of any Revolving Credit Loan which, when
made, exceeds Availability and is not a Permissible Overloan, provided,
however, that
(i) No Consent shall be required in connection with
the making of any Revolving Credit Loan to "cover" any honoring of a
drawing under any L/C; and
(ii) Each Lender acknowledges that subsequent to the
making of a Revolving Credit Loan which does not
constitute a Permissible Overloan, the unpaid principal balance of
the Loan Account may exceed Borrowing Base on account of changed
circumstances beyond the control of the Agent (such as a drop in
collateral value).
(i) The waiver of the obligation of the Borrowers to reduce
the unpaid principal balance of loans under the Revolving Credit to an amount so
that a Permissible Overloan does not exceed 5% of the Loan Ceiling, or subject
to the time limits included in Section 16.3(a) (which relates to the outside
limit on the number of consecutive Business Days that a Permissible Overloan may
be outstanding);
- 122 -
(j) Any amendment of this Article 16;
(k) Amendment of the definitions of the following terms:
"Loan to Collateral Reserve"
"Majority Lender"
"Permissible Overloan"
"SuperMajority Lenders"
"Unanimous Consent"
(l) Any continuation of the Revolving Credit following the
occurrence and during the continuance of an Event of Default under Section
10.11.
16.6 Actions Requiring SwingLine Lender Consent No action under,
amendment of, or waiver of compliance with, any provision of this Agreement or
any of the other Loan Documents which affects the SwingLine Lender may be
undertaken without the Consent of the SwingLine Lender.
16.7 Actions Requiring Agent's Consent
(a) No action under, amendment of, or waiver of compliance
with, any provision of this Agreement or any of the other Loan Documents which
affects the Agent in its capacity as an Agent may be undertaken without the
consent of the Agent; and
(b) No action referenced herein which affects the rights,
duties, obligations or liabilities of the Agent shall be effective without the
written consent of the Agent.
16.8 Miscellaneous Actions:
(a) Notwithstanding any other provision of this Agreement,
no single Lender independently shall exercise any right of action or enforcement
against or with respect to the Borrowers.
(b) The Agent shall be fully justified in failing or
refusing to take action under this Agreement or any other Loan Document on
behalf of any Lender unless the Agent shall first
(i) Receive such clear, unambiguous, written instructions
as the Agent deems appropriate; and
- 123 -
(ii) Be indemnified to the Agent's satisfaction by the
Lenders against any and all liability and expense which may be incurred
by the Agent by reason of taking or continuing to take any such action,
unless such action had been grossly negligent, or in bad faith or shall
constitute willful misconduct.
(c) The Agent may establish reasonable procedures for the
providing of direction and instructions from the Lenders to the Agent, including
the Agent's reliance on multiple counterparts, facsimile transmissions, and time
limits within which such direction and instructions must be received in order to
be included in a determination of whether the requisite Commitment Percentage of
Lenders has provided its direction or instructions.
16.9 Nonconsenting Lenders:
(a) In the event that a Lender (in this Section 16.9, a
"NonConsenting Lender") does not provide its Consent to a proposal by the Agent
to take action which requires consent under this Article XVI, then one or more
Lenders who provided Consent to such action may require the assignment, without
recourse and in accordance with the procedures outlined in Section 17.1, of the
NonConsenting Lender's Commitment on fifteen (15) days written notice to the
Agent and to the NonConsenting Lender.
(b) At the end of such fifteen (15) days, the Lenders who
have given such written notice shall Transfer the following to the NonConsenting
Lender, but only if the NonConsenting Lender delivers to the Agent the Revolving
Credit Note held by the NonConsenting Lender:
(i) Such NonConsenting Lender's Pro-Rata share of the
principal and interest of the Revolving Credit Loans.
(ii) All fees due to the NonConsenting Lender to the date
of such assignment.
(iii) Any out-of-pocket costs and expenses for which the
NonConsenting Lender is entitled to reimbursement from the Borrowers.
