Exhibit 10.1
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
by and among
XXXXXXXX'X STORES, INC., XXXXXXXX'X INC.,
and
xxxxxxxxx.xxx, inc.
as Borrowers
and
FLEET RETAIL GROUP, INC.
as Agent,
FLEET RETAIL GROUP, INC. and XXXXX FARGO RETAIL FINANCE LLC
as Facility Co-Agents
and
THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, as Lenders
Dated: October 4, 2004
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS.................................................................................... 1
SECTION 2. CREDIT FACILITIES..............................................................................24
2.1 Revolving Loans.......................................................................24
2.2 Letter of Credit Accommodations.......................................................25
2.3 Reserved..............................................................................29
2.4 Commitments...........................................................................29
2.5 Reserves..............................................................................29
SECTION 3. INTEREST AND FEES..............................................................................29
3.1 Interest..............................................................................29
3.2 Fees..................................................................................31
3.3 Changes in Laws and Increased Costs of Loans..........................................31
SECTION 4. CONDITIONS PRECEDENT...........................................................................32
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations.............32
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.................34
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST......................................................35
5.1 Grant of Security Interest............................................................35
5.2 Perfection of Security Interests......................................................36
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................40
6.1 Borrowers' Loan Accounts..............................................................40
6.2 Statements............................................................................40
6.3 Collection of Accounts................................................................40
6.4 Payments..............................................................................42
6.5 Authorization to Make Loans...........................................................43
6.6 Use of Proceeds.......................................................................43
6.7 Pro Rata Treatment....................................................................43
6.8 Sharing of Payments, Etc..............................................................44
6.9 Settlement Procedures.................................................................45
6.10 Obligations Several; Independent Nature of Lenders' Rights............................47
6.11 Agent's Allocation of Payments and Collections........................................47
6.12 Borrowers' Representative.............................................................48
6.13 Nature and Extent of Each Borrower's Liability........................................49
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................51
7.1 Collateral Reporting..................................................................51
7.2 Accounts Covenants....................................................................51
7.3 Inventory Covenants...................................................................52
7.4 Commercial Finance Audits.............................................................53
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7.5 Power of Attorney.....................................................................53
7.6 Right to Cure.........................................................................54
7.7 Access to Premises....................................................................55
7.8 Sales Taxes...........................................................................55
7.9 Business Plan.........................................................................55
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................56
8.1 Corporate Existence, Power and Authority..............................................56
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.............56
8.3 Financial Statements; No Material Adverse Change......................................57
8.4 Priority of Liens; Title to Properties................................................57
8.5 Tax Returns...........................................................................57
8.6 Litigation............................................................................57
8.7 Compliance with Other Agreements and Applicable Laws..................................58
8.8 Environmental Compliance..............................................................58
8.9 Employee Benefits.....................................................................59
8.10 Bank Accounts.........................................................................59
8.11 Intellectual Property.................................................................60
8.12 Subsidiaries; Affiliates; Capitalization; Solvency....................................60
8.13 Labor Disputes........................................................................61
8.14 Restrictions on Subsidiaries..........................................................61
8.15 Material Contracts....................................................................61
8.16 Payable Practices.....................................................................61
8.17 Accuracy and Completeness of Information..............................................62
8.18 Credit Card Agreements................................................................62
8.19 Survival of Warranties; Cumulative....................................................62
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................63
9.1 Maintenance of Existence..............................................................63
9.2 New Collateral Locations..............................................................63
9.3 Compliance with Laws, Regulations, Etc................................................63
9.4 Payment of Taxes and Claims...........................................................64
9.5 Insurance.............................................................................65
9.6 Financial Statements and Other Information............................................65
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc...............................67
9.8 Encumbrances..........................................................................68
9.9 Indebtedness..........................................................................69
9.10 Loans, Investments, Etc...............................................................70
9.11 Dividends and Redemptions.............................................................72
9.12 Transactions with Affiliates..........................................................73
9.13 Compliance with ERISA.................................................................73
9.14 End of Fiscal Years; Fiscal Quarters..................................................73
9.15 Change in Business....................................................................73
9.16 Limitation of Restrictions Affecting Subsidiaries.....................................73
9.17 Financial Covenant: Minimum Excess Availability.......................................74
9.18 [Reserved]............................................................................74
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9.19 [Reserved]............................................................................74
9.20 Credit Card Agreements................................................................74
9.21 License Agreements....................................................................75
9.22 After Acquired Real Property..........................................................76
9.23 Costs and Expenses....................................................................76
9.24 Collateral Access Agreements..........................................................77
9.25 Reserved..............................................................................77
9.26 Reserved..............................................................................77
9.27 Further Assurances....................................................................77
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................77
10.1 Events of Default.....................................................................77
10.2 Remedies..............................................................................79
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW...................................83
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.................83
11.2 Waiver of Notices.....................................................................85
11.3 Amendments and Waivers................................................................85
11.4 Waiver of Counterclaims...............................................................86
11.5 Indemnification.......................................................................86
SECTION 12. THE AGENT......................................................................................87
12.1 Appointment, Powers and Immunities....................................................87
12.2 Reliance by Agent.....................................................................87
12.3 Events of Default.....................................................................88
12.4 Fleet Retail Group, Inc. in its Individual Capacity...................................88
12.5 Indemnification.......................................................................89
12.6 Non-Reliance on Agent and Other Lenders...............................................89
12.7 Failure to Act........................................................................89
12.8 Additional Loans and Letter of Credit Accommodations..................................90
12.9 Concerning the Collateral and the Related Financing Agreements........................90
12.10 Appraisals, Field Audit, Examination Reports and other Information; Disclaimer by
Lenders...............................................................................90
12.11 Collateral Matters....................................................................90
12.12 Agency for Perfection.................................................................92
12.13 Successor Agent.......................................................................92
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS...............................................................93
13.1 Term..................................................................................93
13.2 Interpretative Provisions.............................................................94
13.3 Notices...............................................................................95
13.4 Partial Invalidity....................................................................96
13.5 Confidentiality.......................................................................96
13.6 Successors............................................................................97
13.7 Assignments; Participations...........................................................97
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13.8 Entire Agreement......................................................................99
13.9 Counterparts, Etc.....................................................................99
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Compliance Certificate
Exhibit 1.17 Business Plan
Schedule 1.37 Existing Lenders
Schedule 1.56 Existing Letters of Credit
Schedule 7.1 Reporting Requirements
Schedule 8.10 Deposit Accounts
Schedule 8.18 Credit Card Agreements
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated October 4, 2004 (this
"Agreement") is entered into by and among XXXXXXXX'X STORES, INC., a Tennessee
corporation ("Kirkland's"), XXXXXXXX'X, INC., a Tennessee corporation
("Parent"), and xxxxxxxxx.xxx, inc., a Tennessee corporation ("xxxxxxxxx.xxx;"
Kirkland's, Parent and xxxxxxxxx.xxx being referred to collectively as
"Borrowers," and individually as a "Borrower"), the financial institutions from
time to time parties hereto as lenders, whether by execution of this Agreement
or an Assignment and Acceptance (each individually, a "Lender" and collectively,
"Lenders") and FLEET RETAIL GROUP, INC., a Delaware corporation, in its capacity
as agent for Lenders (together with its successors and assigns in such capacity,
"Agent").
RECITALS:
Each Borrower has requested that Lenders enter into certain financing
arrangements with Borrowers, pursuant to which Lenders may make loans and
provide other financial accommodations to Borrowers, which shall be used by
Borrowers to finance their mutual and collective enterprise of retail sales of
decorative home accessories and gifts. In order to utilize the financial powers
of each Borrower in the most efficient and economical manner, and in order to
facilitate the financing of each Borrower's needs, Lenders will, at the request
of any Borrower, make loans to all Borrowers under the term loan and revolving
credit facility on a combined basis and in accordance with the provisions
hereinafter set forth. Borrowers' business is a mutual and collective
enterprise, and Borrowers believe that the consolidation of all term and
revolving credit loans under this Agreement will enhance the aggregate borrowing
powers of each Borrower and ease the administration of their term and revolving
credit loan relationship with Lenders, all to the mutual advantage of Borrowers.
Lenders' willingness to extend credit to Borrowers and to administer each
Borrower's collateral security therefor, on a combined basis as more fully set
forth in this Agreement, is done solely as an accommodation to Borrowers and at
Borrowers' request in furtherance of Borrowers' mutual and collective
enterprise.
Each Lender is willing to agree (severally and not jointly) to make
such loans and provide such financial accommodations to Borrowers on a pro rata
basis according to its Commitment (as defined below) on the terms and conditions
set forth herein and Agent is willing to act as agent for Lenders on the terms
and conditions set forth herein and in the other Financing Agreements.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, all present and future rights of a Borrower
to payment of a monetary obligation, whether or not earned by performance, which
is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed, assigned,
or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use
of a credit or charge card or information contained on or for use with the card.
1.2 "Account Reserves" means such reserves as Agent determines from
time to time in its discretion as being appropriate to reflect impediments to
the Agent's ability to realize upon the Collateral. Without limiting the
generality of the foregoing, Account Reserves may include (but are not limited
to) reserves based upon the following: (a) any Account or parties thereof which
is past due, delinquent or otherwise at risk of non-payment, (b) any Account or
portion thereof which is subject to counterclaim, defense, or dispute, (c) any
Account or portion thereof which is subject to setoff or chargeback, (d) any
facts, events or circumstances which impair the validity, enforceability or
collectibility of such Account or reduce the amount payable or delay payment
thereunder, (e) any material adverse change in the financial condition of the
Credit Card Processor or Agent no longer deems the Credit Card Processor as
credit worthy, (f) any event of default under any Credit Card Agreement which
event of default gives the Credit Card Processor the right to setoff against
amounts otherwise payable to a Borrower or the right to establish reserves or
establish or demand collateral.
1.3 "Acquisition" means any purchase or other acquisition by Borrowers
or any Subsidiary of Borrowers of the Voting Stock or substantially all of the
assets of any other Person.
1.4 "Adjusted Libordollar Rate" shall mean, for any day during the term
hereof, the rate per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) determined by dividing (a) the
Libordollar Rate by (b) a percentage equal to: (i) one (1) minus (ii) the
Reserve Percentage. For purposes hereof, "Reserve Percentage" shall mean the
reserve percentage, expressed as a decimal, prescribed by any United States or
foreign banking authority for determining the reserve requirement which is or
would be applicable to deposits of United States dollars in a non-United States
or an international banking office of Reference Bank used to fund a Libordollar
Rate Loan or any Libordollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Libordollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
1.5 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five (5%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
(5%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
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1.6 "Agent" shall mean Fleet Retail Group, Inc., in its capacity as
agent on behalf of Lenders pursuant to the terms hereof and any replacement or
successor agent hereunder.
1.7 "Agent Payment Account" shall mean account no. 32661228649 of Agent
at Bank of America or such other account of Agent as Agent may from time to time
designate to Borrowers as the Agent Payment Account for purposes of this
Agreement and the other Financing Agreements.
1.8 "Applicable Law" shall mean all laws, rules and regulations
applicable to the Person, conduct, transaction, covenant or Financing Agreement
in question, including all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies; and orders, judgments and decrees
of all courts and arbitrators.
1.9 "Applicable Libor Margin" shall mean, initially, one and one
quarter percent (1.25%), provided, that, commencing as of April 1, 2005, for
each fiscal quarter in which Excess Availability is at any time less than
$15,000,000, then the outstanding principal amount of the Revolving Loans shall
bear interest for any month at a per annum rate equal to one and one half
percent (1.5%) per annum in excess of the Adjusted Libordollar Rate.
1.10 "Assignment and Acceptance" shall mean an (i) Assignment and
Acceptance substantially in the form of EXHIBIT A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder to an Eligible Transferee in accordance with the
provisions of SECTION 13.7 hereof.
1.11 "Bank of America" shall mean Bank of America, N.A., its successor
and assigns.
1.12 "Bank Product Agreements" means those certain Cash Management
Agreements or other agreements entered into from time to time by Borrowers or
their Subsidiaries in connection with any Bank Products.
1.13 "Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrowers or
their Subsidiaries to Bank of America or its Affiliates pursuant to or evidenced
by Bank Product Agreements irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all such amounts that Borrowers are
obligated to reimburse Agent or any Lender as a result of Agent or such Lender
purchasing participations or executing indemnities or reimbursement obligations
with respect to the Bank Products provided to Borrowers or their Subsidiaries
pursuant to the Bank Product Agreements.
1.14 "Bank Products" means any one or more of the following types of
services or facilities extended to Borrowers or their Subsidiaries by Bank of
America or any Affiliate of Bank of America: (a) credit cards, (b) debit cards,
(c) purchase cards, (d) automated clearing house transactions, (e) cash
management, including controlled disbursement, accounts or services, and (f)
Interest Rate Contract (f) Hedge Agreements.
1.15 "Bank Product Reserves" means, as of any date of determination,
the amount of reserves that Agent has established (based upon Bank of America's
or its Affiliate's reasonable
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determination of the credit exposure in respect of the then extant Bank
Products) for Bank Products then provided or outstanding.
1.16 "Bankruptcy Code" shall mean title 11 of the United States Code.
1.17 "Blocked Accounts" shall have the meaning set forth in SECTION 6.3
hereof.
1.18 "Borrower Agent" shall mean Kirkland's Stores, Inc.
1.19 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) the lesser of:
(i) the amount equal to: (I) the lesser of (x) the applicable
Inventory Advance Rate multiplied by the Cost of the Eligible Inventory and the
Cost of Eligible Letter of Credit Inventory or (y) eighty two and one-half
percent (82.5%) percent of the Net Recovery Percentage of the Inventory
multiplied by the Cost of the Eligible Inventory and the Cost of Eligible Letter
of Credit Inventory, plus (II) eighty five percent (85%) of the face amount of
Eligible Credit Card Accounts; or
(ii) the Revolving Loan Limit;
minus
(b) any and all Reserves.
1.20 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the Commonwealth of Massachusetts, the State of New York, or the
State of North Carolina, and a day on which Agent is open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Libordollar Rate Loans, the term Business Day shall also exclude any day on
which banks are closed for dealings in dollar deposits in the London interbank
market or other applicable Libordollar Rate market.
1.21 "Business Interruption Insurance Assignments" shall mean the
Collateral Assignments of Business Interruption Insurance to be executed by each
Borrower on the date hereof in favor of Agent, for the benefit of Agent and
Lenders, as security for the payment of the Obligations.
1.22 "Business Plan" shall mean the Borrowers' business plan annexed
hereto as EXHIBIT 1.17 and any revision, amendment, or update of such business
plan, provided that any material revision, amendment, or update has been
consented to in writing by the Agent (which consent shall not be unreasonably
withheld, conditioned or delayed).
1.23 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
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1.24 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.25 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of a Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by Standard
& Poor's Ratings Service, a division of The XxXxxx-Xxxx Companies, Inc. or at
least P-1 by Xxxxx'x Investors Service, Inc.; (d) repurchase obligations with a
term of not more than thirty (30) days for underlying securities of the types
described in clause (a) above entered into with any financial institution having
combined capital and surplus and undivided profits of not less than
$250,000,000; (e) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; and (f) investments in money market funds and mutual funds
which invest substantially all of their assets in securities of the types
described in clauses (a) through (e) above.
1.26 "Cash Management Agreement" shall mean any agreement entered into
from time to time between any Borrower or any of its Subsidiaries, on the one
hand, and Bank of America or any of its Affiliates, on the other, in connection
with cash management services for operating, collections, payroll and trust
accounts of such Borrower or its Subsidiaries provided by such banking or
financial institution, including automatic clearinghouse services, controlled
disbursement services, electronic funds transfer services, information reporting
services, lockbox services, stop payment services and wire transfer services.
1.27 "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of a Borrower or any other Obligor to any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act) other than the transfer of
stock of Parent in connection with an initial public offering of Parent; (b) the
liquidation or dissolution of a Borrower or any other Obligor or the adoption of
a plan by the stockholders of a Borrower or any other Obligor relating to the
dissolution or liquidation of such Borrower or any other such Obligor; or (c)
the failure by Parent to own one hundred percent (100%) of the Voting Stock of
either of Kirkland's or Xxxxxxxxx.xxx.
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1.28 "Closing Date" shall mean the date on which all of the conditions
precedent in SECTION 4 of this Agreement are satisfied (or waived by Agent in
its sole and absolute discretion) and the initial Loans are made under this
Agreement.
1.29 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.30 "Collateral" shall have the meaning set forth in SECTION 5 hereof.
1.31 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Agent, from any lessor of premises to a
Borrower, or any other Person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, inter alia, acknowledges the
first priority security interest of and Lien of Agent in such Collateral, agrees
to waive or subordinate any and all claims such lessor, consignee or other
person may, at any time, have against such Collateral, whether for processing,
storage or otherwise, and agrees to permit Agent access to, and the right to
remain on, the premises of such lessor, consignee or other person so as to
exercise Agent's rights and remedies and otherwise deal with such Collateral and
in the case of any consignee or other Person who at any time has custody,
control or possession of any Collateral, acknowledges that it holds and will
hold possession of the Collateral for the benefit of Agent and Lenders and
agrees to follow all instructions of Agent with respect thereto.
1.32 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on SCHEDULE 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of SECTION 13.7 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
1.33 "Consolidated" shall mean the consolidation in accordance with
GAAP of the accounts or other items as to which such term applies.
1.34 "Consolidated EBITDA" shall mean, for any fiscal period of
Borrowers, on a Consolidated basis, Borrowers' and their Consolidated
Subsidiaries' (i) income (or loss) before interest and taxes (excluding
therefrom (to the extent otherwise included therein) any gains or losses,
together with any related provisions for taxes, realized upon any sale of assets
other than in the ordinary course of business) plus (ii) to the extent deducted
in determining such income (or loss), depreciation, amortization, any non-cash
extraordinary expenses or non-cash charges, any applicable non-cash
restructuring charge-offs, and write-down of goodwill and intangibles and other
non-cash charges.
1.35 "Consolidated Subsidiaries" shall mean, as to a Borrower, those
Subsidiaries of such Borrower whose accounts are at the time in question, in
accordance with GAAP (and, with respect to any Subsidiaries created, to the
extent permitted by this Agreement, after the date hereof, pursuant to the
written consent of Agent, which consent may be withheld in Agent's
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absolute discretion and which may be conditioned upon, inter alia, the execution
and delivery of guaranties, security agreements, mortgages and other documents
required by Agent in its absolute discretion), consolidated with those of such
Borrower.
1.36 "Cost" shall mean, as determined by Agent in good faith, with
respect to Inventory as of any date, the lower of (a) the cost of such Inventory
as of such date, determined on the weighted average cost basis in accordance
with GAAP or (b) market value.
1.37 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by any Borrower with any Credit Card Issuer or any Credit
Card Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including the agreements
set forth on SCHEDULE 8.18 hereto.
1.38 "Credit Card Issuer" shall mean any Person (other than Borrowers)
who issues or whose members issue credit cards, including MasterCard or VISA
bank credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and
American Express, Discover, Diners Club, Xxxxx Xxxxxxx and other non-bank credit
or debit cards, including credit or debit cards issued by or through American
Express Travel Related Services Company, Inc. and Novus Services, Inc.
1.39 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing transfer and/or payment
procedures with respect to any Borrower's sales transactions involving credit
card or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer.
1.40 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of Borrowers pursuant to SECTIONS
2.1 and 2.2 hereof.
1.41 "Customer Credit Liability" means gift certificates, customer
deposits, merchandise credits, layaway obligations, frequent shopping programs,
and similar liabilities of any Borrower to its retail customers and prospective
customers.
1.42 "Custom Brokers Agreement" means a tri-party agreement in form and
substance satisfactory to the Agent in its discretion among the Borrowers, Agent
and customs broker or carrier, in which the customs broker or carrier
acknowledges that it has control over and holds the documents evidencing
ownership of the subject Inventory for the benefit of the Agent and agrees, upon
notice from the Agent, to hold and dispose of the subject Inventory solely as
directed by the Agent.
1.43 "Debt for Money Borrowed" shall mean, as applied to any Person,
(i) Indebtedness arising from the lending of money by any other Person to such
Person (whether interest-bearing or not); (ii) Indebtedness, whether or not in
any such case arising from the lending of money by another Person to such
Person, (A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for property; (iii) Indebtedness under a
Capital Lease; (iv) reimbursement obligations
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with respect to letters of credit or guaranties of letters of credit; and (v)
Indebtedness of such Person under any guaranty of obligations that would
constitute Debt for Money Borrowed under clauses (i) through (iv) hereof, if
owed directly by such Person.
1.44 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.45 "Defaulting Lender" shall have the meaning set forth in SECTION
6.9 hereof.
1.46 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, a
Borrower or other Obligor with a deposit account at any bank and the bank at
which such deposit account is at any time maintained which provides that such
bank will comply with instructions originated by Agent directing disposition of
the funds in the deposit account without further consent by such Borrower or
such Obligor and such other terms and conditions as Agent may require, including
as to any such agreement with respect to any Blocked Account, providing that all
items received or deposited in the Blocked Accounts are the property of Agent,
and that the bank has no Lien upon, or right to setoff against, the Blocked
Accounts, or the items received for deposit therein, or the funds from time to
time on deposit therein.
1.47 "Domestic Subsidiary" shall mean a Subsidiary of a Borrower (other
than a Subsidiary that is a Borrower) that is incorporated under the laws of a
state of the United States.
1.48 "Eligible Credit Card Account" shall mean Accounts due on a
non-recourse basis from major Credit Card Processors, which accounts have been
outstanding for no more than four (4) Business Days.
1.49 "Eligible Inventory" shall mean, Inventory (after giving effect to
the Borrowers' inventory shrinkage reserve as shown on Borrowers' monthly
inventory report delivered in accordance with SECTION 7.1(a) consisting of
finished goods held for resale in the ordinary course of the business of a
Borrower, which are acceptable to Agent based on the criteria set forth below.
In general, Eligible Inventory shall not include (a) packaging and shipping
materials; (b) supplies used or consumed in a Borrower's business; (c) Inventory
at premises other than those owned and controlled by a Borrower unless such
location is a leased location and such Borrower has provided a written
certificate to Agent that such Borrower is current in the payment of its rent
with respect to such location; (d) Inventory subject to a Lien in favor of any
Person other than Agent except those permitted in this Agreement (but without
limiting the right of Agent to establish any Reserves with respect to amounts
secured by such Lien in favor of any Person even if permitted herein); (e) xxxx
and hold goods; (f) obsolete Inventory, or Slow-Moving Inventory, to the extent
that (i) the aggregate value of Slow-Moving Inventory (as reported on Borrowers'
inventory aging report delivered in accordance with SECTION 7.1(a) hereof) minus
(ii) Borrowers' obsolescence reserve (as reported on Borrowers' inventory report
delivered in accordance with SECTION 7.1(a) hereof) exceeds the product of (A)
the aggregate value of all of Borrowers' Inventory (as so reported) multiplied
by (B) three percent (3%); (g) Inventory which is not subject to the first
priority, valid and perfected security interest and Lien of Agent; (h) returned,
damaged and/or defective Inventory; (i) Inventory purchased or sold on
consignment; (j) Inventory located outside the United States of America or
Inventory in transit
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(unless such Inventory in transit is otherwise deemed to be Eligible Inventory
by Agent in its sole discretion at such time); (k) Inventory that is to be
returned to vendors; (l) lay-away Inventory; and (m) Inventory subject to
deposits made by customers for sales of Inventory that has not been delivered.
The criteria for Eligible Inventory set forth above may only be changed and any
new criteria for Eligible Inventory may only be established by Agent in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Inventory in the good faith determination of Agent. Any Inventory which is
not Eligible Inventory shall nevertheless be part of the Collateral.
1.50 "Eligible Letter of Credit Inventory" shall mean (without
duplication of Eligible Inventory) as to which (A)(a) such Inventory is the
subject of a Qualified Import Letter of Credit having an initial expiry of not
more than 90 days, (b) such Inventory currently is in transit (whether by
vessel, air, or land) from a location outside of the continental United States
and to be received by the Borrower within 90 days of the issuance date of the
Qualified Import Letter of Credit at a location set forth on Schedule 8.2 of the
Information Certificate that is the subject of a Collateral Access Agreement,
(c) title to such Inventory shall pass to the Borrower within 90 days of the
issuance date of the Qualified Import Letter of Credit, (d) such Inventory is
insured against types of loss, damage, hazards, and risks, and in amounts,
satisfactory to Agent in its discretion, (e) such Inventory either (1) is the
subject of a negotiable xxxx of lading (x) that is consigned to Agent (either
directly or by means of endorsements), (y) that was issued by the carrier
respecting the subject Inventory, and (z) that either is (I) in the possession
of Agent or a customs broker that has executed a Customs Broker Agreement with
Agent, or (II) the subject of a telefacsimile copy that Agent has received a
confirmation from that such document is in-transit by air-courier to Agent or a
customs broker, or (2) is the subject of a negotiable cargo receipt and is not
the subject of a xxxx of lading (other than a negotiable xxxx of lading
consigned to, and in the possession of, a consolidator or Agent, or their
respective agents) and such negotiable cargo receipt is (x) consigned to Agent
(either directly or by means of endorsements), (y) that was issued by a
consolidator respecting the subject Inventory, (z) that either is (I) in the
possession of Agent or a customs broker that has executed a Customs Broker
Agreement with Agent, or (II) the subject of a telefacsimile copy that Agent has
received a confirmation that such document is in-transit by air-courier to Agent
or a customs broker that has executed a Customs Broker Agreement with Agent, (f)
the Borrower has provided a Borrowing Base certificate to Agent that certifies
that, to the best knowledge of the Borrower, such Inventory meets all of the
Borrower's representations and warranties contained in the Loan Documents
concerning Eligible Inventory, that it knows of no reason why such Inventory
would not be accepted by the Borrower when it is delivered to Borrower, and that
the shipment as evidenced by the documents conforms to the related order
documents or (B) (a) meets all of the foregoing criteria except that the
Qualified Import Letter of Credit has been drawn upon in full and (b) title has
irrevocably passed to the Borrower. Notwithstanding anything contained herein to
the contrary, Eligible Letter of Credit Inventory, at Cost, shall not at any
time exceed 10% of the Borrowing Base.
1.51 "Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any Person
(whether a corporation, partnership, trust or
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otherwise) that is engaged in the business of making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business and is administered or managed by a Lender or
with respect to any Lender that is a fund or similar investment vehicle which
invests in commercial loans and similar extensions of credit, any other fund or
similar investment vehicle that invests in commercial loans and similar
extensions of credit and is managed or advised by the same investment advisor as
such Lender or by an Affiliate of such investment advisor; and (d) any other
commercial bank, financial institution or "accredited investor" (as defined in
Regulation D under the Securities Act of 1933) approved by Agent (and so long as
no Event of Default exists, approved by Borrower Agent also, but such consent
not to be unreasonably withheld, conditioned or delayed); provided, that, (i)
neither any Borrower nor any other Obligor or any Affiliate of any Borrower or
any other Obligor shall qualify as an Eligible Transferee and (ii) no Person to
whom any Indebtedness which is in any way subordinated in right of payment to
any other Indebtedness of any Borrower or any other Obligor shall qualify as an
Eligible Transferee, except as Agent may otherwise specifically agree.
1.52 "Enforcement Action" shall mean the exercise by Agent, on behalf
of Lenders, in good faith of any of its material enforcement rights and remedies
under the Financing Agreements, Applicable Law or otherwise at any time on and
after the occurrence and during the continuance of an Event of Default,
including the commencement of any action to foreclose on the security interests
or Liens of Agent, on behalf of Lenders, in all or any material portion of the
Collateral, notification of account debtors to make payments to Agent, any
action to take possession of all or any material portion of the Collateral or
commencement of any legal proceedings or actions against or with respect to all
or any portion of the Collateral.
1.53 "Environmental Indemnity Agreement" shall mean the Agreement
Regarding Environmental Matters to be executed by Borrowers on the Closing Date
in favor of Agent and Lenders.
1.54 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (a) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state
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counterparts to such laws and (iii) any common law or equitable doctrine that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Materials.
1.55 "Equipment" shall mean all of a Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment (whether owned or licensed and including embedded software),
vehicles, tools, furniture, fixtures, all attachments, accessions and property
now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
1.56 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.57 "ERISA Affiliate" shall mean any person required to be aggregated
with a Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.58 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan subject to Title IV of ERISA; (b) the adoption of any amendment to a Plan
that would require the provision of security pursuant to Section 401(a)(29) of
the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of
an "accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section
412 of the Code or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (e) the occurrence of a
"prohibited transaction" with respect to which any Borrower or any other
Obligor, or any of its or their respective Subsidiaries is a "disqualified
person" (within the meaning of Section 4975 of the Code) or with respect to
which any Borrower, any other Obligor or any of its or their respective
Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by
any Borrower, any other Obligor or any ERISA Affiliate from a Multiemployer Plan
or a cessation of operations which is treated as such a withdrawal or
notification that a Multiemployer Plan is in reorganization; (g) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (i) the imposition of any liability under Title
IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due
but not delinquent under Section 4007 of ERISA, upon any Borrower, any other
Obligor or any ERISA Affiliate in excess of $200,000, and (j) any other event or
condition with respect to a Plan including any Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably be
expected to result in liability of any Borrower in excess of $200,000.
1.59 "Event of Default" shall mean the occurrence or existence of any
event or condition described in SECTION 10.1 hereof.
1.60 "Excess Availability" shall mean, the amount, as determined by
Agent, calculated at any date, equal to: (a) the Borrowing Base (without regard
to any Reserves) minus (b) the sum
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of: (i) the amount of all then outstanding and unpaid Obligations of Borrowers
plus (ii) the amount of all Reserves, plus (iii) the aggregate amount of all
then outstanding and unpaid trade payables and other obligations of Borrowers
which are outstanding more than sixty (60) days past due as of such time (other
than trade payables or other obligations being contested or disputed by
Borrowers in good faith), plus (iv) without duplication, the amount of checks
issued by Borrowers to pay trade payables and other obligations which are more
than sixty (60) days past due as of such time (other than trade payables or
other obligations being contested or disputed by Borrowers in good faith), but
not yet sent.
1.61 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.62 "Existing Lenders" shall mean the lenders to Borrowers listed on
SCHEDULE 1.37 hereto and their respective predecessors, successors and assigns.
1.63 "Existing Letters of Credit" shall mean, collectively, the letters
of credit issued for the account of any Borrower or any other Obligor or for
which such Borrower is otherwise liable listed on SCHEDULE 1.38 hereto, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.64 "Extraordinary Expenses" shall mean all costs, expenses, fees or
advances that Agent or any Lender may suffer or incur, whether prior to or after
the occurrence of an Event of Default, and whether prior to, after or during the
pendency of an Insolvency Proceeding of an Obligor, on account of or in
connection with (i) repossession, storage, repair, appraisal, insuring,
completion of the manufacture of, preparing for sale, advertising for sale,
selling, collecting or otherwise preserving or realizing upon any Collateral;
(ii) the defense of Agent's Lien upon any Collateral or the priority thereof or
any adverse claim with respect to the Loans, the Financing Agreements or the
Collateral asserted by any Obligor, any receiver or trustee for any Obligor or
any creditor or representative of creditors of any Obligor; (iii) the settlement
or satisfaction of any Liens upon any Collateral (whether or not such Liens are
permitted hereunder); (iv) the collection or enforcement of any of the
Obligations other than through payment in accordance with the terms hereof; (v)
the negotiation, documentation, and closing of any restructuring or forbearance
agreement with respect to the Financing Agreements or Obligations; (vi) amounts
advanced by Agent pursuant to this Agreement; (vii) the enforcement of any of
the provisions of any of the Financing Agreements; or (viii) any payment under a
guaranty, indemnity or other payment agreement provided by Agent or (with
Agent's consent) any Lender, which is reimbursable to Agent or such Lender by
Borrowers pursuant to this Agreement. Such costs, expenses and advances may
include transfer fees, taxes, storage fees, insurance costs, permit fees,
utility reservation and standby fees, legal fees, appraisal fees, brokers' fees
and commissions, auctioneers' fees and commissions, accountants' fees,
environmental study fees, wages and salaries paid to employees of any or all
Borrowers or independent contractors in liquidating any Collateral, travel
expenses, all other fees and expenses payable or reimbursable by Borrowers or
any other Obligor under any of the Financing Agreements, and all other fees and
expenses associated with the enforcement of rights or remedies under any of the
Financing Agreements, but excluding compensation paid to employees (including
inside legal counsel who are employees) of Agent.
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1.65 "Financing Agreements" shall mean, collectively, this Agreement,
the Notes, the Fee Letter, the Collateral Access Agreements, the Subordination
Agreement, the Security Documents, the Guaranty Agreements, and all other notes,
guarantees, security agreements, deposit account control agreements, investment
property control agreements, intercreditor agreements and all other agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by any Borrower or any other Obligor in connection with this Agreement.
1.66 "Fiscal Year" shall mean the fiscal year of Borrowers for
accounting and tax purposes, which shall begin on the Sunday after the Saturday
nearest January 31 of each calendar year and end on the Saturday nearest January
31 of the next succeeding calendar year and when followed by the designation of
a calendar year (e.g., Fiscal Year 2004) means the fiscal year of Borrowers
ended on the Saturday nearest January 31 of the next succeeding calendar year.
1.67 "Foreign Subsidiary" shall mean a Subsidiary that is not a
Domestic Subsidiary.
1.68 "FRG" shall mean Fleet Retail Group, Inc., its successors and
assigns.
1.69 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of SECTIONS 9.17 and 9.19 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the most recent audited financial statements
delivered to Agent prior to the date hereof.
1.70 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.71 "Guarantors" shall mean each Person who may at any time guarantee
payment or performance of the whole or any part of the Obligations.
1.72 "Guaranty Agreement" shall mean a guaranty that is at any time
executed by a Guarantor in favor of Agent and Lenders.
1.73 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
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1.74 "Landing Costs" means customs, duty, freight, and other
out-of-pocket costs and expenses which will be expended to "land" in transit
Inventory.
1.75 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of Debt for Money Borrowed
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time; (h)
all obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person against fluctuations
in interest rates or currency or commodity values; and (i) all obligations owed
by such Person under License Agreements with respect to non-refundable, advance
or minimum guarantee royalty payments.
1.76 "Indemnified Amount" shall mean the amount of any loss, cost,
expenses or damages suffered or incurred by Agent or any of its Indemnities, or
by any Lender or any of its Indemnitees and against which any Lender or any
Obligor has agreed to indemnify them pursuant to the terms of this Agreement or
any of the other Financing Agreements.
1.77 "Information Certificate" shall mean the Information Certificate
of Borrowers constituting EXHIBIT B hereto containing material information with
respect to Borrowers, their businesses and assets provided by or on behalf of
Borrowers to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.78 "Insolvency Proceeding" shall mean any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for (i) the
entry of an order for relief
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under any chapter of the Bankruptcy Code or other insolvency or debt adjustment
law (whether state, federal or foreign), (ii) the appointment of a receiver,
trustee, liquidator or other custodian for such Person or any part of its
property, (iii) an assignment or trust mortgage for the benefit of creditors of
such Person, or (iv) the liquidation, dissolution or winding up of the affairs
of such Person.
1.79 "Intellectual Property" shall mean a Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service xxxx
applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; trade secret rights, copyright rights,
rights in works of authorship, domain names and domain name registration;
software and contract rights relating to computer software programs, in whatever
form created or maintained.
1.80 "Interest Rate" shall mean,
(a) Subject to clause (b) of this definition below as to any Loan,
(i) with respect to Prime Rate Loans, the Prime Rate plus the Applicable Libor
Margin; and (ii) with respect to Libordollar Rate Loans, the Adjusted
Libordollar Rate plus the Applicable Libor Margin;
(b) Notwithstanding anything to the contrary contained in clause
(a) of this definition, the Interest Rate shall mean (i) the rate of two percent
(2%) per annum in excess of the Prime Rate as to Prime Rate Loans and the rate
of two percent (2%) per annum in excess of the Adjusted Libordollar Rate plus
the Applicable Libor Margin as to Libordollar Rate Loans, at Agent's option, in
each case without notice, (A) either (I) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (II)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined by
Agent and (B) on the Revolving Loans to at any time outstanding in excess of the
Borrowing Base or the Revolving Loan Limit (whether or not such excess(es) arise
or are made with or without Agent's or any Lender's knowledge or consent and
whether made before or after an Event of Default).
1.81 "Interest Rate Contract" shall mean any and all transactions,
agreements or documents, including, without limitation, any interest rate
agreement, interest rate collar agreement, interest rate swap agreement, or
other agreement or arrangement at any time entered into by a Borrower with Bank
of America or any of its Affiliates, which provide for an interest rate, credit
commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging any Borrower's or its
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Subsidiaries' exposure to fluctuations in interest or exchange rates, loan,
credit exchange, security or currency valuations or commodity prices.
1.82 "Inventory" shall mean all of a Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by such
Borrower as lessor; (b) are held by such Borrower for sale or lease or to be
furnished under a contract of service; (c) are furnished by such Borrower under
a contract of service; or (d) consist of raw materials, work in process,
finished goods or materials used or consumed in its business.
1.83 "Inventory Advance Rate" shall mean the following percentages
during the periods indicated in the chart below:
PERIOD PERCENTAGE
---------------------------------------------------------------
December 16th - July 31st 60%
---------------------------------------------------------------
August 1st - August 31st 68%
---------------------------------------------------------------
September 1st - October 31st 70%
---------------------------------------------------------------
November 1st - December 15th 69%
---------------------------------------------------------------
1.84 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or any other Obligor (as the case may be) and any securities
intermediary, commodity intermediary or other Person who has custody, control or
possession of any investment property of such Borrower or such other Obligor
acknowledging that such securities intermediary, commodity intermediary or other
Person has custody, control or possession of such investment property on behalf
of Agent, that it will comply with entitlement orders originated by Agent with
respect to such investment property, or other instructions of Agent, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Agent, in each case, without the further consent of such Borrower or
such other Obligor and including such other terms and conditions as Agent may
require.
1.85 "Landlord Lien States" shall mean Pennsylvania, Virginia, and
Washington, and such other states as the Agent may from time to time designate.
1.86 "Lenders" shall mean the financial institutions who are
signatories hereto as Lenders and other persons made a party to this Agreement
as a Lender in accordance with SECTION 13.7 hereof, and their respective
successors and assigns; each sometimes being referred to herein individually as
a "Lender".
1.87 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent or any Lender for the account of
any Borrower or Obligor or (b) with respect to which Agent or Lenders have
agreed to indemnify the issuer or guaranteed to the issuer the performance by
any Borrower or Obligor of its obligations to such issuer; sometimes being
referred to herein individually as "Letter of Credit Accommodation".
1.88 "Libordollar Rate" shall mean the interest rate per annum equal to
the arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-
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sixteenth (1/16) of one (1%) percent) at which Reference Bank is offered
deposits of United States dollars for a one (1) month period, two (2) month
period, three (3) month period, or six (6) month period, as such period is
elected by the Borrower Agent at the time of the applicable Libordollar Rate
Election (each, an "Interest Period"), in the London interbank market (or other
Libordollar Rate market selected by Borrowers and approved by Agent) on or about
10:00 a.m. (New York time) in amounts substantially equal to the principal
amount of the Libordollar Rate Loans.
1.89 "Libordollar Rate Election" shall have the meaning ascribed to
such term in SECTION 3.1(c).
1.90 "Libordollar Rate Loans" shall mean any Revolving Loans or portion
thereof on which interest is payable based on the Adjusted Libordollar Rate in
accordance with the terms hereof.
1.91 "License Agreements" shall have the meaning set forth in SECTION
8.11 hereof.
1.92 "Liens" shall mean any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property. For the purpose of this Agreement, a Borrower
shall be deemed to be the owner of any property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the property has been retained by or vested in some other Person for
security purposes.
1.93 "Loans" shall mean, collectively, the Revolving Loans.
1.94 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance or operations of any
Borrower; (b) the legality, validity or enforceability of this Agreement or any
of the other Financing Agreements; (c) the legality, validity, enforceability,
perfection or priority of the security interests and Liens of Agent upon the
Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to
repay the Obligations or of any Borrower to perform its obligations under this
Agreement or any of the other Financing Agreements as and when to be performed;
or (f) the ability of Agent or any Lender to enforce the Obligations or realize
upon the Collateral or otherwise with respect to the rights and remedies of
Agent and Lenders under this Agreement or any of the other Financing Agreements.
1.95 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower
involving monetary liability of or to any Person in an amount in excess of
$250,000 in any Fiscal Year and (b) any other contract or other agreement (other
than the Financing Agreements), whether written or oral, to which any Borrower
is a party as to which the breach, nonperformance, cancellation or failure to
renew by any party thereto would have a Material Adverse Effect.
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1.96 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
1.97 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the dollar amount equal to the amount
of the recovery in respect of the Inventory at such time a "net orderly
liquidation value" basis as set forth in the most recent acceptable appraisal of
Inventory received by Agent in accordance with SECTION 7.3, net of operating
expenses, liquidation expenses and commissions, and (b) the denominator of which
is the Cost of the aggregate amount of the Inventory subject to such appraisal,
which appraisal has been reviewed and approved by the Agent.
1.98 "Notes" shall mean each Revolving Note and any other promissory
note executed by Borrowers at Agent's request to evidence any of the
Obligations.
1.99 "Obligations" shall mean, in each case, whether now in existence
or hereafter arising, (i) the principal of, and interest and premium, if any, on
the Loans, (ii) all letter of credit accommodations, (iii) all Bank Product
Obligations, and (iv) all other obligations, liabilities and indebtedness of
every kind, nature and description owing by any or all Borrowers to Agent or any
Lender and/or any of their Affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any Borrower
under the Bankruptcy Code or any similar statute (including the payment of
interest and other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, or secured or unsecured.
1.100 "Obligor" shall mean each Borrower, each Guarantor and any other
Person who is liable on or with respect to any of the Obligations or who is the
owner of any property that is security for any of the Obligations.
1.101 "Parent" shall have that meaning ascribed to that term in the
Preamble.
1.102 "Parent Pledge Agreements" shall mean the Stock Pledge Agreements
executed by Parent on or before the Closing Date in favor of Agent, and by which
Parent shall pledge to Agent, for the benefit of Agent and Lenders, as security
for the Obligations and the Guaranty of Parent, 100% of the capital stock of
each of Kirkland's and xxxxxxxxx.xxx.
1.103 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of SECTION
13.7 of this Agreement governing participations.
1.104 "Payment Direction Letter" shall have the meaning set forth in
SECTION 6.3 hereof.
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1.105 "Permitted Acquisitions" shall mean one or more Acquisitions so
long as:
(a) no Default or Event of Default shall have occurred and be
continuing or would result from the consummation of such proposed Acquisition,
(b) such Acquisition is such that the assets being acquired or the
Person whose Voting Stock is being acquired is engaged in the business of the
Borrower or a business reasonably related thereto,
(c) Borrower has provided to Agent written notice thereof not less than
15 days prior to the anticipated closing date of such subject Acquisition
together with such documentation that Agent may require demonstrating that after
giving effect to such subject Acquisition, Borrower and its Subsidiaries (taken
as a whole) would not suffer a Material Adverse Change as a result of such
proposed Acquisition,
(d) the subject Voting Stock is being acquired in such Acquisition
directly by Borrower, or the subject assets are being acquired in such
Acquisition directly by Borrower or a new Subsidiary formed for the purposes of
such Acquisition,
(e) Borrower shall have caused such acquired Person to execute and
deliver a guaranty of the Obligations hereunder, together with any and all
security agreements, UCC-1 financing statements, fixture filings, and other
documentation reasonably requested by Agent to cause such acquired Person to be
obligated with respect to the Obligations and to include the assets of the
acquired Person within the Collateral, provided, that, such assets shall not be
included in the calculation of the Borrowing Base, except to the extent such
assets are deemed acceptable for borrowing by the Agent, in its discretion,
exercised in a commercially reasonable manner.
(f) Following consummation of such Acquisition, those Persons
comprising President, Chief Executive Officer, and Chief Financial Officer, of
the Person whose assets are being acquired or the Person whose Voting Stock is
being acquired do not perform any of the functions of President, Chief Executive
Officer, and Chief Financial Officer of the Borrower unless such Person is
acceptable to the Agent, in its discretion, and
(g) Borrowers shall have delivered to Agent at least ten (10) days
prior to the closing date of the Acquisition, and Agent shall have reviewed and
found acceptable, Borrowers' forecasted Consolidated balance sheets and profit
and loss and cash flow statements, all prepared on a consistent basis with
Borrowers' historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions, that show Excess Availability
at all times during the immediately succeeding six (6) fiscal month period
projected to be not less than $10,000,000.
(h) The total consideration, including assumption of any debt, to be
paid or incurred by Borrowers in connection with the Acquisition shall not
exceed $20,000,000.
1.106 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint
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stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.107 "Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which any Borrower or any other Obligor sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the case
of a Multiemployer Plan has made contributions at any time during the
immediately preceding six (6) plan years.
1.108 "Prime Rate" shall mean that rate, adjusted daily, based upon the
then available Libordollar Rate for a two (2) month contract period.
1.109 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.110 "Priority Bank Products" shall mean collectively, (a) credit card
services or facilities (other than private label credit card services or
facilities with recourse to the Borrowers administered by Bank of America or an
Affiliate of Bank of America which are not in existence on the Closing Date) and
(b) Bank Products set forth in clauses (b) though (e) of the definition of "Bank
Products".
1.111 "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments
of Lenders, as adjusted from time to time in accordance with the provisions of
SECTION 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid principal amount of such Lender's Loans and
the Letter of Credit Accommodations and the denominator shall be the aggregate
principal amount of all unpaid Loans and its interest in the Letter of Credit
Accommodations.
1.112 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial, county
or local, and whether foreign or domestic, that are paid or payable by any
Person in respect of any period in accordance with GAAP.
1.113 "Qualified Import Letter of Credit" means a Letter of Credit
Accommodation that (a) is issued to facilitate the purchase by Borrower of
Eligible Inventory, (b) is in form and substance acceptable to Agent, and (c) is
only drawable by the beneficiary thereof by the presentation of, among other
documents, either (i) a negotiable xxxx of lading that is consigned to Agent
(either directly or by means of endorsements) and that was issued by the carrier
respecting the subject Eligible Letter of Credit Inventory, or (ii) a negotiable
cargo receipt that is consigned to Agent (either directly or by means of
endorsements) and that was issued by a consolidator respecting the subject
Eligible Letter of Credit Inventory; provided, however, that, in the latter
case, no xxxx of lading shall have been issued by the carrier (other than a xxxx
of lading consigned to the consolidator or to Agent).