(c) In the event that the NonConsenting Lender fails to
deliver to the Agent the Revolving Credit Note held by the NonConsenting Lender
as provided in Section 16.9(b), then:
- 124 -
(i) The amount otherwise to be Transferred to the
NonConsenting Lender shall be Transferred to the Agent and held by the
Agent, without interest, to be turned over to the NonConsenting Lender
upon delivery of the Revolving Credit Note held by that NonConsenting
Lender;
(ii) The Revolving Credit Note held by the NonConsenting
Lender shall have no force or effect whatsoever;
(iii) The NonConsenting Lender shall cease to be a
"Lender"; and (iv) The Lender(s) which have Transferred
the amount to the Agent as
described above shall succeed to all rights and become subject to all of
the obligations of the NonConsenting Lender as "Lender".
(d) In the event that more than one (1) Lender wishes to
require such assignment, the NonConsenting Lender's Commitment shall be divided
amongst such Lenders, Pro-Rata based upon their respective Commitments, with the
Agent coordinating such transaction.
(e) The Agent shall coordinate the retirement of the
Revolving Credit Note held by the NonConsenting Lender and the issuance of
Revolving Credit Notes to those Lenders which "take-out" such NonConsenting
Lender, provided, however, that no processing fee otherwise payable as provided
in Section 17.1(c) shall be due under such circumstances.
ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS
17.1 Assignments and Assumptions
(a) Except as provided herein, each Lender (in this Section
17.1, an "ASSIGNING LENDER") may assign to one or more Eligible Assignees (in
this Section 17.1, an "ASSIGNEE LENDER") all or a portion of such Lender's
interests, rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of its Commitment) and the same portion of
the Revolving Credit Loans at the time owing to it, and of the Revolving Credit
Note held by it, provided that:
(i) The Agent shall have given its prior written
consent to such assignment, which consent shall not be unreasonably
withheld, but need not be given if the proposed assignment would result
- 125 -
in any Assignee Lender's having a Dollar Commitment of less than the
"minimum hold" amount specified in Section 17.1(a)(iv).
(ii) If no Event of Default has occurred, such assignment
shall be subject to the consent of the Lead Borrower. Such consent shall
not be unreasonably withheld or delayed and shall be deemed given if no
written objection is received within seven (7) days of the Lead
Borrower's receipt of notice of such proposed assignment.
(iii) Each such assignment shall be of a constant, and not
a varying, percentage of all the Assigning Lender's rights and
obligations under this Agreement.
(iv) Following the effectiveness of such assignment, the
Assigning Lender's Dollar Commitment (if not an assignment of all of the
Assigning Lender's Commitment) shall not be less than $ 10 Million.
(b) The parties to such assignment shall execute and deliver
to the Agent, for recording in the Register, an Assignment and Acceptance
substantially in the form of EXHIBIT 17.1, annexed hereto (an "Assignment and
Acceptance"):
(c) The Assigning Lender shall deliver to the Agent, with
such Assignment and Acceptance, the Revolving Credit Note held by such Assigning
Lender and the Agent's processing fee of $3,000.00 provided, however, that no
such processing fee shall be due where the Assigning Lender is one of the
Lenders at the initial execution of this Agreement.
(d) From and after the effective date specified in an
Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Agent may delay by up to five (5) Business Days after
the delivery of such Assignment and Acceptance):
(i) The Assignee Lender;
(A) Shall be a party to this Agreement and
the other Loan Documents (and to any amendments of this
Agreement and the other Loan Documents) as fully as if the
Assignee Lender had executed each.
(B) To the extent of the Commitment
assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder.
- 126 -
(ii) The Assigning Lender shall be released from
the Assigning Lender's obligations under this Agreement and the
other Loan Documents to the extent of the Commitment assigned by
such Assignment and Acceptance.
(iii) The Agent shall undertake to obtain and
distribute replacement Revolving Credit Notes to such Assigning
Lender and Assignee Lender. (e) Each party to an Assignment and
Acceptance confirms to and agrees with
all parties to this Agreement as to those matters which are set forth in such
Assignment and Acceptance.
(f) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Revolving Credit Loans hereunder owing to, the
Lenders from time to time. As between the Agent and the Lenders, the entries in
the Register shall be conclusive, in the absence of manifest error, and the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a "Lender" hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Lenders at any reasonable time
and from time to time upon reasonable prior notice.