1.114 "Real Property" shall mean all now owned and hereafter acquired
real property of a Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
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1.115 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of a Borrower: (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (c) all
payment intangibles of such Borrower; (d) letters of credit, indemnities,
guarantees, security or other deposits and proceeds thereof issued payable to
such Borrower or otherwise in favor of or delivered to such Borrower in
connection with any Account; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations
owing to such Borrower, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by such
Borrower or to or for the benefit of any third Person (including loans or
advances to any Affiliates or Subsidiaries of such Borrower) or otherwise
associated with any Accounts, Inventory or general intangibles of such Borrower
(including, without limitation, choses in action, causes of action, tax refunds,
tax refund claims, any funds which may become payable to such Borrower in
connection with the termination of any Plan or other employee benefit plan and
any other amounts payable to such Borrower from any Plan or other employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of
insurance covering the lives of employees on which such Borrower is a
beneficiary).
1.116 "Records" shall mean all of a Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Borrower
with respect to the foregoing maintained with or by any other Person).
1.117 "Reference Bank" shall mean Bank of America or such other bank as
Agent may from time to time designate.
1.118 "Register" shall have the meaning set forth in SECTION 13.7
hereof.
1.119 "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds percent (66 2/3%) or more of
the aggregate of the Commitments of all Lenders, or if the Commitments shall
have been terminated, Lenders to whom at least sixty-six and two-thirds percent
(66 2/3%) of the then outstanding Obligations are owing.
1.120 "Reserves" shall mean as of any date of determination, the sum of
(I) the Warehouse Reserve, (II) the Bank Product Reserve, and (III) such other
amounts as Agent may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrowers under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Agent in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value or (ii) the assets,
business or prospects of any Borrower or any
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other Obligor or (iii) the security interests and other rights of Agent or any
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Agent's good faith belief that any collateral report
or financial information furnished by or on behalf of any Borrower or any other
Obligor to Agent is or may have been incomplete, inaccurate or misleading in any
material respect or (c) to reflect outstanding Letter of Credit Accommodations
as provided in Section 2.2 hereof or (d) in respect of any state of facts which
Agent determines in good faith constitutes a Default or an Event of Default. To
the extent Agent may revise the lending formulas used to determine the Borrowing
Base or establish new criteria or revise existing criteria for any component of
the Borrowing Base so as to address any circumstances, condition, event or
contingency in a manner satisfactory to Agent, Agent shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Agent
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such reserve as determined by Agent in good faith.
1.121 Lenders "Revolving Loan Limit" shall mean, at any time, the
amount equal to $45,000,000. At the election of the Borrower Agent upon thirty
(30) days prior written notice to the Agent, the Borrowers' may reduce the
Revolving Loan Limit by up to $15,000,000, to not less than $30,000,000;
provided, that, (x) an Event of Default does not exist at the time of such
election and would not exist after giving effect to such election and (y) each
such decrease is in an increment of $5,000,000.
1.122 "Revolving Loans" shall mean the loans now or hereafter made by
or on behalf of any Lender or by Agent for the account of any Lender on a
revolving basis pursuant to the Credit Facility (involving advances, repayments
and readvances) as set forth in SECTION 2.1 hereof.
1.123 "Revolving Notes" shall mean a Revolving Note to be executed by
Borrowers in favor of each Lender, which shall evidence all Revolving Loans made
by such Lender to Borrowers pursuant to this Agreement.
1.124 "Security Documents" shall mean the Business Interruption
Insurance Assignments, the Deposit Account Control Agreements, the Environmental
Indemnity Agreement, the Trademark Security Agreements, the Parent Pledge
Agreements and the Stock Pledge Agreements and any and all other documents,
instruments or agreements that at any time secure any of the Obligations.
1.125 "Senior Officer" shall mean the chairman of the board of
directors, the president, the chief financial officer or the controller of, or
in-house legal counsel to any Borrower.
1.126 "Settlement Loan" shall mean a Loan made by Agent pursuant to
SECTION 6.9 hereof.
1.127 "Slow-Moving" shall mean that the applicable Inventory is more
than three hundred and thirty (330) days old.
1.128 "Solvent" shall mean, at any time with respect to any Person,
that at such time such Person (a) is able to pay its debts as they mature and
has (and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties
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of such Person at a fair valuation (and including as assets for this purpose at
a fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.129 "Special Agent Advances" shall have the meaning set forth in
SECTION 12.11 hereof.
1.130 "Stock Pledge Agreements" shall mean each Stock Pledge Agreement
executed by a Borrower in favor of Agent and by which such Borrower shall pledge
to Agent, for the benefit of Agent and Lenders, as security for the Obligations,
65% of the capital stock of each Foreign Subsidiary, if any, of such Borrower
and 100% of the capital stock of each Domestic Subsidiary, if any, of such
Borrower.
1.131 "Subordinated Debt" shall mean all Indebtedness of any or all
Borrowers that is fully and absolutely subordinated in right or payment to the
Obligations in a manner satisfactory to Agent and Lenders.
1.132 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.133 "Term" shall have the meaning set forth in SECTION 13.1 hereof.
1.134 "Trademark Security Agreements" shall mean a Trademark Security
Agreement to be executed by each Borrower in favor of Agent on or about the
Closing Date and by which each Borrower shall assign to Agent, for the benefit
of Agent and Lenders, as security for the Obligations, all of such Borrower's
right, title and interest in and to all of its trademarks.
1.135 "UCC" shall mean the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts, and any successor statute, as in effect from time
to time (except that terms used herein which are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts on the date
hereof shall continue to have the same meaning notwithstanding any replacement
or amendment of such statute except as Agent may otherwise determine).
1.136 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time
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Xxxxxxx Xxxxx of any other class or classes have or might have voting power by
reason of the happening of any contingency, and (b) any Capital Stock of such
Person convertible or exchangeable without restriction at the option of the
holder thereof into Capital Stock of such Person described in clause (a) of this
definition.
1.137 "Warehouse Reserve" shall mean an amount equal to one month's
rent for each warehouse location of Borrowers (excluding Borrowers' central
distribution centers) based upon the most recent twelve-month average for such
warehouse location.
1.138 "WFRF" shall Xxxxx Fargo Retail Financial, LLC, its successors
and assigns.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
each Revolving Lender severally (and not jointly) agrees to fund its Pro Rata
Share of Revolving Loans to Borrowers from time to time in amounts requested by
any Borrower up to the amount outstanding at any time equal to the lesser of:
(i) the Borrowing Base at such time or (ii) the Revolving Loan Limit.
(b) Agent may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrower Agent, reduce the lending formula(s)
with respect to Eligible Inventory or Eligible Letter of Credit Inventory to the
extent that Agent determines in good faith that the liquidation value or Net
Recovery Percentage of the Eligible Inventory or Eligible Letter of Credit
Inventory, or any category thereof, has decreased, including any decrease
attributable to a change in the nature, quality, mix or the number of days of
the turnover of the Inventory. The amount of any decrease in the lending
formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Agent in good
faith. In determining whether to reduce the lending formula(s), Agent may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Inventory or Eligible Letter of Credit Inventory or in
establishing Reserves.
(c) Except in Agent's discretion, with the consent of all Lenders,
or as otherwise provided herein, the aggregate principal amount of the Revolving
Loans and Letter of Credit Accommodations outstanding at any time to Borrowers
shall not exceed the lesser of the Borrowing Base or the Revolving Loan Limit.
(d) In the event that the aggregate principal amount of the
Revolving Loans and Letter of Credit Accommodations outstanding to Borrowers
exceed the Borrowing Base or the Revolving Loan Limit, such event shall not
limit, waive or otherwise affect any rights of Agent or Lenders in such
circumstances or on any future occasions and Borrowers shall, within one (1)
Business Day after written demand by Agent, which may be made at any time or
from time to time, immediately repay to Agent the entire amount of any such
excess(es) for which payment is demanded.
(e) Borrowers, Agent and Lenders further agree that, if a Material
Adverse Effect shall occur, or if an Event of Default exists, Agent shall have
the right (exercisable at such
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time as Agent deems appropriate) to (i) suspend the making of Revolving Credit
Loans and the issuance of Letter of Credit Accommodations and (ii) require that
separate Borrowing Base calculations be made for each Borrower, as well as the
right to limit the use of proceeds of the Loans and Letter of Credit
Accommodations by each Borrower to an amount equal to such Borrower's Borrowing
Base.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein,
at the request of a Borrower (or Borrower Agent on behalf of such Borrower),
Agent agrees, for the ratable risk of each Lender according to its Pro Rata
Share, to provide or arrange for Letter of Credit Accommodations for the account
of such Borrower containing terms and conditions acceptable to Agent and the
issuer thereof. Any payments made by or on behalf of Agent or any Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations provided to or for the benefit of a Borrower shall constitute
additional Revolving Loans to such Borrower pursuant to this Section 2 (or
Special Agent Advances as the case may be).
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate
equal to (i) in the case of documentary Letter of Credit Accommodations, fifty
percent (50%) of the Applicable Libor Margin per annum, on the average daily
outstanding balance of such documentary Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each fiscal quarter and (ii) with respect to standby Letter of
Credit Accommodations, the Applicable Libor Margin per annum, on the average
daily outstanding balance of such documentary Letter of Credit Accommodations
for the immediately preceding month (or part thereof), payable in arrears as of
the first day of each fiscal quarter, except that Agent may, and upon the
written direction of Required Lenders shall, require Borrowers to pay to Agent
for the ratable benefit of Lenders such letter of credit fee, at a rate equal to
the amounts set forth above plus two percent (2%) percent per annum on such
daily outstanding balance for: (i) the period from and after the date of
termination hereof until Agent and Lenders have received full and final payment
of all Obligations (notwithstanding entry of a judgment against any Borrower)
and (ii) the period from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing as determined by
Agent. Such letter of credit fee shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed and the obligation of
Borrowers to pay such fee shall survive the termination of this Agreement.
(c) The Borrower requesting such Letter of Credit Accommodation
(or Borrower Agent on behalf of such Borrower) shall give Agent two (2) Business
Days' prior written notice of such Borrower's request for the issuance of a
Letter of Credit Accommodation. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day and in no
event shall be a date less than ten (10) days prior to the end of the then
current term of this Agreement) of issuance of such requested Letter of Credit
Accommodation, whether such Letter of Credit Accommodations may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit
Accommodation is to expire (which date shall be a Business Day), the
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purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. The Borrower
requesting the Letter of Credit Accommodation (or Borrower Agent on behalf of
such Borrower) shall attach to such notice the proposed terms of the Letter of
Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such
Letter of Credit Accommodation (or Borrower Agent on behalf of such Borrower)
shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application, in form and substance satisfactory to such proposed
issuer and Agent, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Agent and such proposed issuer,(ii) as of the date of issuance,
no order of any court, arbitrator or other Governmental Authority shall purport
by its terms to enjoin or restrain money center banks generally from issuing
letters of credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter of
Credit Accommodation refrain from, the issuance of letters of credit generally
or the issuance of such Letters of Credit Accommodation; and (iii) the Excess
Availability of the Borrowers, prior to giving effect to any Reserves with
respect to such Letter of Credit Accommodations, on the date of the proposed
issuance of any Letter of Credit Accommodations, shall be equal to or greater
than: (A) if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Letter of Credit Inventory and the documents of title with
respect thereto are consigned to the issuer, the sum of (1) the percentage equal
to one hundred (100%) percent minus the then applicable percentage with respect
to Eligible Letter of Credit Inventory set forth in the definition of the term
Borrowing Base multiplied by the Cost of such Eligible Letter of Credit
Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates
must be paid in connection with such Inventory upon arrival and for delivery to
one of such Borrower's locations for Eligible Letter of Credit Inventory within
the United States of America and (B) if the proposed Letter of Credit
Accommodation is for any other purpose or the documents of title are not
consigned to the issuer in connection with a Letter of Credit Accommodation for
the purpose of purchasing Inventory, an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Agent with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, a Reserve shall be established in the
applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent's discretion, with the consent of all Lenders,
the amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Agent or any Lender in
connection therewith shall not at any time exceed $15,000,000.
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(f) Borrowers and any other Obligors shall indemnify and hold Agent
and Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation, except for
such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or willful misconduct of Agent or any Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and each other Obligor assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed such Borrower's agent. Each Borrower and each other Obligor
assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Each Borrower
and each other Obligor hereby releases and holds Agent and Lenders harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, any other Obligor, by any issuer or correspondent or otherwise
with respect to or relating to any Letter of Credit Accommodation, except for
the gross negligence or willful misconduct of Agent or any Lender as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(f) shall survive the payment of Obligations
and the termination of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers and each other Obligor shall, at Agent's
request, instruct all suppliers, carriers, forwarders, customs brokers,
warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Agent holds a security interest to deliver them to Agent
and/or subject to Agent's order, and if they shall come into such Borrower's or
such other Obligor's possession, to deliver them, upon Agent's request, to Agent
in their original form. Borrowers and other Obligors shall also, at Agent's
request, designate Agent as the consignee on all bills of lading and other
negotiable and non-negotiable documents.
(h) Each Borrower and each other Obligor hereby irrevocably
authorizes and directs any issuer of a Letter of Credit Accommodation to name
such Borrower or such other Obligors as the account party therein and to deliver
to Agent all instruments, documents and other writings and property received by
issuer pursuant to the Letter of Credit Accommodations and to accept and rely
upon Agent's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit Accommodations or the applications
therefor. Nothing contained herein shall be deemed or construed to grant any
Borrower or other Obligors any right or authority to pledge the credit of Agent
or any Lender in any manner. Agent and Lenders shall have no liability of any
kind with respect to any Letter of Credit Accommodation provided by an issuer
other than Agent or any Lender unless Agent has duly executed and delivered to
such issuer the application or a guarantee or indemnification in writing with
respect to such Letter of Credit Accommodation. Borrowers and other Obligors
shall be bound by any reasonable interpretation made in good faith by Agent, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of any Borrower or any other Obligors.
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(i) So long as no Event of Default exists or has occurred and is
continuing, a Borrower may (i) approve or resolve any questions of
non-compliance of documents,(ii) give any instructions as to acceptance or
rejection of any documents or goods, (iii) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (iv) with
Agent's consent, grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents, and agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral.
(j) At any time an Event of Default exists or has occurred and is
continuing, Agent shall have the right and authority to, and Borrowers shall
not, without the prior written consent of Agent, (i) approve or resolve any
questions of non-compliance of documents,(ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
(iv) grant any extensions of the maturity of, time of payments for, or time of
presentation of, any drafts, acceptances, or documents, and(v) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Agent may take such actions either in its own
name or in any Borrower's name.
(k) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or any other Obligor to any issuer or correspondent
in any application for any Letter of Credit Accommodation, or any other
agreement in favor of any issuer or correspondent relating to any Letter of
Credit Accommodation, shall be deemed to have been granted or undertaken by such
Borrower or such other Obligor to Agent for the ratable benefit of Lenders. Any
duties or obligations undertaken by Agent to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Agent in favor of any issuer or correspondent to the extent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrowers and other Obligors to Agent for the ratable benefit of Lenders and to
apply in all respects to Borrowers and other Obligors.
(l) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(m) Each Borrower is irrevocably and unconditionally obligated,
without presentment, demand or protest, to pay to Agent any amounts paid by an
issuer of a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that any Borrower fails to pay Agent on the
date of any payment under a Letter of Credit Accommodation in an amount equal to
the amount of such payment, Agent (to the extent it has actual notice thereof)
shall promptly notify each Lender of the unreimbursed amount of such payment and
each Lender agrees, upon one (1) Business Day's notice, to fund to Agent the
purchase of its
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participation in such Letter of Credit Accommodation in an amount equal to its
Pro Rata Share of the unpaid amount. The obligation of each Lender to deliver to
Agent an amount equal to its respective participation pursuant to the foregoing
sentence is absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuance of any Event of Default, the
failure to satisfy any other condition set forth in Section 4 or any other event
or circumstance. If such amount is not made available by a Lender when due,
Agent shall be entitled to recover such amount on demand from such Lender with
interest thereon, for each day from the date such amount was due until the date
such amount is paid to Agent at the interest rate then payable by any Borrower
in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a)
hereof.
2.3 Reserved.
2.4 Commitments.
The aggregate amount of each Lender's Pro Rata Share of the Loans and
Letter of Credit Accommodations shall not exceed the amount of such Lender's
Commitment, as the same may from time to time be amended in accordance with the
provisions hereof.
2.5 Reserves.
All Revolving Loans and Letter of Credit Accommodations otherwise
available to Borrowers pursuant to the lending formulas and subject to the
Revolving Loan Limit and other applicable limits hereunder shall be subject to
Agent's continuing right to establish and revise Reserves. Without limiting any
other rights or remedies of Agent under this Agreement or any of the other
Financing Agreements with respect to the establishment of Reserves or otherwise,
Agent may establish and revise Reserves to reflect: (a) inventory shrinkage; (b)
Customer Credit Liabilities; (c) amounts due or to become due in respect of
sales, use and/or withholding taxes and/or ad valorum taxes; (d) any rental
payments, service charges or other amounts due to lessors of real or personal
property to the extent Inventory or Records are located in or on property or
such Records are needed to monitor or otherwise deal with the Collateral and
with respect to any rental payments, to the extent that Agent determines that
Borrowers are not current with respect to such payments and for up to two months
rent to the extent that Collateral is located in Landlord Lien States and the
Borrowers have not delivered executed landlord waivers in form and substance
acceptable to the Agent, in its discretion; (e) Landing Costs, (f) Account
Reserves, and (g) amounts owing by any Borrower to Credit Card Issuers or Credit
Card Processors in connection with the Credit Card Agreements. Notwithstanding
the foregoing, in the case of gift certificates, initially, Agent will establish
Reserves, commencing as of the Closing Date and reset on the first day of each
month thereafter, in an amount equal to 50% of the aggregate amount of gift
certificates issued and outstanding for prior 6 months.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers jointly and severally shall pay to Agent, for the
benefit of Lenders, interest on the outstanding principal amount of the Loans at
the applicable Interest Rate.
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All interest accruing hereunder on and after the date of any Event of Default or
termination hereof shall be payable ON DEMAND.
(b) Unless Agent shall have received a Libordollar Rate Election in
accordance with SECTION 3.1(c) hereof, the outstanding principal amount of the
Revolving Loans shall bear interest for any month at the per annum rate equal to
the Interest Rate applicable to Prime Rate Loans. For any month when Agent shall
have received a Prime Rate Election in accordance with SECTION 3.1(c) hereof,
the outstanding principal amount of the Revolving Loans shall bear interest for
such month at the per annum rate equal to the Interest Rate applicable to Prime
Rate Loans. For any month when Agent shall have received a Libordollar Rate
Election in accordance with SECTION 3.1(c) hereof, the outstanding principal
amount of the Revolving Loans shall bear interest for such month at the per
annum rate equal to the Interest Rate applicable to Libordollar Rate Loans.
(c) Any Borrower may from time to time request that Libordollar
Rate Loans be converted to Prime Rate Loans effective as of the first day of the
immediately succeeding calendar month. Such request (a "Prime Rate Election")
shall be effective for the month specified and for each succeeding month unless
Agent shall receive a Libordollar Rate Election in accordance with this SECTION
3.1(c) and shall be delivered to Agent no later than three (3) Business Days
prior to the first day of such calendar month; provided, that, no Default or
Event of Default shall exist or have occurred and be continuing and no party
hereto shall have sent any notice of termination of this Agreement. Any Borrower
may from time to time request that Prime Rate Loans be converted to Libordollar
Rate Loans effective as of the first day of the immediately succeeding calendar
month. Such request (a "Libordollar Rate Election") shall be effective for the
month specified and for each succeeding month unless Agent shall receive a Prime
Rate Election in accordance with this SECTION 3.1(c) and shall be delivered to
Agent no later than three (3) Business Days prior to the first day of such
calendar month; provided, that, no Default or Event of Default shall exist or
have occurred and be continuing and no party hereto shall have sent any notice
of termination of this Agreement. Any request by or on behalf of any Borrower to
convert Libordollar Rate Loans to Prime Loans or Prime Rate Loans to Libordollar
Rate Loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Agent and Lenders shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Libordollar Rate market to fund any Libordollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent and Lenders had purchased such
deposits to fund the Libordollar Rate Loans. Borrowers shall not have more than
five (5) Libordollar Rate Loans in effect at any given time. Borrowers may only
exercise the Libordollar Rate Election for Libordollar Rate Loans of at least
$1,000,000 and integral multiple of $500,000 in excess thereof.
(d) Interest shall be payable by Borrowers to Agent, for the
account of Lenders, (i) for Prime Rate Loans, monthly in arrears not later than
the first day of each calendar month, and (ii) for Libordollar Rate Loans, in
arrears on the last day of each Interest Period therefor and, if such Interest
Period is longer than three months, at three-month intervals following the first
day of such Interest Period, and shall in each case be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed. The interest
rate on non-contingent Obligations (other than Libordollar Rate Loans) shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the first day of the month after any
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change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Agent and Lenders exceed the
maximum amount or the rate permitted under any Applicable Law, and if any such
part or provision of this Agreement is in contravention of any such Applicable
Law, such part or provision shall be deemed amended to conform thereto.
3.2 Fees.
(a) Borrowers jointly and severally shall pay to Agent, for the
account of the Lenders, quarterly an unused line fee at a rate equal to two
tenths of one percent (0.20%) per annum calculated upon the amount by which the
Revolving Loan Limit exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding quarter (or part thereof) while this Agreement is in
effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each quarter in arrears.
(b) Borrowers jointly and severally agree to pay to the Agent, for
the account of the Lenders, a facility fee equal to $15,000, which fee shall be
payable as of the Closing Date.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to any Lender or
any banking or financial institution from whom any Lender borrows funds or
obtains credit (a "Funding Bank"), or (ii) a Funding Bank or any Lender complies
with any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or any Lender determines that the adoption of
any Applicable Law regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof has or would have the effect described below, or a
Funding Bank or any Lender complies with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, and in the case of any event set forth in
this clause (iii), such adoption, change or compliance has or would have the
direct or indirect effect of reducing the rate of return on any Lender's capital
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration the Funding Bank's or Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to any Lender of funding or maintaining
the Loans, Letter of Credit Accommodations, or its Commitment, then Borrowers
shall from time to time upon demand by Agent pay to Agent additional amounts
sufficient to indemnify Lenders against such increased cost on an after-tax
basis (after taking into account applicable deductions and credits in respect of
the amount indemnified). A certificate as to the amount of such increased cost
shall be submitted to Borrower Agent by Agent and shall be conclusive, absent
manifest error.