(g) The Assigning Lender and Assignee Lender, directly
between themselves, shall make all appropriate adjustments in payments for
periods prior to the effective date of an Assignment and Assumption.
17.2 Participations. Each Lender may sell participations to one or more
financial institutions in all or a portion of such Lender's rights and
obligations under the Loan Agreement, provided that no such participation shall
include any provision which accords the Person purchasing such participation the
right to consent to any action, amendment, or waiver which is subject to any
requirement herein for approval by all or a requisite number or proportion of
the Lenders. No such sale of a participation shall relieve a Lender from that
Lender's obligations hereunder nor obligate the Agent to any Person other than a
Lender.
- 127 -
17.3 Pledges To Federal Reserve Banks Nothing included in this Agreement
shall prevent or limit any Lender, to the extent that such Lender is subject to
any of the twelve Federal Reserve Banks organized under sub-section 4 of the
Federal Reserve Act (12 U.S.C. sub-section 341), from pledging all or any
portion of that Lender's interest and rights under this Agreement to any such
Federal Reserve Bank, provided, however, that neither such pledge nor the
enforcement thereof shall release the pledging Lender from its obligations
hereunder or under any of the Loan Documents.
ARTICLE XVIII - TERM:
18.1. Termination of Revolving Credit. The Revolving Credit shall remain
in effect (subject to suspension as provided in Section 2.4(g) hereof) until the
Termination Date.
18.2. Effect of Termination. On the Termination Date, the Borrowers
shall pay the Agent (whether or not then due), in immediately available funds,
all then outstanding Liabilities including, without limitation: the entire
balance of the Loan Account; any accrued and unpaid Line Fee; any payments due
on account of the indemnification obligations included in Section 2.9(e); and
all unreimbursed costs and expenses of the Agent and of each Lender for which
the Borrowers are responsible; and shall make such arrangements concerning any
L/C's then outstanding as are reasonably satisfactory to the Agent . Until such
payment, all provisions of this Agreement, other than those contained in Article
II which place an obligation on the Agent and any Lender to make any loans or
advances or to provide financial accommodations under the Revolving Credit or
otherwise, shall remain in full force and effect until all Liabilities shall
have been paid in full. The release by the Agent of the security and other
collateral interests granted the Agent by the Borrowers hereunder may be upon
such conditions and indemnifications as the Agent may reasonably require.
ARTICLE XIX - GENERAL:
19.1. Protection of Collateral. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrowers
- 128 -
(and may utilize any logo or other distinctive symbol associated with the
Borrowers) in connection with any advertising, promotion, or marketing
undertaken by the Agent with the Lead Borrower's approval, which approval shall
not be unreasonably withheld or delayed.
19.2. Successors and Assigns. This Agreement shall be binding upon the
Borrowers and the Borrowers' representatives, successors, and assigns and shall
inure to the benefit of the Agent and each Lender and the respective successors
and assigns of each provided, however, no trustee or other fiduciary appointed
with respect to the Borrowers shall have any rights hereunder. In the event that
the Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
19.3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
19.4. Amendments; Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrowers and the Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by the Agent or any Lender to give notice to the Borrowers of the
Borrowers' having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.
- 129 -
(b) The Borrowers may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Agent shall be in reliance upon all representations
and warranties theretofore made to the Agent by or on behalf of the Borrowers
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
(c) The following provisions of this Agreement may be
amended without the consent of the Lead Borrower or any Borrower (a copy of
which amendments shall be provided by the Agent to the Lead Borrower):
Article Relates To
------- ----------
13: Revolving Credit Fundings and Distributions
15(other than 15.10 with respect to required The Agent
notices to and consents of Lead Borrower):
17(other than 17.1(a)(ii), 17.2 and 17.3 with Assignments and Participations
respect to required notices to and consents of
Lead Borrower):
19.5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto the Agent full power
(exercisable after and during the occurrence of an Event of Default) to do any
and all things necessary or appropriate in connection with the exercise of such
powers as fully and effectually as the Borrowers might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Borrowers and each shall survive
the same. All powers conferred upon the Agent by this Agreement, being coupled
- 130 -
with an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Agent.
19.6. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion (subject, as between the Agent and the
Lenders, to Section 14.7). The Borrowers shall remain liable for any deficiency
remaining following such application.
19.7. Costs and Expenses of Agent and Of Lenders
(a) The Borrowers shall pay on demand all Costs of
Collection and all reasonable expenses of the Agent in connection with the
preparation, execution, and delivery of this Agreement and of any other Loan
Documents, whether now existing or hereafter arising, and all other reasonable
expenses which may be incurred by the Agent in preparing or amending this
Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities, and all costs and
expenses of the Agent which relate to the credit facility contemplated hereby.
(b) The Borrowers shall pay on demand all costs and expenses
(including attorneys' reasonable fees) incurred, following the occurrence of any
Event of Default, by each Lender in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as any such costs and expenses in connection with any
"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) The Borrowers authorize the Agent to pay all such fees
and expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) The undertaking on the part of the Borrowers in this
Section 19.7 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrowers, other
than a termination, release, or discharge which given because all Liabilities
had been paid in full.
- 131 -
19.8. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by such Lender or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and any document so
reproduced may be destroyed. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.
19.9. New York Law. Pursuant to Section 5-1401 of the New York General
Obligations Law, this Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be governed
by the laws of the State of New York.
19.10. Consent to Jurisdiction.
(a) Pursuant to Section 5-1402 of the New York General
Obligations Law, the Borrowers agree that any legal action, proceeding, case, or
controversy against any Borrower with respect to any Loan Document may be
brought in the New York State courts and the United State District Court sitting
in Manhattan, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, each Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) To the extent permitted by applicable law, each Borrower
WAIVES personal service of any and all process upon it, and irrevocably consents
to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified mail, postage
prepaid, to the Lead Borrower at the Lead Borrower's address for notices as
specified herein, such service to become effective five (5) Business Days after
such mailing.
- 132 -
(c) Each Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other court of competent jurisdiction.
(e) Each Borrower agrees that any action commenced by that
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in New York
City and that such Courts shall have exclusive jurisdiction with respect to any
such action.
19.11. Indemnification. The Borrowers shall indemnify, defend, and hold
the Agent and each Lender and any Participant and any employee, officer, or
agent of any of the foregoing (each, an "INDEMNIFIED PERSON") harmless of and
from any claim brought or threatened against any Indemnified Person by any
Person other than any Borrower (as well as from reasonable attorneys' fees and
expenses in connection therewith) on account of the relationship of the
Borrowers with the Agent or any Lender (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender's selection, but at the expense of the Borrowers with the understanding
that in the absence of an Event of Default any compromise or settlement shall be
with the Lead Borrower's consent) other than any claim as to which a final
determination is made in a judicial proceeding (in which the Agent and any other
Indemnified Person has had an opportunity to be heard), which determination
includes a specific finding that the Indemnified Person seeking indemnification
had acted in a grossly negligent manner or in actual bad faith or has engaged in
willful misconduct. This indemnification shall survive payment of the
Liabilities and/or any termination, release, or discharge executed by the Agent
in favor of the Borrowers, other than a termination, release, or discharge which
makes specific reference to this Section 19.11.
- 133 -
19.12. Rules of Construction. The following rules of construction shall
be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and words in
the plural include the singular.
(b) Each representation, warranty, covenant, and undertaking
of the Borrowers in any Loan Document is the joint and several representation,
warranty, covenant, and undertaking of all of the Borrowers unless such
representation, warranty, covenant or undertaking is made by the Lead Borrower
alone or by any other specific Borrowers.
(c) Titles, headings (indicated by being underlined or shown
in SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(d) The words "includes" and "including" are not limiting.
(e) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(f) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(g) Text which is shown in italics, shown in BOLD, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.
(h) The words "may not" are prohibitive and not permissive.
(i) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person
has undertaken reasonable and diligent investigation with respect to the
subject of such "knowledge" (whether or not such investigation has actually been
undertaken).
- 134 -
(j) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan
Document are to such instrument as amended to the date on which application of
such reference is being made.
(n) Except as otherwise specifically provided, all
references to time are to Boston time.