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(b) If prior to the first day of any month, (i) Agent shall have
determined in good faith (which determination shall be conclusive and binding
upon Borrowers) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Libordollar
Rate, (ii) Agent has received notice from the Required Lenders that the
Libordollar Rate determined or to be determined for such month will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
their Libordollar Rate Loans during such month, or (iii) Dollar deposits in the
principal amounts of the Libordollar Rate Loans for such two month period on
which the Libordollar Rate is to be based are not generally available in the
London interbank market, Agent shall give telecopy or telephonic notice thereof
to Borrowers and Lenders as soon as practicable thereafter, and will also give
prompt written notice to Borrowers and Lenders when such conditions no longer
exist. If such notice is given (A) any Libordollar Rate Loans requested to be
made on the first day of such month shall be made as Prime Rate Loans, (B) any
Loans that were to have been converted on the first day of such month to or
continued as Libordollar Rate Loans shall be converted to or continued as Prime
Rate Loans and (C) each outstanding Libordollar Rate Loan shall be converted, on
the last day of the then-current month to Prime Rate Loans. Until such notice
has been withdrawn by Agent, no further Libordollar Rate Loans shall be made or
continued as such, nor shall Borrowers have the right to convert Prime Rate
Loans to Libordollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of
or any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Agent or any Lender to make or maintain Libordollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly
give written notice of such circumstances to Borrower Agent and Agent (which
notice shall be withdrawn whenever such circumstances no longer exist), (ii) the
commitment of such Lender hereunder to make Libordollar Rate Loans, continue
Libordollar Rate Loans as such and convert Prime Rate Loans to Libordollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Libordollar Rate Loans, such Lender
shall then have a commitment only to make a Prime Rate Loan when a Libordollar
Rate Loan is requested and (iii) such Lender's Loans then outstanding as
Libordollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current months with respect to
such Loans or within such earlier period as required by law.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations.
Each of the following is a condition precedent to Agent and Lenders
making the initial Loans and Letter of Credit Accommodations hereunder:
(a) Agent shall have received, in form and substance satisfactory
to Agent, all releases, terminations and such other documents as Agent may
request to evidence and effectuate the termination by the Existing Lenders of
their respective financing arrangements with Borrowers and the termination and
release by it or them, as the case may be, of any interest in and to any assets
and properties of each Borrower and each other Obligor, duly authorized,
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executed and delivered by it or each of them, including, but not limited to, (i)
UCC termination statements for all UCC financing statements previously filed by
it or any of them or their predecessors, as secured party and such Borrower or
any other Obligor, as debtor; and (ii) satisfactions and discharges of any
mortgages, deeds of trust or deeds to secure debt by any Borrower or any other
Obligor in favor of it or any of them, in form acceptable for recording with the
appropriate Governmental Authority;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
certificate of incorporation of each Borrower and each Guarantor certified by
the Secretary of State (or equivalent Governmental Authority) which shall set
forth the same complete corporate name of such Borrower or such Guarantor, as is
set forth herein and such document as shall set forth the organizational
identification number of such Borrower, or such Guarantor, if one is issued in
its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of any Obligor since the date of Agent's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of any Obligor to perform its obligations hereunder or under any of
the other Financing Agreements to which it is a party or of Agent or any Lender
to enforce the Obligations or realize upon the Collateral;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Agent, together with such supporting documentation as may
be necessary or appropriate, and other documents and information that will
enable Agent to accurately identify and verify the Collateral), the results of
which each case shall be satisfactory to Agent, not more than three (3) Business
Days prior to the date hereof;
(e) Agent shall have received, in form and substance satisfactory
to Agent, all consents, waivers, acknowledgments and other agreements from third
Persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and Liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, subject to the provisions of SECTION
9.24 hereof, Collateral Access Agreements by owners and lessors of leased
premises of each Borrower and by processors and warehouses at which Collateral
is located;
(f) the Excess Availability as determined by Agent, as of the date
hereof, shall be not less than $15,000,000 after giving effect to the initial
Loans and Letter of Credit Accommodations made or to be made in connection with
the initial transactions hereunder and the payment of all fees and expenses in
connection with the transactions contemplated hereby;
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(g) Agent shall have received, in form and substance satisfactory
to Agent, (i) a Deposit Account Control Agreement by and among Agent, Parent and
Fleet National Bank, and Deposit Account Control Agreements among Agent,
Xxxxxxxx'x and Bank of America, N.A., AmSouth Bank, US Bank, Firth Third Bank,
Regions Bank, National City Bank, and Wachovia, respectively, in each case duly
authorized, executed and delivered by such bank and such Obligor, (ii) evidence
of Borrowers' delivery of a Payment Direction Letter to each other bank at which
any Borrower maintains a deposit account and (ii) evidence of the Borrowers'
delivery of all Cash Management Agreements;
(h) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in and Lien upon all of the Collateral;
(i) Agent shall have received and reviewed lien and judgment search
results for the jurisdiction of incorporation of each Obligor, the jurisdiction
of the chief executive office of each Obligor and all jurisdictions in which
assets of each Obligor is located, which search results shall be in form and
substance satisfactory to Agent;
(j) Agent shall have received originals of the shares of the stock
certificates representing all of the issued and outstanding shares of the
Capital Stock of each Borrower and Guarantor (other than Parent) and owned by
any Borrower or Guarantor, in each case together with stock powers duly executed
in blank with respect thereto;
(k) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as lender's loss payee and additional insured;
(l) Agent shall have received, in form and substance satisfactory
to Agent, such opinion letters of counsel to Borrowers and Guarantors with
respect to the Financing Agreements and such other matters as Agent may request;
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Agent, in form and substance satisfactory to Agent;
(n) Agent shall have received, in form and substance acceptable to
the Agent, (i) credit card processor agreements from each of the Borrowers'
Credit Card Processors and/or Credit Card Issuers;
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations.
Each of the following is an additional condition precedent to the Loans
and Letter of Credit Accommodations to Borrowers, including the initial Loans
and Letter of Credit Accommodations and any future Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as
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though such representations and warranties had been made on and as of the date
of the making of each such Loan and after giving effect thereto, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans and Letter of
Credit Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
has a reasonable likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and
be continuing on and as of the date of the making of such Loan and after giving
effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest.
To secure payment and performance of all Obligations, each Borrower
hereby grants to Agent, for itself and the ratable benefit of Lenders, a
continuing security interest in, a Lien upon, and a right of set off against,
and hereby assigns to Agent, for itself and the ratable benefit of Lenders, as
security, all personal and real property and fixtures, and interests in property
and fixtures, of such Borrower, whether now owned or hereafter acquired or
existing, and wherever located (together with all other collateral security for
the Obligations at any time granted to or held or acquired by Agent or any
Lender, collectively, the "Collateral"):
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and
Equipment;
(d) all lease, leaseholds, and fixtures;
(e) all chattel paper, including, without limitation, all tangible
and electronic chattel paper;
(f) all instruments, including, without limitation, all promissory
notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
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(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of Borrower now or hereafter held or received by or
in transit to Agent, any Lender or its Affiliates or at any other depository or
other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise;
(l) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower irrevocably and unconditionally authorizes Agent
(or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Agent or its designee as the
secured party and such Borrower as debtor, as Agent may require to perfect its
security interest in the Collateral, and including any other information with
respect to such Borrower or otherwise required by part 5 of Article 9 of the
Uniform Commercial Code of such jurisdiction as Agent may determine, together
with any amendment and continuations with respect thereto, which authorization
shall apply to all financing statements filed on, prior to or after the date
hereof. Each Borrower hereby ratifies and approves all financing statements
naming Agent or its designee as secured party and such Borrower, as debtor with
respect to the Collateral (and any amendments with respect to such financing
statements) filed by or on behalf of Agent prior to the date hereof and ratifies
and confirms the authorization of Agent to file such financing statements (and
amendments, if any). Each Borrower hereby authorizes Agent to adopt on behalf of
such Borrower any symbol required for authenticating any electronic filing. In
the event that the description of the collateral in any financing statement
naming Agent or its designee as the secured party and such Borrower as debtor
includes assets and properties of such Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the
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filing of such financing statement shall nonetheless be deemed authorized by
such Borrower to the extent of the Collateral included in such description and
it shall not render the financing statement ineffective as to any of the
Collateral or otherwise affect the financing statement as it applies to any of
the Collateral. In no event shall any Borrower at any time file, or permit or
cause to be filed, without the prior written consent of Agent, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming Agent or its designee as
secured party and such Borrower as debtor.
(b) No Borrower has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that a Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, such
Borrower shall promptly notify Agent thereof in writing. Promptly upon the
receipt thereof by or on behalf of such Borrower (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent's option, Borrowers shall, or Agent may at
any time on behalf of Borrowers, cause the original of any such instrument or
chattel paper to be conspicuously marked in a form and manner acceptable to
Agent with the following legend referring to chattel paper or instruments as
applicable: "This [chattel paper][instrument] is subject to the security
interest of Congress Financial Corporation (Southern), as agent and any sale,
transfer, assignment or encumbrance of this [chattel paper][instrument] violates
the rights of such secured party."
(c) In the event that any Borrower shall at any time hold or
acquire an interest in any electronic chattel paper or any transferable record
(as such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent's request, such
Borrower shall take, or cause to be taken, such actions as Agent may request to
give Agent control of such electronic chattel paper under Section 9-105 of the
UCC and control of such transferable record under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction.
(d) No Borrower has any deposit accounts as of the date hereof,
except as set forth in the Information Certificate. No Borrower shall directly
or indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (i) Agent shall
have received not less than five (5) Business Days prior written notice of the
intention of a Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower is dealing and the purpose of the account, (ii) the bank
where such account is opened or maintained shall be acceptable to Agent, and
(iii) on or before the opening of such deposit account, such Borrower shall, as
Agent may specify, either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower and the bank at which such
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deposit account is opened and maintained, (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Agent or (C) deliver a Payment Direction Letter to such bank. The
terms of this subsection (d) shall not apply to deposit accounts specifically
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of a Borrower's salaried employees.
(e) Each Borrower owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that any Borrower shall be entitled to or
shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower shall promptly endorse, assign and deliver the same to
Agent, accompanied by such instruments of transfer or assignment duly executed
in blank as Agent may from time to time specify. If any securities, now or
hereafter acquired by any Borrower is uncertificated and are issued to such
Borrower or its nominee directly by the issuer thereof, such Borrower shall
immediately notify Agent thereof and shall as Agent may specify, either (A)
cause the issuer to agree to comply with instructions from Agent as to such
securities, without further consent of such Borrower or such nominee, or (B)
arrange for Agent to become the registered owner of the securities.
(ii) No Borrower shall directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of such Borrower to
open or establish such account which notice shall specify in reasonable detail
and specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Agent
may specify either (1) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.
(f) No Borrower is a beneficiary or otherwise entitled to any right
to payment under any letter of credit, banker's acceptance or similar instrument
as of the date hereof, except as set forth in the Information Certificate. In
the event that any Borrower shall be entitled to or shall receive any right to
payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Agent thereof in writing. Each Borrower
shall immediately, as Agent may
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specify, either (i) deliver, or cause to be delivered to Agent, with respect to
any such letter of credit, banker's acceptance or similar instrument, the
written agreement of the issuer and any other nominated person obligated to make
any payment in respect thereof (including any confirming or negotiating bank),
in form and substance satisfactory to Agent, consenting to the assignment of the
proceeds of the letter of credit to Agent by such Borrower and agreeing to make
all payments thereon directly to Agent or as Agent may otherwise direct or (ii)
cause Agent to become, at Borrowers' expense, the transferee beneficiary of the
letter of credit, banker's acceptance or similar instrument (as the case may
be).
(g) No Borrower has any commercial tort claims as of the date
hereof, except as set forth in the Information Certificate. In the event that
any Borrower shall at any time after the date hereof have any commercial tort
claims, such Borrower shall promptly notify Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by such Borrower to
Agent of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of a
security interest, the sending thereof by such Borrower to Agent shall be deemed
to constitute such grant to Agent. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. Without limiting the authorization of
Agent provided in SECTION 5.2(a) hereof or otherwise arising by the execution by
Borrowers of this Agreement or any of the other Financing Agreements, Agent is
hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and any
Borrower as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower shall
promptly upon Agent's request, execute and deliver, or cause to be executed and
delivered, to Agent such other agreements, documents and instruments as Agent
may require in connection with such commercial tort claim.
(h) No Borrower has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for goods
located in the United States in transit to a location of such Borrower permitted
herein in the ordinary course of business of such Borrower in the possession of
the carrier transporting such goods. In the event that any goods, documents of
title or other Collateral are at any time after the date hereof in the custody,
control or possession of any other Person not referred to in the Information
Certificate or such carriers, Borrowers shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, each Borrower shall use its best efforts
to deliver to Agent a Collateral Access Agreement duly authorized, executed and
delivered by such Person and such Borrower.
(i) Each Borrower shall take any other actions reasonably requested
by Agent from time to time to cause the attachment, perfection and first
priority of, and the ability of Agent to enforce, the security interest and Lien
of Agent in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other Applicable Law, to the
extent, if any, that such Borrower's signature thereon is required therefor,
(ii) causing Agent's name to be noted as secured party on any certificate of
title for a titled good if such notation is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security
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interest of Agent in such Collateral, (iii) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of Agent to enforce, the security interest of Agent in
such Collateral, (iv) obtaining the consents and approvals of any Governmental
Authority or third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking all actions
required by any earlier versions of the UCC or by other law, as applicable in
any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts.
Agent shall maintain one or more loan account(s) on its books in which
shall be recorded (a) all Loans, Letter of Credit Accommodations and other
Obligations and the Collateral, (b) all payments made by or on behalf of any
Borrower and (c) all other appropriate debits and credits as provided in this
Agreement, including fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Agent's customary practices
as in effect from time to time.
6.2 Statements.
Agent shall render to Borrower Agent each month a statement setting
forth the balance in the Borrowers' loan account(s) maintained by Agent for
Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Agent receives a
written notice from Borrower Agent of any specific exceptions of Borrowers
thereto within thirty (30) days after the date such statement has been received
by Borrower Agent. Until such time as Agent shall have rendered to Borrower
Agent a written statement as provided above, the balance in Borrowers' loan
account(s) shall be presumptive evidence of the amounts due and owing to Agent
and Lenders by Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense,
deposit account arrangements and merchant payment arrangements with the banks
set forth on SCHEDULE 8.10 hereto and after prior written notice to Agent, such
other banks as Borrowers may hereafter select as are acceptable to Agent. The
banks set forth on SCHEDULE 8.10 constitute all of the banks with whom Borrowers
have deposit account arrangements and merchant payment arrangements as of the
date hereof and identifies the Borrower maintaining such arrangements and
identifies each of the deposit accounts at such banks to a retail store location
of Borrowers or otherwise describes the nature of the use of such deposit
account by Borrowers.
(b) Each Borrower shall deposit all proceeds from sales of
Inventory in every form, including cash, checks, credit card sales drafts,
credit card sales or charge slips or receipts and other forms of daily store
receipts, from each retail store location of such Borrower on each Business Day
into the deposit accounts of such Borrower used solely for such purpose and
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identified to each retail store location as set forth on SCHEDULE 8.10.
Borrowers shall cause all such funds deposited into the separate deposit
accounts to be sent by wire transfer or by automated clearinghouse transfer
daily and all other proceeds of Collateral to be sent daily by wire transfer, to
the Blocked Accounts or the Agent Payment Account. Each Borrower shall
irrevocably direct in writing, in form and substance satisfactory to Agent (a
"Payment Direction Letter"), each of the banks in which any such deposit account
is located and into which proceeds from sales of Inventory from a retail store
location of such Borrower are at any time deposited not to honor any instruction
from a Borrower with respect to such deposit account or any funds in such
account other than an instruction of such Borrower to send all funds deposited
in such account by wire transfer or automated clearinghouse transfer to a
Blocked Account or the Agent Payment Account, and to honor any direction of
Agent with respect to such deposit account and the funds in such account, even
if Agent's direction is contrary to any instruction of a Borrower. Such
direction shall not be rescinded, revoked or modified without the prior written
consent of Agent.
(c) Borrowers shall establish and maintain, at its expense, deposit
accounts with such banks as are acceptable to Agent (the "Blocked Accounts").
Each Borrower shall promptly either cause all amounts on deposit in its deposit
accounts used by each retail store location to be sent as provided in SECTION
6.3(b) above, or shall itself deposit or cause to be deposited, on a daily
basis, to the Blocked Accounts or cause to be sent directly to the Agent Payment
Account all proceeds from sales of Inventory, and shall cause to be sent
directly to the Agent Payment Account by wire transfer or automated
clearinghouse transfer on a daily basis all amounts payable to such Borrower
from Credit Card Issuers and Credit Card Processors and all other proceeds of
Collateral. The banks at which the Blocked Accounts are established shall enter
into an agreement, in form and substance satisfactory to Agent, providing that
all items received or deposited in the Blocked Accounts are the Property of
Agent, that the depository bank has no Lien upon, or right to setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on Borrower's or Agent's
instruction, all funds received or deposited into the Blocked Accounts into the
Agent Payment Account, and will not honor any instruction from a Borrower other
than an instruction to transfer such funds to the Agent Payment Account.
Borrowers agrees that all amounts deposited in such Blocked Accounts or other
funds received and collected by Agent, whether on the Accounts or as proceeds of
Inventory or other Collateral or otherwise shall be the Property of Agent held
for the benefit of Agent and Lenders. The Borrowers shall deliver to the Agent,
as a condition to the effectiveness of this Agreement, notification, executed by
the Borrowers, to each of the Borrowers' Credit Card Processor and/Credit Card
Issuers an tri-party agreement (in form and substance satisfactory to the
Agent), which agreement provides that payment of all credit card charges
submitted by the Borrowers to such Credit Card Process and/or Credit Card Issuer
and any other amount payable to the Borrowers by such Credit Card Process and/or
Credit Card Issuer shall be directed to the Agent Payment Account or as
otherwise directed by the Agent.
(d) For purposes of calculating the amount of the Loans available
to Borrowers such payments will be applied (conditional upon final collection)
to the Obligations (except to the extent remitted to Borrowers as provided in
SECTION 6.3(c) above) on the Business Day of receipt by Agent of immediately
available funds in the Agent Payment Account provided such payments and notice
thereof are received in accordance with Agent's usual and
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customary practices as in effect from time to time and within sufficient time to
credit Borrowers' loan account on such day, and if not, then on the next
Business Day. For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Agent (for the benefit of the Agent)
in the Agent Payment Account provided such payments or other funds and notice
thereof are received in accordance with Agent's usual and customary practices as
in effect from time to time and within sufficient time to credit Borrowers' Loan
Account on such day, and if not, then on the next Business Day.
6.4 Payments.
(a) All Obligations shall be payable to the Agent Payment Account
as provided in SECTION 6.3 or such other place as Agent may designate from time
to time. Except to the extent remitted to Borrowers as provided in SECTION
6.3(c) above, Agent shall apply payments received or collected from any Borrower
or any other Obligor or for the account of Borrowers (including the monetary
proceeds of collections or of realization upon any Collateral) in accordance
with SECTION 6.11 hereof. Notwithstanding anything to the contrary contained in
this Agreement, to the extent Borrowers use any proceeds of the Loans or Letter
of Credit Accommodations to acquire rights in or the use of any Collateral or to
repay any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the Obligations shall be deemed applied first to the
Obligations arising from Loans or Letter of Credit Accommodations that were not
used for such purposes and second to the Obligations arising from Loans or
Letter of Credit Accommodations the proceeds of which were used to acquire
rights in or the use of any Collateral in the chronological order in which
Borrowers acquired such rights in or the use of such Collateral. So long as no
Event of Default has occurred and is continuing, SECTION 6.4(a) shall not be
deemed to apply to any payment by Borrowers specified by Borrowers to be for the
payment of specific Obligations then due and payable (or prepayable) under any
provision of this Agreement.
(b) Notwithstanding the last proviso contained in SECTION 6.3(c),
at Agent's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrowers. So long as no Event of
Default exists, Agent shall charge the loan account(s) of Borrowers for all
principal, interest, fees, costs, expenses and other charges (to the extent then
due and payable) provided for in this Agreement and the other Financing
Agreements; provided, that this sentence shall be for the benefit of the Lenders
only and shall not be enforceable by Borrowers and in no event shall Agent be
required to charge the loan account(s) for any of the foregoing amounts if such
amounts would exceed the Borrowing Base. Borrowers shall make all payments to
Agent and Lenders on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Agent or any
Lender is required to surrender or return such payment or proceeds to any Person
for any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Agent or such Lender. Borrowers shall be jointly and severally liable to pay to
Agent, and do hereby indemnify, defend and hold Agent and
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Lenders harmless for the amount of any payments or proceeds surrendered or
returned. This SECTION 6.4(b) shall remain effective notwithstanding any
contrary action which may be taken by Agent or any Lender in reliance upon such
payment or proceeds. This SECTION 6.4 shall survive the payment of the
Obligations and the termination of this Agreement.
6.5 Authorization to Make Loans.
Agent and Lenders are authorized to make the Loans and provide the and
Letter of Credit Accommodations based upon telephonic or other instructions
received from anyone purporting to be an officer of any Borrower or other
authorized Person or, at the discretion of Agent, if such Loans are necessary to
satisfy any Obligations then due and payable as determined by Agent. All
requests for Loans and Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or the Letter of Credit
Accommodation established (which day shall be a Business Day) and the amount of
the requested Loan or Letter of Credit Accommodation. Requests received after
11:00 a.m., Boston, Massachusetts time on any day shall be deemed to have been
made as of the opening of business on the immediately following Business Day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrowers or when deposited to the credit of Borrowers or otherwise
disbursed or established in accordance with the instructions of any Borrower or
in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds.
Borrowers shall use the initial proceeds of the Loans provided by Agent
to Borrowers hereunder only for: (a) payments to each of the Persons listed in
the disbursement direction letter furnished by Borrowers to Agent on the Closing
Date and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. All other Loans and Letter of Credit Accommodations made to or for
the benefit of Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital, Permitted Acquisitions,
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
6.7 Pro Rata Treatment.
Except to the extent otherwise provided in this Agreement: (a) the
making and conversion of Loans shall be made among the Lenders based on their
respective Pro Rata Shares as to the Loans and (b) each payment on account of
any Obligations to or for the account of one or more of Lenders in respect of
any Obligations due on a particular day shall be allocated among the Lenders
entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.
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6.8 Sharing of Payments, Etc.
(a) Each Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim Agent or any
Lender may otherwise have, each Lender shall be entitled, at its option (but
subject, as among Agent and Lenders, to the provisions of SECTION 12.3(b)
hereof), to offset balances held by it for the account of Borrowers at any of
its offices, in dollars or in any other currency, against any principal of or
interest on any Loans owed to such Lender or any other amount payable to such
Lender hereunder, that is not paid when due (regardless of whether such balances
are then due to Borrowers), in which case it shall promptly notify Borrower
Agent and Agent thereof; provided, that, such Lender's failure to give such
notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any of the other Financing Agreements
through the exercise of any right of setoff, banker's lien or counterclaim or
similar right or otherwise (other than from Agent as provided herein), and, as a
result of such payment, such Lender shall have received more than its Pro Rata
Share of the principal of the Loans or more than its share of such other amounts
then due hereunder or thereunder by any Borrower to such Lender than the
percentage thereof received by any other Lender, it shall promptly pay to Agent,
for the benefit of Lenders, the amount of such excess and simultaneously
purchase from such other Lenders a participation in the Loans or such other
amounts, respectively, owing to such other Lenders (or such interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all Lenders shall share
the benefit of such excess payment (net of any expenses that may be incurred by
such Lender in obtaining or preserving such excess payment) in accordance with
their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end
all Lenders shall make appropriate adjustments among themselves (by the resale
of participation sold or otherwise) if such payment is rescinded or must
otherwise be restored.