(o) In the determination of any notice, grace, or other
period of time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act,
event, or default from which the designated period of time begins to run
shall not be included and the last day of the period so computed shall
be included unless such last day is not a Business Day, in which event
the last day of the relevant period shall be the then next Business Day
and (II) the period so computed shall end at 5:00 PM on the relevant
Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The work "through" means "to and including".
(p) In the event of any inconsistency between the provisions
of this Agreement and any other Loan Document, the provisions of this Agreement
shall govern and control.
19.13. Intent. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure
all Liabilities under the Loan Documents, whether now existing or hereafter
arising.
- 135 -
(d) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrowers which is prohibited unless such consent
is given may be given or refused by the Agent in its sole discretion and without
reference to Section 2.16 hereof.
19.14. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to any Borrower from the Agents, any Lender, or any
participant (a "Participant") in the credit facility contemplated hereby or any
from any Affiliate of the Agent or, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrowers in the possession of
the Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any and
all obligations of the Borrowers to the Agent and each Lender or any Participant
or any such Affiliate and may be applied or set off against the Liabilities and
against such obligations, following the occurrence of an Event of Default and
then only with the consent of, or upon the direction of, the Agent and whether
or not other Collateral is then available to the Agent, any Lender, or any
Participant or any such Affiliate.
19.15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in
excess of the maximum rate imposed by applicable law. Any payment which is made
which, if treated as interest on a Liability would result in such interest's
exceeding such maximum rate shall be held, to the extent of such excess, as
additional collateral for the Liabilities as if such excess were "Collateral."
19.16. Waivers.
(a) The Borrowers (and all guarantors, endorsers, and
sureties of the Liabilities) make each of the waivers included in Section
19.16(b), below, knowingly, voluntarily, and intentionally, and understand that
the Agent and each Lender, in entering into the financial arrangements
- 136 -
contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Borrowers as provided herein, whether not or in the
future, are relying on such waivers.
(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required hereby or
by applicable law, the right to notice and/or hearing prior to the
Agent's exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWERS OR ANY OTHER PERSON
AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE
WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment, or
other basis on which the amount of any Liability, as stated on the books
and records of the Agent or any Lender, could be reduced or claimed to
be paid otherwise than in accordance with the tenor of and written terms
of such Liability.
(v) Any claim to consequential, special, or punitive
damages.
- 137 -
LECHTERS, INC.
("LEAD BORROWER")
By: /s/ Xxxxx X. Xxxxxxxx
Print Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
and Chief Financial Officer
ALL BORROWERS IN EXHIBIT A HERETO
(other than the Lead Borrower)
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
and Chief Financial Officer
of each such Borrower
BANKBOSTON RETAIL FINANCE INC.
("AGENT")
By: /s/ Xxxxx Xxxxx
Print Name: Xxxxx Xxxxx
Title: Vice President
- 138 -
PNC BANK, NATIONAL ASSOCIATION,
(a "LENDER")
By: /s/ Xxxxx X. Raphaels
Title: Vice President
- 139 -
CONGRESS FINANCIAL CORPORATION,
(a "LENDER")
By: /s/ Xxxxxx XxXxxxxx
Title: Vice President
- 140 -
XXXXXX FINANCIAL, INC.,
(a "LENDER")
By: /s/ Xxxxxxx X. Xxxxxxx
Title: Assistant Vice President
- 141 -
SCHEDULE B
SCHEDULE OF LENDERS' COMMITMENTS
LENDER DOLLAR COMMITMENT COMMITMENT PERCENTAGE
---------------------------------- ------------------------------- ------------------------------
BankBoston Retail Finance Inc. $45,000,000.00 37.5%
---------------------------------- ------------------------------- ------------------------------
Xxxxxx Financial, Inc. $27,500,000.00 22.92%
---------------------------------- ------------------------------- ------------------------------
Congress Financial Corporation $27,500,000.00 22.92%
---------------------------------- ------------------------------- ------------------------------
PNC Bank, National Association $20,000,000.00 16.67%
---------------------------------- ------------------------------- ------------------------------
---------------------------------- ------------------------------- ------------------------------
TOTAL COMMITMENTS $120,000,000 100%
---------------------------------- ------------------------------- ------------------------------
- 142 -