(c) Each Borrower agrees that any Lender purchasing a participation
(or direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker's lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any right of setoff, banker's lien, counterclaims or similar rights or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of any Borrower. If, under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, assign such
rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
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6.9 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
may, at its option, subject to the terms of this Section, make available, on
behalf of Lenders, up to five million dollars ($5,000,000) of the Loans
requested or charged to Borrowers' loan account(s) or otherwise to be advanced
by Lenders pursuant to the terms hereof, without requirement of prior notice to
Lenders of the proposed Loans (the "Settlement Loan").
(b) With respect to all Loans made by Agent on behalf of Lenders
as provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans (including Settlement Loans) shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the
outstanding Loans as of 5:00 p.m. New York time on the Business Day immediately
preceding the date of each settlement computation; provided, that, Agent retains
the absolute right at any time or from time to time to make the above described
adjustments at intervals more frequent than weekly, but in no event more than
twice in any week. Agent shall deliver to each of the Lenders after the end of
each week, or at such lesser period or periods as Agent shall determine, a
summary statement of the amount of outstanding Loans for such period (such week
or lesser period or periods being hereinafter referred to as a "Settlement
Period"). If the summary statement is sent by Agent and received by a Lender
prior to 12:00 p.m. New York time, then such Lender shall make the settlement
transfer described in this Section by no later than 3:00 p.m. New York City time
on the same Business Day and if received by a Lender after 12:00 p.m. New York
City time, then such Lender shall make the settlement transfer by not later than
3:00 p.m. New York City time on the next Business Day following the date of
receipt. If, as of the end of any Settlement Period, the amount of a Lender's
Pro Rata Share of the outstanding Loans is more than such Lender's Pro Rata
Share of the outstanding Loans as of the end of the previous Settlement Period,
then such Lender shall forthwith (but in no event later than the time set forth
in the preceding sentence) transfer to Agent by wire transfer in immediately
available funds the amount of the increase. Alternatively, if the amount of a
Lender's Pro Rata Share of the outstanding Loans in any Settlement Period is
less than the amount of such Lender's Pro Rata Share of the outstanding Loans
for the previous Settlement Period, Agent shall forthwith transfer to such
Lender by wire transfer in immediately available funds the amount of the
decrease. The obligation of each of the Lenders to transfer such funds and
effect such settlement shall be irrevocable and unconditional and without
recourse to or warranty by Agent. Agent and each Lender agrees to xxxx its books
and records at the end of each Settlement Period to show at all times the dollar
amount of its Pro Rata Share of the outstanding Loans and Letter of Credit
Accommodations. Each Lender shall only be entitled to receive interest on its
Pro Rata Share of the Loans to the extent such Loans have been funded by such
Lender. Because the Agent on behalf of Lenders may be advancing and/or may be
repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent in
accordance with the amount of Loans actually advanced by and repaid to each
Lender and the Agent and shall accrue from and including the date such Loans are
so advanced to but excluding the date such Loans are either repaid by Borrowers
or actually settled with the applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available
and the settlement described above shall not yet have occurred, upon repayment
of any Loans by
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Xxxxxxxxx, Xxxxx may apply such amounts repaid directly to any amounts made
available by Agent pursuant to this Section. In lieu of weekly or more frequent
settlements, Agent may, at its option, at any time require each Lender to
provide Agent with immediately available funds representing its Pro Rata Share
of each Loan, prior to Agent's disbursement of such Loan to Borrowers. In such
event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to Borrowers pursuant
to this Section on any day, Agent may assume that each Lender will make
available to Agent such Lender's Pro Rata Share of the Loan requested or
otherwise made on such day and Agent may, in its discretion, but shall not be
obligated to, cause a corresponding amount to be made available to or for the
benefit of Borrowers on such day. If Agent makes such corresponding amount
available to Borrowers and such corresponding amount is not in fact made
available to Agent by such Lender, Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon
for each day from the date such payment was due until the date such amount is
paid to Agent at the Federal Funds Rate for each day during such period (as
published by the Federal Reserve Bank of New York or at Agent's option based on
the arithmetic mean determined by Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of the three leading brokers of Federal funds transactions in New
York City selected by Agent) and if such amounts are not paid within three (3)
days of Agent's demand, at the highest Interest Rate provided for in SECTION 3.1
hereof applicable to Prime Rate Loans. During the period in which such Lender
has not paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of Borrowers shall, for
all purposes hereof, be a Loan made by Agent for its own account. Upon any such
failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Borrower Agent of such failure and Borrowers shall pay such corresponding amount
to Agent for its own account within five (5) Business Days of Borrower Agent's
receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of
any Loans made available by the Agent on such Lender's behalf, or any Lender who
fails to pay any other amount owing by it to Agent, is a "Defaulting Lender".
Agent shall not be obligated to transfer to a Defaulting Lender any payments
received by Agent for the Defaulting Lender's benefit, nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder (including any
principal, interest or fees). Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent may hold and, in its discretion,
relend to Borrowers the amount of all such payments received or retained by it
for the account of such Defaulting Lender. For purposes of voting or consenting
to matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such Lender's Commitment shall be deemed to be zero (0). This
Section shall remain effective with respect to a Defaulting Lender until such
default is cured. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by Borrowers or any other Obligor of their duties and
obligations hereunder.
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(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that Borrowers may have against
any Lender as a result of any default by any Lender hereunder in fulfilling its
Commitment.
6.10 Obligations Several; Independent Nature of Lenders' Rights.
The obligation of each Lender hereunder is several, and no Lender shall
be responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to SECTION 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
6.11 Agent's Allocation of Payments and Collections.
(a) Except to the extent otherwise expressly provided with respect
to Defaulting Lenders under SECTION 6.9, all monies to be applied to the
Obligations shall be allocated among Agent and such of the Lenders as are
entitled thereto (and, with respect to monies allocated to Lenders, on a Pro
Rata Share basis, unless otherwise provided herein):
first, to pay any fees or expense reimbursements
(including any Extraordinary Expenses) then due and payable by
Borrowers to Agent under the Financing Agreements and to pay
any Indemnified Amount then due and payable by Borrowers to
Agent under the Financing Agreements;
second, to pay any fees, expense reimbursements
(including any Extraordinary Expenses) and any Indemnified
Amount then due and payable by Borrowers to Lenders under the
Financing Agreements;
third, to pay interest then due and payable in
respect of all Special Agent Advances which Agent has not been
reimbursed;
fourth, to pay interest then due and payable in
respect of all Settlement Loans;
fifth, to pay the outstanding principal amount of
Special Agent Advances;
sixth, to pay the outstanding principal amount of any
Settlement Loans;
seventh, so long as no Event of Default has occurred
and is continuing, at the Agent's election, to pay any
Obligations due and payable in respect Priority Bank Products,
until paid in full;
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eighth, to pay interest then due and payable in
respect of the Loans (including interest payable in respect of
the Revolving Loans but excluding Settlement Loans and Special
Agent Advances);
ninth, to pay the outstanding principal amount of the
Revolving Loans (other than Settlement Loans and Special Agent
Advances) and cash collateralize Letter of Credit
Accommodations with a funded reserve of up to 110% of the
aggregate stated amount of all Letter of Credit
Accommodations;
tenth, if an Event of Default has occurred and is
continuing, at the Agent's election, to pay to cash
collateralize any Obligations in respect of Bank Products in
an amount up to the amount of the Bank Products Reserve
established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until the
Borrowers' and their Subsidiaries' Obligations in respect of
the then extant Bank Products have been paid in full or the
cash collateral amount has been exhausted;
eleventh, to pay any other Obligations (including
Obligations in respect of Bank Products) then due and payable
by Borrowers to Agent or any Lender; and
twelfth, to the Borrowers.
(b) In the event of a direct conflict between the allocation
provisions of SECTIONS 6.11(a) and other provisions contained in any other
Financing Agreement, it is the intention of Agent and Lenders that the
allocation provisions in such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the event of
any actual conflict that cannot be resolved as aforesaid, the provisions of
SECTION 6.11(a) shall control and govern.
(c) The allocations set forth in this SECTION 6.11 are solely to
determine the rights and priorities of Agent and Lenders as among themselves and
may be changed by Agent and Lenders without notice to or the consent or approval
of Borrowers or any other Person.
6.12 Borrowers' Representative.
Each Borrower hereby irrevocably appoints Borrower Agent and Borrower
Agent agrees to act under this Agreement, as the agent and representative of
itself and each other Borrower for all purposes under this Agreement, including
requesting Borrowings, selecting whether any Loan or portion thereof is to bear
interest as a Prime Rate Loan or an Libordollar Rate Loan, and receiving account
statements and other notices and communications to Borrowers (or any of them)
from Agent. Agent may rely, and shall be fully protected in relying, on any
notice of borrowing, disbursement instructions, reports, information or any
other notice or communication made or given by Borrower Agent, whether in its
own name, on behalf of any Borrower or on behalf of "the Borrowers," and Agent
shall have no obligation to make any inquiry or request any confirmation from or
on behalf of any other Borrower as to the binding effect on such Borrower of any
such request, instruction, report, information, notice or communication, nor
shall the joint and several character of Borrowers' liability for the
Obligations be affected, provided that the provisions of this SECTION 6.12 shall
not be
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construed so as to preclude any Borrower from directly requesting Borrowings or
taking other actions permitted to be taken by "a Borrower" hereunder. Agent may
maintain a single Loan Account in the name of "Kirkland's Stores, Inc."
hereunder, and each Borrower expressly agrees to such arrangement and confirms
that such arrangement shall have no effect on the joint and several character of
such Borrower's liability for the Obligations.
6.13 Nature and Extent of Each Borrower's Liability.
(a) Joint and Several Liability. Each Borrower shall be liable
for, on a joint and several basis, and hereby guarantees the timely payment by
all other Borrowers of, all of the Loans, Letter of Credit Accommodations and
other Obligations, regardless of which Borrower actually may have received the
proceeds of any Loans, the benefit of any Letter of Credit Accommodations, or
other extensions of credit hereunder or the amount of such Loans received and
Letter of Credit Accommodations established or the manner in which Agent or any
Lender accounts for such Loans, Letter of Credit Accommodations or other
extensions of credit on its books and records, it being acknowledged and agreed
that Loans to any Borrower and Letter of Credit Accommodations established for
the benefit of any Borrower inure to the mutual benefit of all Borrowers and
that Agent and Lenders are relying on the joint and several liability of
Borrowers in extending the Loans, establishment of Letter of Credit
Accommodations and other financial accommodations hereunder. Each Borrower
hereby unconditionally and irrevocably agrees that upon default in the payment
when due (whether at stated maturity, by acceleration or otherwise) of any
principal of, or interest owed on, any of the Loans, Letter of Credit
Accommodations or other Obligations, such Borrower shall forthwith pay the same,
without notice or demand.
(b) Unconditional Nature of Liability. Each Borrower's joint and
several liability hereunder with respect to, and guaranty of, the Loans, Letter
of Credit Accommodations and other Obligations shall, to the fullest extent
permitted by Applicable Law, be unconditional irrespective of (i) the validity,
enforceability, avoidance or subordination of any of the Obligations or of any
promissory note or other document evidencing all or any part of the Obligations,
(ii) the absence of any attempt to collect any of the Obligations from any other
Obligor or any Collateral or other security therefor, or the absence of any
other action to enforce the same, (iii) the waiver, consent, extension,
forbearance or granting of any indulgence by Agent or any Lender with respect to
any provision of any instrument evidencing or securing the payment of any of the
Obligations, or any other agreement now or hereafter executed by any other
Borrower and delivered to Agent or any Lender, (iv) the failure by Agent to take
any steps to perfect or maintain the perfected status of its security interest
in or Lien upon, or to preserve its rights to, any of the Collateral or other
security for the payment or performance of any of the Obligations or Agent's
release of any Collateral or of its Liens upon any Collateral, (v) Agent's or
Lenders' election, in any proceeding instituted under the Bankruptcy Code, for
the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing
or grant of a security interest by any other Borrower, as debtor-in-possession
under Section 364 of the Bankruptcy Code, (vii) the release or compromise, in
whole or in part, of the liability of any Obligor for the payment of any of the
Obligations, (viii) any amendment or modification of any of the Financing
Agreements or waiver of any Default or Event of Default thereunder, (ix) any
increase in the amount of the Obligations beyond any limits imposed herein or in
the amount of any interest, fees or other charges payable in connection
therewith, or any decrease in the same, (x) the
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disallowance of all or any portion of Agent's or any Lender's claims for the
repayment of any of the Obligations under Section 502 of the Bankruptcy Code, or
(xi) any other circumstance that might constitute a legal or equitable discharge
or defense of any Borrower. After the occurrence and during the continuance of
any Event of Default, Agent may proceed directly and at once, without notice to
any Obligor, against any or all of Obligors to collect and recover all or any
part of the Obligations, without first proceeding against any other Obligor or
against any Collateral or other security for the payment or performance of any
of the Obligations, and each Borrower waives any provision that might otherwise
require Agent under Applicable Law to pursue or exhaust its remedies against any
Collateral or Obligor before pursuing another Obligor. Each Borrower consents
and agrees that Agent shall be under no obligation to xxxxxxxx any assets in
favor of any Obligor or against or in payment of any or all of the Obligations.
(c) No Reduction in Liability for Obligations. No payment or
payments made by an Obligor or received or collected by Agent from a Borrower or
any other Person by virtue of any action or proceeding or any setoff or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Borrower under this Agreement, each of
whom shall remain jointly and severally liable for the payment and performance
of all Loans and other Obligations until the Obligations are paid in full and
this Agreement is terminated.
(d) Contribution. Each Borrower is unconditionally obligated to
repay the Obligations as a joint and several obligor under this Agreement. If,
as of any date, the aggregate amount of payments made by a Borrower on account
of the Obligations and proceeds of such Borrower's Collateral that are applied
to the Obligations exceeds the aggregate amount of Loan proceeds actually used
by such Borrower in its business (such excess amount being referred to as an
"Accommodation Payment"), then each of the other Borrowers (each such Borrower
being referred to as a "Contributing Borrower") shall be obligated to make
contribution to such Borrower (the "Paying Borrower") in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of each
Borrower by the Allocable Percentage of the Borrower from whom contribution is
sought less (B) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Borrower (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such Contributing Borrower by way of contribution hereunder, and to be
decreased by any amounts theretofore received by such Contributing Borrower by
way of contribution hereunder); provided, however, that a Paying Borrower's
recovery of contribution hereunder from the other Borrowers shall be limited to
that amount paid by the Paying Borrower in excess of its Allocable Percentage of
all Accommodation Payments then outstanding of all Borrowers. As used herein,
the term "Allocable Percentage" shall mean, on any date of determination
thereof, a fraction the denominator of which shall be equal to the number of
Borrowers who are parties to this Agreement on such date and the numerator of
which shall be 1; provided, however, that such percentages shall be modified in
the event that contribution from a Borrower is not possible by reason of
insolvency, bankruptcy or otherwise by reducing such Borrower's Allocable
Percentage equitably and by adjusting the Allocable Percentage of the other
Borrowers proportionately so that the Allocable Percentages of all Borrowers at
all times equals 100%.
(e) Subordination. Each Borrower hereby subordinates any claims,
including any right of payment, subrogation, contribution and indemnity, that it
may have from or against
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any other Obligor, and any successor or assign of any other Obligor, including
any trustee, receiver or debtor-in-possession, howsoever arising, due or owing
or whether heretofore, now or hereafter existing, to the payment in full of all
of the Obligations.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrowers shall provide Agent with the documents in a form
satisfactory to Agent as set forth on SCHEDULE 7.1 hereto and such other reports
as to the Collateral or the financial condition of the Borrowers as the Agent
may from time to time reasonably request.
(b) Following the occurrence and during the continuance of an Event
of Default and at any time during which Excess Availability is less than or
equal to $10,000,000, Borrowers shall promptly provide Agent with such other
reports as to the Collateral or the financial condition of the Borrowers as
Agent shall request from time to time.
(c) If any Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Agent and to
follow Agent's instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Each Borrower shall notify Agent promptly of the assertion of
any material claims, offsets, defenses or counterclaims by any account debtor,
Credit Card Issuer or Credit Card Processor or any disputes with any of such
Persons or any settlement, adjustment or compromise thereof and (ii) all
material adverse information relating to the financial condition of any account
debtor, Credit Card Issuer or Credit Card Processor. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any account debtor, Credit Card Issuer or Credit Card Processor except in the
ordinary course of a Borrower's business in accordance with the current
practices of a Borrower as in effect on the date hereof. So long as no Event of
Default exists or has occurred and is continuing, Borrowers shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor, Credit Card Issuer, or Credit Card Processor. At any time that an Event
of Default exists or has occurred and is continuing, Agent shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors, Credit Card Issuers or Credit Card
Processors or grant any credits, discounts or allowances.
(b) Each Borrower shall notify Agent promptly of: (i) any notice
of a material default by such Borrower under any of the Credit Card Agreements
or of any default which might result in the Credit Card Issuer or Credit Card
Processor ceasing to make payments or suspending payments to such Borrower, (ii)
any notice from any Credit Card Issuer or Credit Card Processor that such Person
is ceasing or suspending, or will cease or suspend, any present or future
payments due or to become due to such Borrower from such Person, or that such
Person is terminating or will terminate any of the Credit Card Agreements, and
(iii) the failure of such Borrower to comply with any material terms of the
Credit Card Agreements or any terms thereof
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which might result in the Credit Card Issuer or Credit Card Processor ceasing or
suspending payments to such Borrower.
(c) With respect to each Account: (i) no payments shall be made
thereon except payments delivered to Agent pursuant to the terms of this
Agreement, (ii) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Agent in accordance with the terms of this Agreement and (iii) none
of the transactions giving rise thereto will violate any applicable State or
Federal Laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(d) Agent may, at any time or times that an Event of Default exists
or has occurred, (i) unless such amounts are already being directly deposited in
the Agent Payment Account, notify any or all account debtors, Credit Card
Issuers and Credit Card Processors that the Accounts have been assigned to Agent
and that Agent has a security interest therein and Agent may direct any or all
account debtors, Credit Card Issuers and Credit Card Processors to make payments
of Accounts directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Agent shall not be
liable for its failure to collect or enforce the payment thereof not for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Agent's request, all invoices and statements sent to any
account debtor, Credit Card Issuer or Credit Card Processor shall state that the
Accounts due from such account debtor, Credit Card Issuer or Credit Card
Processor and such other obligations have been assigned to Agent and are payable
directly and only to Agent, and each Borrower shall deliver to Agent such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require.
(e) Agent shall have the right at any time or times, in Agent's
name or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(f) Each Borrower shall deliver or cause to be delivered to Agent,
with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now owns or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Agent may otherwise agree in writing.
7.3 Inventory Covenants.
With respect to the Inventory: (a) each Borrower shall at all times
maintain inventory records reasonably satisfactory to Agent, keeping correct and
accurate records itemizing and describing the kind, type, quality, quantity and
aging of Inventory, such Borrower's cost therefor
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and daily withdrawals therefrom and additions thereto; (b) each Borrower shall
conduct a physical count of the Inventory at least once each year, but at any
time or times as Agent may request on or after an Event of Default, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be reasonably satisfactory to Agent concerning
such physical count; (c) no Borrower shall remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Agent, except for sales of Inventory in the ordinary course of a Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Agent's request, Borrowers
shall, at its expense, no more than one time in any twelve (12) month period,
but at any time or times as Agent may request at Agent's expense, or at any time
or times as Agent may request at Borrowers' expense on or after an Event of
Default or at any time during which Excess Availability is less than or equal to
$5,000,000, deliver or cause to be delivered to Agent written reports or
appraisals or appraisal updates as to the Inventory in form, scope and
methodology acceptable to Agent and by an appraiser acceptable to Agent,
addressed to Agent and upon which Agent is expressly permitted to rely; (e) upon
Agent's request, Borrowers shall, at their expense, conduct through RGIS
Inventory Specialists, Inc. or another inventory counting service acceptable to
Agent, a physical count of the Inventory in form, scope and methodology
acceptable to Agent no more than once in any twelve (12) month period, but at
any time or times as Agent may request on or after an Event of Default or at any
time or times as Agent may request in the event of test count variances is in
excess of 5% of the Cost of all Eligible Inventory, the results of which shall
be reported directly by such inventory counting service to Agent and Borrowers
shall promptly deliver confirmation in a form satisfactory to Agent that
appropriate adjustments have been made to the inventory records of each Borrower
to reconcile the inventory count to each Borrower's inventory records; (f) each
Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with Applicable Law (including, but not limited to,
the requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (g) each Borrower assumes
all responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; (h) no Borrower shall sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate a Borrower to repurchase such Inventory
except for the right of return given to retail customers of a Borrower in the
ordinary course of the business of a Borrower in accordance with the then
current return policy of such Borrower; (i) each Borrower shall keep the
Inventory in good and marketable condition; and (j) no Borrower shall acquire or
accept any Inventory on consignment or approval.
7.4 Commercial Finance Audits.
Upon Agent's request, Borrowers shall, at their expense, no more than
one time in any twelve (12) month period, but at any time or times as Agent may
request at Agent's expense, or at any time or times as Agent may request at
Borrowers' expense on or after an Event of Default or at any time during which
Excess Availability is less than or equal to $5,000,000, permit the Agent or its
representatives to conduct commercial finance audits.
7.5 Power of Attorney.
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Each Borrower hereby irrevocably designates and appoints Agent (and all
persons designated by Agent) as such Borrower's true and lawful
attorney-in-fact, and authorizes Agent, in such Borrower's, or Agent's name, to:
(a) at any time an Event of Default exists or has occurred and is continuing (i)
demand payment on Receivables or other Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
such Borrower's name on any proof of claim in bankruptcy or other similar
document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
and handle and store all mail relating to the Collateral; and (ix) do all acts
and things which are necessary, in Agent's determination, to fulfill such
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment in
respect of Receivables or constituting Collateral or otherwise received in or
for deposit in the Blocked Accounts or otherwise received by Agent or any
Lender, (ii) have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Receivables or other
proceeds of Collateral are sent or received, (iii) endorse such Borrower's name
upon any items of payment in respect of Receivables or constituting Collateral
or otherwise received by Agent and any Lender and deposit the same in Agent's
account for application to the Obligations, (iv) endorse such Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (v) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs or foreign export control authorities in such Borrowers' name, Agent's
name or the name of Agent's designee, and to sign and deliver to customs
officials powers of attorney in such Borrower's name for such purpose, and to
complete in such Borrower's or Agent's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, and (vi) sign such Borrower's name on any verification of Receivables
and notices thereof to account debtors or any secondary obligors or other
obligors in respect thereof. Each Borrower hereby releases Agent and Lenders and
their respective officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Agent's or any Lender's
own gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure.
Agent may, at its option, upon notice to Borrower Agent, (a) cure any
default by any Borrower under any material agreement with a third party that
affects the Collateral, its value or the ability of Agent to collect, sell or
otherwise dispose of the Collateral or the rights and remedies of Agent or any
Lender therein or the ability of any Borrower or any other Obligor to perform
its obligations hereunder or under any of the other Financing Agreements, (b)
pay or
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bond on appeal any judgment entered against any Borrower, (c) discharge taxes,
Liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which, in Agent's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent may add any amounts so
expended to the Obligations and charge Borrowers' account therefor, such amounts
to be repayable by Borrowers on demand. Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of any Borrower or any
other Obligor. Any payment made or other action taken by Agent or any Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises.
From time to time as requested by Agent or, at the cost and expense of
Borrowers, (a) Agent, or their respective designees shall have complete access
to all of each Borrower premises during normal business hours and after notice
to, or at any time and without notice to any Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrowers' books and records,
including the Records, and (b) each Borrower shall promptly furnish to Agent
such copies of such books and records or extracts therefrom as Agent may
request, and (c) Agent or any Lender or Agent's designee may use during normal
business hours such of each Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral.
7.8 Sales Taxes.
Borrowers shall segregate collections of sales tax in a separate
Blocked Account at any time upon Agent's request if an Event of Default exists.
7.9 Business Plan.
(a) Borrowers may provide the Agent, from time to time hereafter,
with updated forecasts of the Borrowers' anticipated performance and operating
results.
(b) Borrowers shall, no sooner than thirty (30) days prior to the
end of period covered by the Business Plan or later than sixty (60) days after
to the end of period covered by the Business Plan, furnish the Agent with an
updated and extended forecast which shall go out at least through the end of the
next fiscal year and shall include a Consolidated income statement, balance
sheet, and statement of cash flow, by month, as well as components of the
Borrowing Base and shall include assumptions as are reasonably satisfactory to
the Agents, each prepared in conformity with GAAP and consistent with the
Borrowers' then current practices.
(c) The Agent, following receipt of any such forecasts, may but
shall not be under any obligation to, provide its written sign-off on such
forecasts (in which event, such forecasts shall become the Business Plan).
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SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Agent and Lenders the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and Letter of Credit Accommodations by Lenders to Borrowers:
8.1 Corporate Existence, Power and Authority.
Each Borrower is a corporation duly organized and in good standing
under the laws of its state of incorporation or organization and is duly
qualified as a foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder (a) are all within such Borrower's corporate powers, (b) have been
duly authorized, (c) are not in contravention of law or the terms of such
Borrower's certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which such Borrower
is a party or by which such Borrower or its property are bound and (d) will not
result in the creation or imposition of, or require or give rise to any
obligation to grant, any Lien, security interest, charge or other encumbrance
upon any property of such Borrower. This Agreement and the other Financing
Agreements to which a Borrower is a party constitute legal, valid and binding
obligations of such Borrower enforceable in accordance with their respective
terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of each Borrower is as set forth on the
signature page of this Agreement and in the Information Certificate applicable
to such Borrower. No Borrower has, during the past five years, been known by or
used any other corporate or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property or assets out of the ordinary course of
business, except as set forth in the Information Certificate.
(b) Each Borrower is an organization of the type and organized in
the jurisdiction set forth in the Information Certificate applicable to such
Borrower. The Information Certificate accurately set forth the organizational
identification numbers of each Borrower or accurately state that such Borrower
has none and accurately set forth the federal employer identification number of
each Borrower.
(c) The chief executive office and mailing address of each Borrower
and each Borrower's Records concerning Accounts are located only at the address
identified as such in SCHEDULE 8.2 to the Information Certificate and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in SCHEDULE 8.2 to the Information Certificate
applicable to such Borrower, subject to the rights of Borrowers to establish new
locations in accordance with SECTION 9.2 below. The Information Certificate
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correctly identify any of such locations which are not owned by a Borrower and
set forth the owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change.
All financial statements relating to Borrowers which have been or may
hereafter be delivered by Borrowers to Agent and Lenders have been prepared in
accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present in all material respects the financial
condition and the results of operation of each Borrower as at the dates and for
the periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrowers to Agent prior to the date of this Agreement,
there has been no act, condition or event which has had or is reasonably likely
to have a Material Adverse Effect since the date of the most recent audited
financial statements of Borrowers furnished by Borrowers to Agent prior to the
date of this Agreement.
8.4 Priority of Liens; Title to Properties.
The security interests and Liens granted to Agent under this Agreement
and the other Financing Agreements constitute valid and perfected first priority
Liens and security interests in and upon the Collateral subject only to the
Liens indicated on SCHEDULE 8.4 to the Information Certificate and the other
Liens permitted under SECTION 9.8 hereof. Each Borrower has good and marketable
fee simple title to or valid leasehold interests in all of its and good, valid
and merchantable title to all of its property and assets subject to no Liens, of
any kind, except those granted to Agent and such others as are specifically
listed on SCHEDULE 8.4 to the Information Certificate or permitted under SECTION
9.8 hereof.
8.5 Tax Returns.
Each Borrower has filed, or caused to be filed, in a timely manner all
tax returns, reports and declarations which are required to be filed by it. All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Each Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation.
Except as set forth on SCHEDULE 8.6 to the Information Certificate, (a)
there is no investigation by any Governmental Authority pending, or to the best
of each Borrower's knowledge threatened, against or affecting any Borrower, its
or their assets or business and (b) there is no action, suit, proceeding or
claim by any Person pending, or to the best of each Borrower's knowledge
threatened, against any Borrower or its or their assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, in each case,
which if
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adversely determined against such Borrower has or could reasonably be expected
to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) No Borrower is in default in any respect under, or in violation
in any respect of the terms of, any material agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound. Each Borrower is in compliance with the requirements of all
Applicable Laws, rules, regulations and orders of any Governmental Authority
relating to its respective business, including, without limitation, those set
forth in or promulgated pursuant to the Occupational Safety and Health Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the
Code, as amended, and the rules and regulations thereunder, and all
Environmental Laws.
(b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any Governmental
Authority required for the lawful conduct of its business (the "Permits"). All
of the Permits are valid and subsisting and in full force and effect. There are
no actions, claims or proceedings pending or to the best of each Borrower's
knowledge, threatened that seek the revocation, cancellation, suspension or
modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on SCHEDULE 8.8 to the Information
Certificate or in that certain Phase I Environmental Assessment with respect to
the Real Property located at 000 Xxxxx Xxxxxxx, Xxxxxxx, XX 00000 dated October,
2000, prepared by Water & Air Research, Inc. for Parent (the "Phase I Report"),
neither any Borrower nor any of its Subsidiaries has generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of each Borrower and each of its
Subsidiaries complies in all material respects with all Environmental Laws and
all Permits.
(b) Except as set forth on SCHEDULE 8.8 to the Information
Certificate or the Phase I report, there has been no investigation by any
Governmental Authority or any proceeding, complaint, order, directive, claim,
citation or notice by any Governmental Authority or any other person nor is any
pending or to the best of each Borrower's knowledge threatened, with respect to
any non-compliance with or violation of the requirements of any Environmental
Law by any Borrower or any of its Subsidiaries or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which adversely affects or could reasonably be expected to adversely
affect in any material respect any Borrower or its business, operations or
assets or any properties at which any Borrower has transported, stored or
disposed of any Hazardous Materials.
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(c) Except as set forth on SCHEDULE 8.8 to the Information
Certificate or the Phase I report, no Borrower nor any of its Subsidiaries has
material liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(d) Each Borrower and each of its Subsidiaries have all Permits
required to be obtained or filed in connection with the operations of such
Borrower under any Environmental Law and all of such licenses, certificates,
approvals or similar authorizations and other Permits are valid and in full
force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination, opinion or notification letter from the Internal
Revenue Service and to the best of each Borrower's knowledge, nothing has
occurred which would cause the loss of such qualification. Each Borrower and its
ERISA Affiliates have made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.
(b) There are no pending, or to the best of each Borrower's
knowledge, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan (other than claims for benefits made in the
ordinary course of the operation of the Plan). To the best of each Borrower's
knowledge, there has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) no Borrower nor any of its ERISA Affiliates, has incurred and do
not reasonably expect to incur, any liability under Title IV of ERISA with
respect to any Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) no Borrower nor any of its Affiliates, has incurred and do
not reasonably expect to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) no Borrower nor any of its ERISA Affiliates, has engaged in a
transaction that would be subject to Section 4069 or 4212(c) of ERISA with
respect to any Plan subject to Title IV of ERISA.
8.10 Bank Accounts.
All of the deposit accounts, investment accounts or other accounts in
the name of or used by any Borrower maintained at any bank or other financial
institution are set forth on SCHEDULE 8.10 to the Information Certificate,
subject to the right of each Borrower to establish new accounts in accordance
with SECTION 5.2 hereof.
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8.11 Intellectual Property.
Each Borrower owns or licenses or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted or proposed to be conducted. As of the date hereof, no Borrower has
any Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in SCHEDULE 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in SCHEDULE 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of each
Borrower's knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by such
Borrower infringes any patent, trademark, service xxxx, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting such
Borrower contesting its right to sell or use any such Intellectual Property.
SCHEDULE 8.11 to the Information Certificate sets forth all of the agreements or
other arrangements of Borrowers pursuant to which any Borrower has a license or
other right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other arrangements of any
Borrower as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by any Borrower after
the date hereof, collectively, the "License Agreements" and individually, a
"License Agreement"). No trademark, service xxxx, copyright or other
Intellectual Property at any time used by any Borrower which is owned by another
person, or owned by any Borrower subject to any security interest, Lien,
collateral assignment, pledge or other encumbrance in favor of any Person other
than Agent, is affixed to any Eligible Inventory, except (a) to the extent
permitted under the term of the license agreements listed on SCHEDULE 8.11 to
the Information Certificate and (b) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower
under Applicable Law (including the United States Copyright Act of 1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) No Borrower has any direct or indirect Subsidiaries or
Affiliates nor is any Borrower engaged in any joint venture or partnership
except as set forth in SCHEDULE 8.12 to the Information Certificate.
(b) Each Borrower is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of its Subsidiaries
listed on SCHEDULE 8.12 to its Information Certificate as being owned by such
Borrower and there are no proxies, irrevocable or otherwise, with respect to
such shares and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.
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(c) The issued and outstanding shares of Capital Stock of each
Borrower are directly and beneficially owned and held by the persons indicated
in the Information Certificate, and in each case all of such shares have been
duly authorized and are fully paid and non-assessable, free and clear of all
claims, Liens, pledges and encumbrances of any kind, except as disclosed in
writing to Agent prior to the date hereof.
(d) Each Borrower is Solvent and will continue to be Solvent after
the creation of the Obligations, the security interests of Agent and the other
transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on SCHEDULE 8.13 to each Information Certificate is
a list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to any Borrower and any union, labor
organization or other bargaining agent in respect of the employees of any
Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or, to the best of each Borrower's knowledge,
threatened against it, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or, to best of each Borrower's knowledge, threatened against it,
and (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against any Borrower or, to the best of each Borrower's knowledge, threatened
against any Borrower.
8.14 Restrictions on Subsidiaries.
Except for restrictions contained in this Agreement or any other
agreement with respect to Indebtedness of any Borrower permitted hereunder as in
effect on the date hereof, there are no contractual or consensual restrictions
on any Borrower or any of its Subsidiaries which prohibit or otherwise restrict
(a) the transfer of cash or other assets (i) between any Borrower and any of its
Subsidiaries or (ii) between any Subsidiaries of any Borrower or (b) the ability
of any Borrower or any of its Subsidiaries to incur Indebtedness or grant
security interests to Agent or any Lender in the Collateral.
8.15 Material Contracts.
SCHEDULE 8.15 to each Information Certificate sets forth all Material
Contracts to which a Borrower is a party or is bound as of the date hereof. Each
Borrower has delivered true, correct and complete copies of such Material
Contracts to Agent on or before the date hereof. No Borrower is in breach or in
default in any material respect of or under any Material Contract and no
Borrower has received any notice of the intention of any other party thereto to
terminate any Material Contract.
8.16 Payable Practices.
No Borrower has made any material change in the historical accounts
payable practices from those in effect immediately prior to the date hereof.
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8.17 Accuracy and Completeness of Information.
All information furnished by or on behalf of each Borrower in writing
to Agent or any Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including all information on the Information Certificate is true and correct in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has had
or could reasonably be expected to have a Material Adverse Affect, which has not
been fully and accurately disclosed to Agent in writing prior to the date
hereof.
8.18 Credit Card Agreements.
Set forth in SCHEDULE 8.18 hereto is a correct and complete list of (a)
all of the Credit Card Agreements and all other agreements, documents and
instruments existing as of the date hereof between or among a Borrower, any of
its Affiliates, the Credit Card Issuers, the Credit Card Processors and any of
their Affiliates, (b) the percentage of each sale payable to the Credit Card
Issuer or Credit Card Processor under the terms of the Credit Card Agreements,
(c) all other fees and charges payable by a Borrower under or in connection with
the Credit Card Agreements and (d) the term of such Credit Card Agreements. The
Credit Card Agreements constitute all of such agreements necessary for each
Borrower to operate its business as presently conducted with respect to credit
cards and debit cards and no Accounts of any Borrower arise from purchases by
customers of Inventory with credit cards or debit cards, other than those which
are issued by Credit Card Issuers with whom a Borrower has entered into one of
the Credit Card Agreements set forth on SCHEDULE 8.18 hereto or with whom a
Borrower has entered into a Credit Card Agreement in accordance with SECTION
9.21 hereof. Each of the Credit Card Agreements constitutes the legal, valid and
binding obligations of a Borrower and to the best of each Borrower's knowledge,
the other parties thereto, enforceable in accordance with their respective terms
and are in full force and effect. No default or event of default, or act,
condition or event which after notice or passage of time or both, would
constitute a default or an event of default under any of the Credit Card
Agreements exists or has occurred. Borrowers and the other parties thereto have
complied with all of the terms and conditions of the Credit Card Agreements to
the extent necessary for any Borrower to be entitled to receive all payments
thereunder. Each Borrower has delivered, or caused to be delivered to Agent,
true, correct and complete copies of all of the Credit Card Agreements.
8.19 Survival of Warranties; Cumulative.
All representations and warranties contained in this Agreement or any
of the other Financing Agreements shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to Agent and Lenders
on the date of each additional borrowing or other credit accommodation hereunder
and shall be conclusively presumed to have been relied on by Agent and Lenders
regardless of any investigation made or information possessed by Agent or any
Lender. The representations and warranties set forth herein shall be cumulative
and in addition to any other representations or warranties which any Borrower
shall now or hereafter give, or cause to be given, to Agent or any Lender.
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower shall at all times preserve, renew and keep in
full force and effect its corporate existence and rights and franchises with
respect thereto and maintain in full force and effect all licenses, trademarks,
tradenames, approvals, authorizations, leases, contracts and Permits necessary
to carry on the business as presently or proposed to be conducted.
(b) No Borrower shall change its name unless each of the following
conditions is satisfied: (i) Agent shall have received not less than thirty (30)
days prior written notice from such Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Agent shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of such
Borrower as soon as it is available.
(c) No Borrower shall change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Agent shall have received not less than
thirty (30) days' prior written notice from such Borrower of such proposed
change, which notice shall set forth such information with respect thereto as
Agent may require and Agent shall have received such agreements as Agent may
reasonably require in connection therewith. No Borrower shall change its type of
organization, jurisdiction of organization or other legal structure.
9.2 New Collateral Locations.
A Borrower may only open any new location within the continental United
States provided such Borrower (a) gives Agent thirty (30) days prior written
notice of the intended opening of any such new location, if such new location is
not a new warehouse location, and (b) executes and delivers, and uses its best
efforts to cause the owner or lessor of such location to execute and deliver, to
Agent such agreements, documents, and instruments as Agent may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location. A Borrower may only lease, occupy or use any new warehouse location
provided such Borrower (i) gives Agent written notice of such new location,
including its address and the name and address of its owner or lessor within
five (5) days after such Borrower occupies or delivers Inventory to such
warehouse, and (ii) executes and delivers, and uses its best efforts to cause
the owner or lessor of such warehouse to execute and deliver, to Agent such
agreements, documents, and instruments as Agent may deem reasonably necessary or
desirable to protect its interests in the Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, approvals, orders and other Permits applicable to it and
duly observe in all material respects all requirements of any foreign, Federal,
State or local Governmental Authority, including ERISA, the Code, the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938,
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as amended, and all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee health and safety,
including all of the Environmental Laws.
(b) Each Borrower shall give written notice to Agent immediately
upon such Borrower's receipt of any notice of, or such Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by such Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material other than in the ordinary
course of business and other than as permitted under any applicable
Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by such Borrower to Agent. Each Borrower
shall take prompt action to respond to any material non-compliance with any of
the Environmental Laws and shall regularly report to Agent on such response.
(c) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of a Borrower in order to avoid any
non-compliance, with any Environmental Law, that could reasonably be expected to
have a Material Adverse Effect, such Borrower shall, at Agent's request and
Borrowers' expense: (i) cause an independent environmental engineer reasonably
acceptable to Agent to conduct such tests of the site where non-compliance or
alleged non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Agent a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(d) Each Borrower shall indemnify, defend and hold harmless Agent
and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of a Borrower and
the preparation and implementation of any closure, remedial or other required
plans. All representations, warranties, covenants and indemnifications in this
SECTION 9.3 shall survive the payment of the Obligations and the termination of
this Agreement.
9.4 Payment of Taxes and Claims.
Each Borrower shall, and shall cause each of its Subsidiaries to, duly
pay and discharge all taxes, assessments, contributions and governmental charges
upon or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower or such Subsidiary, as the case
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may be, and with respect to which adequate reserves have been set aside on its
books. Borrowers shall be jointly and severally liable for any tax or penalties
imposed on Agent or any Lender as a result of the financing arrangements
provided for herein and each Borrower agrees to indemnify and hold Agent
harmless with respect to the foregoing, and to repay to Agent, for the benefit
of Lenders, on demand the amount thereof, and until paid by Borrowers such
amount shall be added and deemed part of the Loans, provided, that, nothing
contained herein shall be construed to require Borrowers to pay any income or
franchise taxes attributable to the income of Lenders from any amounts charged
or paid hereunder to Lenders. The foregoing indemnity shall survive the payment
of the Obligations and the termination of this Agreement.
9.5 Insurance.
Each Borrower shall, and shall cause each of its Subsidiaries to, at
all times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably satisfactory
to Agent as to form, amount and insurer. Each Borrower shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably
require as proof of such insurance, and, if any Borrower fails to do so, Agent
is authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage and that
Agent may act as attorney for each Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Each Borrower shall cause Agent to be
named as a loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Agent. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by any Borrower or any of its or
their Affiliates.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, keep proper books and records in which true and complete entries shall be
made of all dealings or transactions of or in relation to the Collateral and the
business of such Borrower and its Subsidiaries in accordance with GAAP. Each
Borrower shall promptly furnish to Agent and Lenders all such financial and
other information as Agent shall reasonably request relating to the Collateral
and the assets, business and operations of such Borrower, and to notify the
auditors and accountants of such Borrower that Agent is authorized to obtain
such information directly from them. Without limiting the foregoing, Borrowers
shall furnish or cause to be furnished to Agent, the following: (i) within
thirty (30) days after the end of each fiscal month (unless such month is the
last month of a fiscal quarter, and then within forty-five (45) days after the
end of such month, and if the initial public offering of Parent occurs,
concurrently with each delivery of its 10-Q for any period), monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders' equity), all in
reasonable
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detail, fairly presenting the financial position and the results of the
operations of Borrowers and their Subsidiaries as of the end of and through such
fiscal month, certified to be correct by the chief financial officer of
Borrowers, subject to normal year-end adjustments and no footnotes and
accompanied by a compliance certificate substantially in the form of EXHIBIT C
hereto, and (ii) within ninety (90) days after the end of each Fiscal Year,
audited consolidated financial statements and unaudited consolidating financial
statements of Borrowers and their Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrowers and their Subsidiaries as of the end of and for such
Fiscal Year, together with the unqualified opinion (which shall not contain a
"going concern" qualification) of independent certified public accountants with
respect to the audited consolidated financial statements, which accountants
shall be an independent accounting firm selected by Borrowers and acceptable to
Agent, that such audited consolidated financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrowers and their Subsidiaries as of the end of and for the
Fiscal Year then ended.
(b) Borrowers shall promptly notify Agent in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to Collateral having a value of more than $250,000 or which if
adversely determined would result in any material adverse change in any
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise, (ii) any Material Contract being terminated or amended or any new
Material Contract entered into (in which event Borrowers shall provide Agent
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $250,000 shall have been entered against any Borrower any of its
properties or assets, (iv) any notification of a material violation of laws or
regulations received by any Borrower, (v) any ERISA Event, and (vi) the
occurrence of any Default or Event of Default.
(c) Each Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
such Borrower sends to its stockholders generally and copies of all reports and
registration statements which such Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Each Borrower shall furnish or cause to be furnished to Agent
such budgets, forecasts, projections and other information respecting the
Collateral and the business of such Borrower, as Agent may, from time to time,
reasonably request. Agent is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of such
Borrower to any court or other Governmental Authority, or to any Lender or
Participant or prospective Lender or Participant, or any Affiliate of any Lender
or Participant, subject to SECTION 13.5 hereof. Each Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrowers' expense, copies of the financial statements of Borrowers and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrowers and to disclose to Agent and Lenders such information as they may
have regarding the business of any Borrower. Any documents, schedules, invoices
or other papers delivered to Agent or any Lender may be destroyed or otherwise
disposed of by Agent or such
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Lender one (1) year after the same are delivered to Agent or such Lender, except
as otherwise designated by party to Agent or such Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
No Borrower shall, and shall not permit any of its Subsidiaries to,
directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, except in
connection with the consummation of Permitted Acquisitions;
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for
(i) sales of Inventory in the ordinary course of business,
(ii) the sale or other disposition of Equipment (including
worn-out or obsolete Equipment or Equipment no longer used or useful in the
business of Borrower) so long as such sales or other dispositions do not involve
Equipment having an aggregate fair market value in excess of $500,000 for all
such Equipment disposed of by all Borrowers in any Fiscal Year of Borrowers, and
(iii) the issuance of Capital Stock of a Borrower consisting of
common stock pursuant to an employee stock option or grant or similar equity
plan or 401(k) plans of a Borrower for the benefit of its employees, directors
and consultants, provided, that, in no event shall any Borrower be required to
issue, or shall any Borrower issue, Capital Stock pursuant to such stock plans
or 401(k) plans which would result in a Change of Control or other Event of
Default,
(iv) sales or other dispositions by a Borrower of assets in
connection with the closing or sale of a retail store location of a Borrower in
the ordinary course of a Borrower's business, which assets consist of leasehold
interests in the premises of such store, the Equipment and fixtures located at
such premises and the books and records relating exclusively and directly to the
operations of such store; provided, that, as to each and all such closures of
retail stores, (A) on the date of, and after giving effect to, any such retail
store closure, Borrowers shall not have closed retail store locations accounting
for more than $2,000,000 of Consolidated EBITDA in the immediately preceding
twelve (12) fiscal month period, and (B) Agent shall have received not less than
ten (10) Business Days prior written notice of such closure; and provided
further that, as to each and all such sales of retail stores (V) on the date of,
and after giving effect to, any such retail store sale in any calendar year,
Borrowers shall not have sold retail store locations accounting for more than
five percent (5%) of all sales of all Borrowers in the immediately preceding
twelve (12) fiscal month period, (W) Agent shall have received not less than ten
(10) Business Days prior written notice of such sale, which notice shall set
forth in reasonable detail satisfactory to Agent the parties to such sale, the
assets to be sold or otherwise disposed of, the purchase price and the manner of
payment thereof and such other information with respect thereto as Agent may
request, (X) as of the date of such sale or other disposition and after giving
effect thereto, no Default or Event of Default shall exist or have occurred, (Y)
such sale shall be on commercially reasonable prices and terms in a bona fide
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arm's length transaction, and (Z) any and all net proceeds payable or delivered
to any Borrower in respect of such sale or other disposition shall be paid or
deposited into the Agent Payment Account, and
(v) the sale or transfer of Capital Stock of Parent in
connection with Parent's initial public offering or any subsequent public
offering of Capital Stock of Parent;
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 Encumbrances.
No Borrower shall, and shall not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Lien of any nature whatsoever on
any of its assets or properties, including the Collateral, except:
(a) Liens of Agent for itself and the benefit of Lenders;
(b) Liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers or their Subsidiaries, as the case may be and with
respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory Liens (other than liens securing the
payment of taxes) arising in the ordinary course of a Borrower's or its
Subsidiary's business to the extent: (i) such liens secure Indebtedness which is
not overdue or (ii) such Liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower or its
Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of a Borrower or its Subsidiaries as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under SECTION 9.9(b) hereof;
(f) pledges and deposits of cash by a Borrower after the date
hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of such Borrower as of the date hereof;
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(g) pledges and deposits of cash by a Borrower after the date
hereof to secure the performance of tenders, bids, leases, trade contracts
(other than for the repayment of Indebtedness), statutory obligations and other
similar obligations in each case in the ordinary course of business consistent
with the current practices of such Borrower as of the date hereof; provided,
that, in connection with any performance bonds issued by a surety or other
person, the issuer of such bond shall have waived in writing any rights in or
to, or other interest in, any of the Collateral in an agreement, in form and
substance satisfactory to Agent;
(h) Liens arising from (i) operating leases and the precautionary
UCC financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by a Borrower located on the premises of such
Borrower (but not in connection with, or as part of, the financing thereof) from
time to time in the ordinary course of business and consistent with current
practices of such Borrower and the precautionary UCC financing statement filings
in respect thereof;
(i) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such Liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto; and
(j) the security interests and liens set forth on SCHEDULE 8.4 to
the Information Certificate.
9.9 Indebtedness.
No Borrower shall, nor shall it permit any of its Subsidiaries to,
incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly), the Indebtedness, performance,
obligations or dividends of any other Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $2,500,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
any Borrower or any Subsidiary other than the Equipment or Real Property so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment or Real Property so acquired, as the case may be;
(c) guarantees by a Borrower of the Obligations of the other
Borrowers in favor of Agent for the benefit of Lenders;
(d) the Indebtedness of a Borrower to any other Borrower arising
after the date hereof pursuant to loans by such Borrower permitted under SECTION
9.10(g) hereof;
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(e) unsecured Indebtedness of a Borrower arising after the date
hereof to any third Person (but not to any other Borrower ), provided, that,
each of the following conditions is satisfied as determined by Agent: (i) such
Indebtedness shall be on terms and conditions acceptable to Agent and shall be
subject and subordinate in right of payment to the right of Agent, and the other
Lenders to receive the prior indefeasible payment and satisfaction in full
payment of all of the Obligations pursuant to the terms of an intercreditor
agreement between Agent and such third party, in form and substance satisfactory
to Agent, (ii) Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower to incur such Indebtedness,
which notice shall set forth in reasonable detail satisfactory to Agent the
amount of such Indebtedness, the Person or Persons to whom such Indebtedness
will be owed, the interest rate, the schedule of repayments and maturity date
with respect thereto and such other information as Agent may request with
respect thereto, (iii) Agent shall have received true, correct and complete
copies of all agreements, documents and instruments evidencing or otherwise
related to such Indebtedness, (iv) except as Agent may otherwise agree in
writing, all of the proceeds of the loans or other accommodations giving rise to
such Indebtedness shall be paid to Agent for application to the Obligations in
such order and manner as Agent may determine, (v) as of the date of incurring
such Indebtedness and after giving effect thereto, no Default or Event of
Default shall exist or have occurred, (vi) such Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto, except, that, Borrower
may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vii) such Borrower shall
furnish to Agent all notices or demands in connection with such Indebtedness
either received by such Borrower or on its behalf promptly after the receipt
thereof, or sent by such Borrower or on its behalf concurrently with the sending
thereof, as the case may be;
(f) the Indebtedness set forth on SCHEDULE 9.9 to the Information
Certificate; provided, that, (i) a Borrower may only make payments of principal
and interest in respect of such Indebtedness in accordance with the terms of the
Subordination Agreement, (ii) such Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof except, that, such Borrower may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iii)
such Borrower shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by such Borrower or on its behalf, promptly
after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Etc.
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No Borrower shall, nor shall it permit any of its Subsidiaries to,
directly or indirectly, make any loans or advance money or property to any
Person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the Capital Stock (other than the purchase of Capital
Stock of Parent in connection with Parent's initial public offering) or
Indebtedness or all or a substantial part of the assets or property of any
Person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) the terms and conditions of SECTION 5.2
hereof shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are held;
(c) the existing equity investments of a Borrower as of the date
hereof in its Subsidiaries, provided, that, no Borrower shall have any further
obligations or liabilities to make any capital contributions or other additional
investments or other payments to or in or for the benefit of any of such
Subsidiaries;
(d) loans and advances by a Borrower to employees of such Borrower
(i) not to exceed the principal amount of $250,000 in the aggregate at any time
outstanding for all Borrowers and their Subsidiaries: (A) reasonably and
necessary work-related travel or other ordinary business expenses to be incurred
by such employee in connection with their work for such Borrower and (B)
reasonable and necessary relocation expenses of such employees (including home
mortgage financing for relocated employees); and (ii) not to exceed the
principal amount of $1,000,000 in the aggregate at any time outstanding for all
Borrowers and their Subsidiaries to permit such employees to purchase Capital
Stock in such Borrower so long as no Default or Event of Default shall exist or
have occurred and be continuing;
(e) stock or obligations issued to a Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Agent, upon Agent's
request, together with such stock power, assignment or endorsement by such
Borrower as Agent may request;
(f) obligations of account debtors to a Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to such Borrower; provided, that, promptly upon the receipt of
the original of any such promissory note by such Borrower, such promissory note
shall be endorsed to the order of Agent by such Borrower and promptly delivered
to Agent as so endorsed; and
(g) the loans and advances set forth on SCHEDULE 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i) no
Borrower shall, directly or indirectly, amend, modify, alter or change the terms
of such loans and advances or any
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agreement, document or instrument related thereto and (ii) each Borrower shall
furnish to Agent all notices or demands in connection with such loans and
advances either received by such Borrower or on its behalf, promptly after the
receipt thereof, or sent by such Borrower or on its behalf, concurrently with
the sending thereof, as the case may be.
9.11 Dividends and Redemptions.
No Borrower shall, directly or indirectly, declare or pay any dividends
on account of any shares of class of any Capital Stock of such Borrower now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock (or set aside or otherwise deposit or
invest any sums for such purpose) for any consideration or apply or set apart
any sum, or make any other distribution (by reduction of capital or otherwise)
in respect of any such shares or agree to do any of the foregoing, except that:
(a) Xxxxxxxx'x, Inc, may redeem Capital Stock of Xxxxxxxx'x, Inc.
held by the public, provided, that each of the following conditions is
satisfied: (x) the Borrower Agent shall have delivered to Agent at least ten
(10) days prior to the redemption date, and Agent shall have reviewed and found
acceptable, Borrowers' forecasted Consolidated balance sheets and profit and
loss and cash flow statements, all prepared on a consistent basis with
Borrowers' historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions, that show Excess Availability
at all times during the immediately succeeding six (6) fiscal month period
projected to be not less than $10,000,000 and (y) no Default or Event of Default
exists after or would result from giving effect to such redemption;
(b) Xxxxxxxx'x, Inc., may pay dividends, provided, that each of the
following conditions is satisfied: (x) the Borrower Agent shall have delivered
to Agent at least ten (10) days prior to the payment date, and Agent shall have
reviewed and found acceptable, Borrowers' forecasted Consolidated balance sheets
and profit and loss and cash flow statements, all prepared on a consistent basis
with Borrowers' historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, that show Excess
Availability at all times during the immediately succeeding six (6) fiscal month
period projected to be not less than $10,000,000 and (y) no Default or Event of
Default exists after or would result from giving effect to such payment;
(c) a Borrower may repurchase Capital Stock consisting of common
stock held by employees pursuant to any employee stock ownership plan thereof
upon the termination, retirement or death of any such employee in accordance
with the provisions of such plan, provided, that, as to any such repurchase,
each of the following conditions is satisfied: (i) as of the date of the payment
for such repurchase and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing, (ii) such repurchase
shall be paid with funds legally available therefor, (iii) such repurchase shall
not violate any law or regulation or the terms of any indenture, agreement or
undertaking to which such Borrower is a party or by which such Borrower or its
or their property are bound, and (iv) the aggregate amount of all payments for
such repurchases in any calendar year shall not exceed $250,000.
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9.12 Transactions with Affiliates.
No Borrower shall, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director or other Affiliate of a
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's business (as the case may be) and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person; or
(b) make any payments (whether by dividend, loan or otherwise) of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of a Borrower, except (i) reasonable compensation to officers,
employees and directors for services rendered to such Borrower in the ordinary
course of business.
9.13 Compliance with ERISA.
Each Borrower shall, and shall cause each of its ERISA Affiliates, to:
(a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal and State law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; (c) not terminate any of such Plans so as to incur any
material liability to the Pension Benefit Guaranty Corporation; (d) not allow or
suffer to exist any prohibited transaction involving any of such Plans or any
trust created thereunder which would subject such Borrower or such ERISA
Affiliate to a material tax or penalty or other liability on prohibited
transactions imposed under Section 4975 of the Code or ERISA; (e) make all
required contributions to any Plan which it is obligated to pay under Section
302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow
or suffer to exist any accumulated funding deficiency, whether or not waived,
with respect to any such Plan; or (g) allow or suffer to exist any occurrence of
a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such Plan
that is a single employer plan, which termination could result in any material
liability to the Pension Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters.
Each Borrower shall, for financial reporting purposes, cause its, and
each of its Subsidiaries' (a) fiscal years to end on the Saturday closest to
January 31 of each year and (b) fiscal quarters to end in April, July, October,
and January (on a 4/5/4 basis) of each year.
9.15 Change in Business.
No Borrower shall engage in any business other than the business of
such Borrower on the date hereof and any business reasonably related, ancillary
or complimentary to the business in which such Borrower is engaged on the date
hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries.
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No Borrower shall, directly, or indirectly, create or otherwise cause
or suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower to (a) pay dividends or make other
distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of
such Borrower; (b) make loans or advances to such Borrower or any Subsidiary of
such Borrower, (c) transfer any of its properties or assets to such Borrower or
any Subsidiary of such Borrower; or (d) create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than encumbrances and restrictions arising under (i)
Applicable Law, (ii) this Agreement, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of such
Borrower or any Subsidiary of such Borrower, (iv) customary restrictions on
dispositions of real property interests found in reciprocal easement agreements
of such Borrower or any Subsidiary of Borrower, (v) any agreement relating to
permitted Indebtedness incurred by a Subsidiary of such Borrower prior to the
date on which such Subsidiary was acquired by such Borrower and outstanding on
such acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.
9.17 Financial Covenant: Minimum Excess Availability.
The Borrowers shall, at all times tested, maintain Excess Availability
of at least three million dollars ($3,000,000).
9.18 [Reserved]
9.19 [Reserved]
9.20 Credit Card Agreements.
Each Borrower shall (a) observe and perform all material terms,
covenants, conditions and provisions of the Credit Card Agreements to be
observed and performed by it at the times set forth therein; (b) not do, permit,
suffer or refrain from doing anything, as a result of which there could be a
default under or breach of any of the terms of any of the Credit Card Agreements
and (c) at all times maintain in full force and effect the Credit Card
Agreements and not terminate, cancel, surrender, modify, amend, waive or release
any of the Credit Card Agreements, or consent to or permit to occur any of the
foregoing; except, that, (i) a Borrower may terminate or cancel any of the
Credit Card Agreements in the ordinary course of the business of a Borrower;
provided, that, such Borrower shall give Agent not less than fifteen (15) days
prior written notice of its intention to so terminate or cancel any of the
Credit Card Agreements; (d) not enter into any new Credit Card Agreements with
any new Credit Card Issuer unless Agent shall have received not less than thirty
(30) days prior written notice of the intention of such Borrower to enter into
such agreement (together with such other information with respect thereto as
Agent may request); (e) give Agent immediate written notice of any Credit Card
Agreement entered into by such Borrower after the date hereof, together with a
true, correct and complete copy thereof and such other information with respect
thereto as Agent may request; and (f) furnish to Agent, promptly upon the
request of Agent, such information and evidence as Agent may require
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from time to time concerning the observance, performance and compliance by such
Borrower or the other party or parties thereto with the terms, covenants or
provisions of the Credit Card Agreements.
9.21 License Agreements.
(a) Each Borrower shall (i) promptly and faithfully observe and
perform all of the material terms, covenants, conditions and provisions of the
material License Agreements to which it is a party to be observed and performed
by it, at the times set forth therein, if any, (ii) not do, permit, suffer or
refrain from doing anything that could reasonably be expected to result in a
default under or breach of any of the terms of any material License Agreement,
(iii) not cancel, surrender, modify, amend, waive or release any material
License Agreement in any material respect or any term, provision or right of the
licensee thereunder in any material respect, or consent to or permit to occur
any of the foregoing; except, that, subject to SECTION 9.22(b) below, a Borrower
may cancel, surrender or release any material License Agreement in the ordinary
course of the business of such Borrower; provided, that, such Borrower (as the
case may be) shall give Agent not less than thirty (30) days prior written
notice of its intention to so cancel, surrender and release any such material
License Agreement, (iv) give Agent prompt written notice of any material License
Agreement entered into by such Borrower after the date hereof, together with a
true, correct and complete copy thereof and such other information with respect
thereto as Agent may request, (v) give Agent prompt written notice of any
material breach of any obligation, or any default, by any party under any
material License Agreement, and deliver to Agent (promptly upon the receipt
thereof by such Borrower in the case of a notice to Borrower and concurrently
with the sending thereof in the case of a notice from such Borrower) a copy of
each notice of default and every other notice and other communication received
or delivered by such Borrower in connection with any material License Agreement
which relates to the right of such Borrower to continue to use the property
subject to such License Agreement, and (vi) furnish to Agent, promptly upon the
request of Agent, such information and evidence as Agent may reasonably require
from time to time concerning the observance, performance and compliance by such
Borrower or the other party or parties thereto with the material terms,
covenants or provisions of any material License Agreement.
(b) Each Borrower will either exercise any option to renew or
extend the term of each material License Agreement to which it is a party in
such manner as will cause the term of such material License Agreement to be
effectively renewed or extended for the period provided by such option and give
prompt written notice thereof to Agent or give Agent prior written notice that
such Borrower does not intend to renew or extend the term of any such material
License Agreement or that the term thereof shall otherwise be expiring, not less
than sixty (60) days prior to the date of any such non-renewal or expiration. In
the event of the failure of a Borrower to extend or renew any material License
Agreement to which it is a party, Agent shall have, and is hereby granted, the
irrevocable right and authority, at its option, to renew or extend the term of
such material License Agreement, whether in its own name and behalf, or in the
name and behalf of a designee or nominee of Agent or in the name and behalf of
such Borrower, as Agent shall determine at any time that an Event of Default
shall exist or have occurred and be continuing. Agent may, but shall not be
required to, perform any or all of such obligations of any Borrower under any of
the License Agreements, including, but not limited to,
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the payment of any or all sums due from such Borrower thereunder. Any sums so
paid by Agent shall constitute part of the Obligations.
9.22 After Acquired Real Property.
(a) If any Borrower hereafter acquires any leasehold interest in
any Real Property (other than a retail store or a warehouse not owned by an
Affiliate of a Borrower) or fixtures and such Real Property or fixtures at any
one location has a fair market value in an amount equal to or greater than
$250,000 (or if a Default or Event of Default exists, then regardless of the
fair market value of such assets), without limiting any other rights of Agent or
any Lender, or duties or obligations of any Borrower, promptly upon Agent's
request, such Borrower shall execute and deliver to Agent, and shall use its
best efforts to obtain all necessary consents of any other Person with respect
to, a leasehold mortgage, deed of trust or deed to secure debt, or collateral
assignment of leasehold interest, as Agent may determine, in form and substance
satisfactory to Agent and in form appropriate for recording in the real estate
records of the jurisdiction in which such Real Property or other property is
located granting to Agent a first and only Lien and mortgage on in such
leasehold interest (except as such Borrower would otherwise be permitted to
incur hereunder or as otherwise consented to in writing by Agent) and such other
agreements, documents and instruments as Agent may require in connection
therewith.
9.23 Costs and Expenses.
Borrowers jointly and severally shall pay to Agent and Lenders on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent's customary charges and fees with respect thereto;
(c) costs and expenses of preserving and protecting the Collateral; (d) costs
and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the Liens of Agent, selling or otherwise realizing upon
the Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent or any Lender arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (e) subject to Section 7.4, all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Agent during the course
of periodic field examinations of the Collateral and any Borrower's operations;
(f) charges, fees or expenses charged by any bank or issuer in connection with
the Letter of Credit Accommodations; and (g) the fees and disbursements of
counsel (including legal assistants) to Agent and Lenders in connection with any
of the foregoing.
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9.24 Collateral Access Agreements.
Borrowers shall use their best efforts to obtain Collateral Access
Agreements for each leased location of a Borrower prior to the Closing Date but
in any event on a best efforts basis, within ninety (90) days after the Closing
Date.
9.25 Reserved.
9.26 Reserved.
9.27 Further Assurances.
At the request of Agent at any time and from time to time, each
Borrower shall, at their expense, duly execute and deliver, or cause to be duly
executed and delivered, such further agreements, documents and instruments, and
do or cause to be done such further acts as may be necessary or proper to
evidence, perfect, maintain and enforce the security interests and Liens and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Agent may
at any time and from time to time request a certificate from an officer of
Borrowers representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Agent, Agent and Lenders may, at Agent's option, cease
to make any further Loans or provide any further Letter of Credit Accommodations
until Agent has received such certificate and, in addition, Agent has determined
that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default.
The occurrence or existence of any one or more of the following events
are referred to herein individually as an "Event of Default", and collectively
as "Events of Default":
(a) any Obligor fails to pay any of the Obligations when due
(whether due at stated maturity, on demand, upon acceleration or otherwise);
(b) any Obligor shall fail or neglect to perform, keep or observe
any covenant contained in Sections 6, 7.1, 7.2, 7.3, 7.7, 8.8, 8.9, 9.1 through
9.26 hereof on the date that such Obligor is required to perform, keep or
observe such covenant;
(c) any Obligor shall fail or neglect to perform, keep or observe
any covenant contained in this Agreement or in any of the other Financing
Agreements (other than a covenant which is dealt with specifically elsewhere in
Section 10.1 hereof) and the breach of such other covenant is not cured to
Agent's and Lenders' satisfaction within 10 days after the sooner to occur of
Borrower Agent's receipt of notice of such breach from Agent or the date on
which such failure or neglect first becomes known to any Senior Officer;
provided, however, that such notice and opportunity to cure shall not apply in
the case of any failure to perform, keep or observe any covenant which is not
capable of being cured at all or within such 10-day period or which is a willful
and knowing breach by any Obligor;
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(d) any representation, warranty or statement of fact made by any
Obligor to Agent in this Agreement, the other Financing Agreements or any other
written agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
(e) any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Agent or any Lender;
(f) any judgment for the payment of money is rendered against any
Obligor in excess of $250,000 in any one case or in excess of $500,000 in the
aggregate (to the extent not covered by insurance where the insurer has assumed
responsibility in writing for such judgment) and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
any Obligor or any of the Collateral having a value in excess of $250,000;
(g) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Obligor, which is a partnership,
limited liability company, limited liability partnership or a corporation,
dissolves or suspends or discontinues doing business;
(h) any Obligor makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors in connection with a moratorium or adjustment of the
Indebtedness due to them;
(i) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Obligor or all or any part of its properties;
(j) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Obligor or for all or any part of its property;
(k) any default in respect of any Indebtedness of any Obligor
(other than Indebtedness owing to Agent and Lenders hereunder), in any case in
an amount in excess of $500,000, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto, or any default by any Obligor under any
Material Contract, which default continues for more than the applicable cure
period, if any, with respect thereto and/or is not waived in writing by the
other parties thereto;
(l) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any
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action based on the assertion that any provision hereof or of any of the other
Financing Agreements has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms, or any security interest or Lien
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest or Lien in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(m) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of any Obligor in an aggregate
amount in excess of $200,000;
(n) any Change of Control shall occur;
(o) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Obligor of which any Obligor or Agent receives
notice, in either case, as to which there is a reasonable possibility of an
adverse determination, in the good faith determination of Agent, under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against any Obligor, pursuant to which statute or proceedings
the penalties or remedies sought or available include forfeiture of (i) any of
the Collateral having a value in excess of $250,000, or (ii) any other property
of any Obligor which is necessary or material to the conduct of its business;
(p) there shall be a material adverse change in the business,
assets or prospects of any Obligor after the date hereof;
(q) there shall be an event of default under any of the other
Financing Agreements;
(r) any Credit Card Issuer or Credit Card Processor shall send
notice to any Borrower that it is ceasing to make or suspending payments to such
Borrower of amounts due or to become due to such Borrower or shall cease or
suspend such payments, or shall send notice to any Borrower that it is
terminating its arrangements with such Borrower or such arrangements shall
terminate as a result of any event of default under such arrangements, which
continues for more than the applicable cure period, if any, with respect
thereto, unless such Borrower shall have entered into arrangements with another
Credit Card Issuer or Credit Card Processor, as the case may be, within thirty
(30) days after the date of any such notice; or
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other Applicable
Law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or any other Obligor, except as such notice or consent
is expressly provided for hereunder or required by Applicable Law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other Applicable Law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or any other Obligor of
this
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Agreement or any of the other Financing Agreements. Subject to SECTION 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or any other Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
and upon the direction of the Required Lenders, shall (i) accelerate the payment
of all Obligations and demand immediate payment thereof to Agent for itself and
the ratable benefit of Lenders, (provided, that, upon the occurrence of any
Event of Default described in SECTIONS 10.1(i) AND 10.1(j), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require any Borrower or any other Obligor, at
Borrowers' expense, to assemble and make available to Agent any part or all of
the Collateral at any place and time designated by Agent, (iv) collect,
foreclose, receive, appropriate, setoff and realize upon any and all Collateral,
(v) remove any or all of the Collateral from any premises on or in which the
same may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (vi) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all Collateral (including
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with the Agent having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Borrower or any other Obligor, which right
or equity of redemption is hereby expressly waived and released by Borrowers and
all other Obligors and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Agent upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Agent. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Agent to Borrower designating the
time and place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and each Borrower waives any other notice. In the
event Agent institutes an action to recover any Collateral or seeks recovery of
any Collateral by way of prejudgment remedy, each Borrower waives the posting of
any bond which might otherwise be required. At any time an Event of Default
exists or has occurred and is continuing, upon Agent's request, Borrowers will
either, as Agent shall specify, furnish cash collateral to the issuer to be used
to secure and fund Agent's reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodation or furnish cash collateral to Agent for
any Letter of Credit Accommodation. Such cash collateral shall be in the amount
equal to one hundred ten percent (110%) of the amount of the Letter of Credit
Accommodation plus the amount of any fees and expenses payable in connection
therewith through the end of the latest expiration date of such letter of
credit.
(c) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, and upon the direction
of the Required Lenders, Agent shall, enforce the rights of any Borrower or any
Obligor against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, Agent may, in its discretion, and upon the
direction of the
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Required Lenders, Agent shall, at such time or times (i) notify any or all
account debtors, secondary obligors or other obligors in respect thereof that
the Receivables have been assigned to Agent and that Agent has a security
interest therein and Agent may direct any or all account debtors, secondary
obligors and other obligors to make payment of Receivables directly to Agent,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or
other obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Agent and Lenders shall not be
liable for any failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests and the interests of Lenders. At any time that an Event of
Default exists or has occurred and is continuing, at Agent's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Agent and are payable directly
and only to Agent and each Borrower shall deliver to Agent such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Agent may require. In the event any
account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, each Borrower shall, upon Agent's request, hold the returned
Inventory in trust for Agent, segregate all returned Inventory from all of its
other property, dispose of the returned Inventory solely according to Agent's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Agent's prior written consent. At any time an Event of Default
exists or has occurred and is continuing, upon Agent's request, Borrowers will
either, as Agent shall specify, furnish cash collateral to the issuer to be used
to secure and fund Agent's reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Agent for
the Letter of Credit Accommodations. Such cash collateral shall be in the amount
equal to one hundred ten (110%) percent of the amount of the Letter of Credit
Accommodations plus the amount of any fees and expenses payable in connection
therewith through the end of the latest expiration date of such Letter of Credit
Accommodations.
(d) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, enforce the rights of
any Borrower or Obligor against any account debtor, secondary obligor or other
obligor in respect of any of the Accounts or other Receivables. Without limiting
the generality of the foregoing, Agent may, in its discretion, at such time or
times (i) notify any or all account debtors, secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to Agent and
that Agent has a security interest therein and Agent may direct any or all
accounts debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of
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Lenders. At any time that an Event of Default exists or has occurred and is
continuing, at Agent's request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Agent and are payable directly and only to Agent and Borrowers and
Obligors shall deliver to Agent such originals of documents evidencing the sale
and delivery of goods or the performance of services giving rise to any Accounts
as Agent may require. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Agent's request, hold the returned Inventory in trust for Agent, segregate all
returned Inventory from all of its other property, dispose of the returned
Inventory solely according to Agent's instructions, and not issue any credits,
discounts or allowances with respect thereto without Agent's prior written
consent.
(e) To the extent that Applicable Law imposes duties on Agent or
any Lender to exercise remedies in a commercially reasonable manner (which
duties cannot be waived under such law), each Borrower acknowledges and agrees
that it is not commercially unreasonable for Agent or any Lender (i) to fail to
incur expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other persons obligated
on Collateral or to remove Liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as such Borrower, for expressions
of interest in acquiring all or any portion of the Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by Agent or any
Lender would not be commercially unreasonable in the exercise by Agent or any
Lender of remedies against the Collateral and that other actions or omissions by
Agent or any Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or to impose any duties on Agent or Lenders that would
not have been granted or imposed by this Agreement or by Applicable Law in the
absence of this Section.
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(f) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower hereby grants to Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable at any time an
Event of Default shall exist or have occurred and for so long as the same is
continuing) without payment of royalty or other compensation to such Borrower,
to use or assign to the extent required in connection with any sale, liquidation
or other disposition of the Collateral, any of the trademarks, service-marks,
trade names, business names, trade styles, designs, logos and other source of
business identifiers and other Intellectual Property and general intangibles now
owned or hereafter acquired by such Borrower, wherever the same maybe located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
(g) Agent may apply the cash proceeds of Collateral actually
received by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in accordance
with SECTION 6.11 hereof, whether or not then due. Borrowers and all other
Obligors shall remain liable to Agent and Lenders for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including attorneys' fees and
expenses.
(h) Without limiting the foregoing, upon the occurrence of a
Default or an Event of Default, (i) Agent and Lenders may, at Agent's option,
and upon the occurrence of an Event of Default, at the direction of the Required
Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or
arranging Letter of Credit Accommodations or reduce the lending formulas or
amounts of Loans available to Borrowers and/or (B) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Agent and Lenders to Borrowers, and (ii) Agent may, at its option,
establish such Reserves as Agent determines without limitation or restriction,
notwithstanding anything to the contrary provided herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of
Massachusetts (without regard to principles of conflicts of laws).
(b) Borrowers, Agent and Lenders irrevocably consent and submit to
the non-exclusive jurisdiction of the Commonwealth of Massachusetts and the
United States District Court for the District of Massachusetts (Eastern
Division), whichever Agent may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort,
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equity or otherwise, and agree that any dispute with respect to any such matters
shall be heard only in the courts described above (except that Agent and Lenders
shall have the right to bring any action or proceeding against any Borrower or
any other Obligor or its or their property in the courts of any other
jurisdiction which Agent deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or any
other Obligor or its or their property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed five (5) days after
the same shall have been so deposited in the U.S. mails, or, at Agent's option,
by service upon Borrower Agent in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, Borrowers shall
appear in answer to such process, failing which Borrowers shall be deemed in
default and judgment may be entered by Agent against Borrowers for the amount of
the claim and other relief requested.
(d) EACH BORROWER, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
BORROWER, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT SUCH BORROWER, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to any Borrower
or any other Obligor (whether in tort, contract, equity or otherwise) for losses
suffered by any Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Agent and such Lender, that the losses were the result of acts or omissions
constituting gross negligence or willful misconduct. In any such litigation,
Agent and Lenders shall be entitled to the benefit of the rebuttable presumption
that it acted in good faith and with the exercise of ordinary care in the
performance by it of the terms of this Agreement. Each Borrower: (i) certifies
that neither Agent, any Lender nor any representative, agent or attorney acting
for or on behalf of Agent or any Lender has represented, expressly or otherwise,
that Agent and Lenders would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Agent and Lenders are relying upon, among other
things, the waivers and certifications set forth in this SECTION 11.1 and
elsewhere herein and therein.
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11.2 Waiver of Notices.
Each Borrower hereby expressly waives demand, presentment, protest and
notice of protest and notice of dishonor with respect to any and all instruments
and chattel paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or demand on any
Borrower which Agent or any Lender may elect to give shall entitle such Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor
any terms hereof or thereof may be amended, waived, discharged or terminated
unless such amendment, waiver, discharge or termination is in writing signed by
Agent and the Required Lenders or at Agent's option, by Agent with the
authorization of the Required Lenders, and as to amendments to any of the
Financing Agreements (other than with respect to any provision of SECTION 12
hereof), by Borrowers; except, that, no such amendment, waiver, discharge or
termination shall:
(i) reduce the interest rate or any fees or extend the time of
payment of interest or any fees or reduce the principal amount of any Loan or
Letter of Credit Accommodation, in each case without the consent of each Lender
directly affected thereby,
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, in each case without the consent
of the Lender directly affected thereby,
(iii) release any Collateral (except as expressly required
hereunder or under any of the other Financing Agreements or Applicable Law and
except as permitted under SECTION 12.11(b) hereof), without the consent of Agent
and all Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all Lenders,
(v) consent to the assignment or transfer by any Borrower or
any other Obligor of any of their rights and obligations under this Agreement,
without the consent of Agent and all Lenders,
(vi) amend, modify or waive any terms of this SECTION 11.3 or
SECTION 12.8 hereof, without the consent of Agent and all Lenders, or
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all Lenders.
(b) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of
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any right, power and/or remedy on any one occasion shall not be construed as a
bar to or waiver of any such right, power and/or remedy which Agent or any
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
(c) Notwithstanding anything to the contrary contained in SECTION
11.3(a) above, in the event that Borrowers request that this Agreement or any
other Financing Agreements be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders and such amendment or
other modification is agreed to by the Required Lenders, then, with the consent
of Borrowers, Agent and the Required Lenders, Borrowers, Agent and the Required
Lenders may amend this Agreement without the consent of the Lenders that did not
agree to such amendment or other modification (collectively, the "Minority
Lenders") to provide for (i) the termination of the Commitment of each of the
Minority Lenders, (ii) the addition to this Agreement of one or more other
Lenders, or an increase in the Commitment of one or more of the Required
Lenders, so that the Commitments, after giving effect to such amendment, shall
be in the same aggregate amount as the Commitments immediately before giving
effect to such amendment, (iii) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or Required
Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv) the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Borrowers and the Required Lenders may determine to be
appropriate.
(d) The consent of Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Agent hereunder or under any
of the other Financing Agreements, in addition to the consent of the Lenders
otherwise required by this Section.
11.4 Waiver of Counterclaims.
Each Borrower waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any nature (other then compulsory counterclaims) in
any action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.
11.5 Indemnification.
Each Borrower shall indemnify, defend and hold Agent and each Lender,
and its officers, directors, agents, employees, advisors and counsel and their
respective Affiliates (each such person being an "Indemnitee"), harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees and expenses) imposed on, incurred by or asserted
against any of them in connection with any litigation, investigation, claim or
proceeding commenced or threatened related to the negotiation, preparation,
execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the fees and expenses of counsel except that no
Borrower shall have any obligation under this SECTION 11.5 to indemnify an
Indemnitee with respect to a
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matter covered hereby resulting from the gross negligence or willful misconduct
of such Indemnitee as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction (but without limiting the obligations of any
Borrower as to any other Indemnitee). To the extent that the undertaking to
indemnify, defend, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrowers shall pay
the maximum portion which it is permitted to pay under Applicable Law to Agent
and Lenders in satisfaction of indemnified matters under this Section. To the
extent permitted by Applicable Law, no Borrower shall assert, and each Borrower
hereby waives any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. All amounts due under this Section shall be
payable upon demand. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities.
Each Lender irrevocably designates, appoints and authorizes Fleet
Retail Group, Inc. to act as Agent hereunder and under the other Financing
Agreements with such powers as are specifically delegated to Agent by the terms
of this Agreement and of the other Financing Agreements, together with such
other powers as are reasonably incidental thereto. Agent (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement
and in the other Financing Agreements, and shall not by reason of this Agreement
or any other Financing Agreement be a trustee or fiduciary for any Lender; (b)
shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any of the other
Financing Agreements, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by any Borrower or any other Obligor or any other Person to perform any
of its obligations hereunder or thereunder; and (c) shall not be responsible to
Lenders for any action taken or omitted to be taken by it hereunder or under any
other Financing Agreement or under any other document or instrument referred to
or provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
Agent may deem and treat the payee of any note as the holder thereof for all
purposes hereof unless and until the assignment thereof pursuant to an agreement
(if and to the extent permitted herein) in form and substance satisfactory to
Agent shall have been delivered to and acknowledged by Agent.
12.2 Reliance by Agent.
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Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telecopy, telex, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by Agent.
As to any matters not expressly provided for by this Agreement or any other
Financing Agreement, Agent shall in all cases be fully protected in acting, or
in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Lenders or all of Lenders as is required in
such circumstance, and such instructions of such Agents and any action taken or
failure to act pursuant thereto shall be binding on all Lenders.
12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, or a Borrower specifying such Event
of Default or any unfulfilled condition precedent, and stating that such notice
is a "Notice of Default or Failure of Condition". In the event that Agent
receives such a Notice of Default or Failure of Condition, Agent shall give
prompt notice thereof to the Lenders. Agent shall (subject to SECTION 12.7) take
such action with respect to any such Event of Default or failure of condition
precedent as shall be directed by the Required Lenders; provided, that, unless
and until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders. Without limiting the
foregoing, and notwithstanding the existence or occurrence and continuance of an
Event of Default or any other failure to satisfy any of the conditions precedent
set forth in SECTION 4 of this Agreement to the contrary, Agent may, but shall
have no obligation to, continue to make Loans and issue or cause to be issued
Letter of Credit Accommodations for the ratable account and risk of Lenders from
time to time if Agent believes making such Loans or issuing or causing to be
issued such Letter of Credit Accommodations is in the best interests of Lenders.
12.4 Fleet Retail Group, Inc. in its Individual Capacity.
With respect to its Commitment and the Loans made and Letter of Credit
Accommodations issued or caused to be issued by it (and any successor acting as
Agent), so long as Fleet Retail Group, Inc. shall be a Lender hereunder, it
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not acting as Agent, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include Fleet Retail
Group, Inc. in its individual capacity as Lender hereunder. Fleet Retail Group,
Inc. (and any successor acting as Agent) and its Affiliates may (without having
to account therefor to any Lender) lend money to, make investments in and
generally engage in any kind of business with any Borrower (and any of its
Subsidiaries or Affiliates) as if it were not acting as Agent, and Fleet Retail
Group, Inc. and its Affiliates may accept fees and other consideration from any
Borrower or any other Obligor and any of its Subsidiaries and Affiliates for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders.
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12.5 Indemnification.
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrowers hereunder and without limiting any obligations of any Borrower
hereunder) ratably, in accordance with their Pro Rata Shares, for any and all
claims of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against Agent (including by any Lender) arising out of or by reason of
any investigation in or in any way relating to or arising out of this Agreement
or any other Financing Agreement or any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including the costs and expenses that Agent is obligated to pay hereunder) or
the enforcement of any of the terms hereof or thereof or of any such other
documents, provided, that, no Lender shall be liable for any of the foregoing to
the extent it arises from the gross negligence or willful misconduct of the
party to be indemnified as determined by a final non-appealable judgment of a
court of competent jurisdiction. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
12.6 Non-Reliance on Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on
Agent or other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of each Borrower and each other
Obligor and has made its own decision to enter into this Agreement and that it
will, independently and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Financing Agreements. Agent
shall not be required to keep itself informed as to the performance or
observance by any Borrower or any other Obligor of any term or provision of this
Agreement or any of the other Financing Agreements or any other document
referred to or provided for herein or therein or to inspect the properties or
books of Borrower or any Obligor. Agent will use reasonable efforts to provide
Lenders with any information received by Agent from any Borrower or any other
Obligor which is required to be provided to Lenders hereunder and with a copy of
any Notice of Default or Failure of Condition received by Agent from any
Borrower or any Lender; provided, that, Agent shall not be liable to any Lender
for any failure to do so, except to the extent that such failure is attributable
to Agent's own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall not have any duty or responsibility to
provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Borrower or any other Obligor
that may come into the possession of Agent.
12.7 Failure to Act.
Except for action expressly required of Agent hereunder and under the
other Financing Agreements, Agent shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction from Lenders of their indemnification
obligations under SECTION 12.5 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
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12.8 Additional Loans and Letter of Credit Accommodations.
Except to the extent necessary to make Special Agent Advances permitted
pursuant to Section 12.11 hereof, Agent shall not make any Revolving Loans or
provided any Letter of Credit Accommodations to any Borrower on behalf of
Lenders intentionally and with actual knowledge that such Revolving Loans or
Letter of Credit Accommodations would cause the aggregate amount of the total
outstanding Revolving Loans and Letter of Credit Accommodations to Borrowers to
exceed the Borrowing Base, without the prior consent of all Lenders.
12.9 Concerning the Collateral and the Related Financing Agreements.
Each Lender authorizes and directs Agent to enter into this Agreement
and the other Financing Agreements. Each Lender agrees that any action taken by
Agent or Required Lenders in accordance with the terms of this Agreement or the
other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
12.10 Appraisals, Field Audit, Examination Reports and other
Information; Disclaimer by Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each appraisal, field audit or
examination report and a weekly report with respect to the Borrowing Base
prepared by Agent (each field audit or examination report and monthly report
with respect to the Borrowing Base being referred to herein as a "Report" and
collectively, "Reports");
(b) expressly agrees and acknowledges that Agent (A) does not
make any representation or warranty as to the accuracy of any Report, or (B)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding any
Borrower and any other Obligor and will rely significantly upon Borrowers' and
other Obligors' books and records, as well as on representations of Borrowers'
and other Obligors' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of SECTION 13.5 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on
or after an Event of Default and for so long as the same is continuing or upon
any other failure of a
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condition precedent to the Loans and Letter of Credit Accommodations, make such
disbursements and advances ("Special Agent Advances") which Agent, in its sole
discretion, deems necessary or desirable either (i) to preserve or protect the
Collateral or any portion thereof or (ii) to enhance the likelihood or maximize
the amount of repayment by any Borrower or any other Obligor of the Loans,
Letter of Credit Accommodations and other Obligations or (iii) to pay any other
amount chargeable to any Borrower or any other Obligor pursuant to the terms of
this Agreement or any of the other Financing Agreements consisting of costs,
fees and expenses and payments to any issuer of Letter of Credit Accommodations;
provided, that, the Special Agent Advances described in clauses (i) and (ii)
above, together with the aggregate outstanding principal amount of additional
Revolving Loans and Letter of Credit Accommodations described in SECTION 12.8,
shall not exceed the lesser of (A) an amount equal to ten percent (10%) of the
Borrowing Base , or (B) $4,500,000 and shall not be extant for more than 60
consecutive days. Special Agent Advances shall be repayable on demand and be
secured by the Collateral. Special Agent Advances shall not constitute Loans but
shall otherwise constitute Obligations hereunder. Agent shall notify each Lender
and Borrower Agent in writing of each such Special Agent Advance, which notice
shall include a description of the purpose of such Special Agent Advance.
Without limitation of its obligations pursuant to SECTION 6.9, each Lender
agrees that it shall make available to Agent, upon Agent's demand, in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
each such Special Agent Advance. If such funds are not made available to Agent
by such Lender, Agent shall be entitled to recover such funds, on demand from
such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the Federal Funds
Rate for each day during such period (as published by the Federal Reserve Bank
of New York or at Agent's option based on the arithmetic mean determined by
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and if
such amounts are not paid within three (3) days of Agent's demand, at the
highest Interest Rate provided for in SECTION 3.1 hereof applicable to Prime
Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and
in its discretion to release any security interest in, mortgage or Lien upon,
any of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under SECTION 13.1 below, or (ii) constituting property being
sold or disposed of if Borrowers certify to Agent that the sale or disposition
is made in compliance with SECTION 9.7 hereof (and Agent may rely conclusively
on any such certificate, without further inquiry), or (iii) constituting
property in which any Borrower or any other Obligor did not own an interest at
the time the security interest, mortgage or Lien was granted or at any time
thereafter, or (iv) having a value in the aggregate in any twelve (12) month
period of less than $50,000, so long as no Event of Default exists at the time
of such release, or (v) if approved, authorized or ratified in writing by all of
Lenders. Except as provided above, Agent will not release any security interest
in, mortgage or Lien upon, any of the Collateral without the prior written
authorization of all of Lenders. Upon request by Agent at any time, Lenders will
promptly confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section.
(c) Without any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in
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writing, upon request by Agent, the authority to release Collateral conferred
upon Agent under this Section. Agent shall (and is hereby irrevocably authorized
by Lenders to) execute such documents as may be necessary to evidence the
release of the security interest, mortgage or Liens granted to Agent upon any
Collateral to the extent set forth above; provided, that, (i) Agent shall not be
required to execute any such document on terms which, in Agent's opinion, would
expose Agent to liability or create any obligations or entail any consequence
other than the release of such security interest, mortgage or Liens without
recourse or warranty and (ii) such release shall not in any manner discharge,
affect or impair the Obligations or any security interest, mortgage or Lien upon
(or obligations of any Borrower or any other Obligor in respect of) the
Collateral retained by such Borrower or such other Obligor.
(d) Agent shall have no obligation whatsoever to any Lender or
any other Person to investigate, confirm or assure that the Collateral exists or
is owned by any Borrower or any other Obligor or is cared for, protected or
insured or has been encumbered, or that any particular items of Collateral meet
the eligibility criteria applicable in respect of the Loans and Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the Liens and security interests granted to Agent pursuant hereto or any of
the Financing Agreements or otherwise have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this Agreement
or in any of the other Financing Agreements, it being understood and agreed that
in respect of the Collateral, or any act, omission or event related thereto,
Agent may act in any manner it may deem appropriate, in its discretion, given
Agent's own interest in the Collateral as a Lender and that Agent shall have no
duty or liability whatsoever to any other Lender.
12.12 Agency for Perfection.
Each Lender hereby appoints Agent and each other Lender as agent and
bailee for the purpose of perfecting the security interests in and Liens upon
the Collateral of Agent in assets which, in accordance with Article 9 of the UCC
can be perfected only by possession (or where the security interest of a secured
party with possession has priority over the security interest of another secured
party) and Agent and each Lender hereby acknowledges that it holds possession of
any such Collateral for the benefit of Agent as secured party. Should any Lender
obtain possession of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent's request therefor shall deliver such
Collateral to Agent or in accordance with Agent's instructions.
12.13 Successor Agent.
Agent may resign as Agent upon thirty (30) days' notice to Lenders and
Borrower Agent. If Agent resigns under this Agreement, the Required Lenders
shall appoint from among the Lenders a successor agent for Lenders. If no
successor agent is appointed prior to the effective date of the resignation of
Agent, Agent may appoint, after consulting with Lenders and Borrowers, a
successor agent from among Lenders. Upon the acceptance by the Lender so
selected of its appointment as successor agent hereunder, such successor agent
shall succeed to all of the rights, powers and duties of the retiring Agent and
the term "Agent" as used herein and
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in the other Financing Agreements shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this SECTION 12 shall inure to its benefit as to any actions taken or omitted by
it while it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is thirty (30) days after the date of a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nonetheless thereupon become effective and Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date five (5) years from the
date hereof (the "Term"), unless sooner terminated pursuant to the terms hereof.
Borrowers may terminate this Agreement at any time upon ten (10) days prior
written notice to Agent (which notice shall be irrevocable) and Agent may, at
its option, and shall at the direction of Required Lenders, terminate this
Agreement at any time on or after an Event of Default; provided, that, in each
case, this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the earlier of: (i) the last day of the Term or (ii) the
effective date of termination of the Financing Agreements, Borrowers shall pay
to Agent all outstanding and unpaid Obligations and shall furnish cash
collateral to Agent (or at Agent's option, a letter of credit issued for the
account of Borrowers and at Borrowers' expense, in form and substance
satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as
beneficiary) in such amounts as Agent determines are reasonably necessary to
secure Agent and Lenders from loss, cost, damage or expense, including
attorneys' fees and expenses, in connection with any contingent Obligations,
including issued and outstanding Letter of Credit Accommodations, checks or
other payments provisionally credited to the Obligations and/or as to which
Agent or any Lender has not yet received final and indefeasible payment. The
amount of such cash collateral (or letter of credit, as Agent may determine) as
to any Letter of Credit Accommodations shall be in the amount equal to one
hundred ten (110%) percent of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the latest expiration date of such Letter of Credit Accommodations.
Such payments in respect of the Obligations and cash collateral shall be
remitted by wire transfer in Federal funds to the Agent Payment Account or such
other bank account of Agent, as Agent may, in its discretion, designate in
writing to Borrowers for such purpose. Interest shall be due until and including
the next Business Day, if the amounts so paid by Borrowers to the Agent Payment
Account or other bank account designated by Agent are received in such bank
account later than 12:00 noon, Boston, Massachusetts time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or any other Obligor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent's continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
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Financing Agreements and Applicable Law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid. Accordingly, each
Borrower waives any rights it may have under the UCC to demand the filing of
termination statements with respect to the Collateral and Agent shall not be
required to send such termination statements to any Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid and satisfied
in full in immediately available funds.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article
8 or Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to any Borrower, any Obligor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with SECTION 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined by Agent.
(g) All references to the term "good faith" used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers shall have the burden of proving any lack of
good faith on the part of Agent or any Lender alleged by Borrowers at any time.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrowers most recently
received by Agent prior to the date hereof.
(i) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
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(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Agent and the
other parties, and are the products of all parties. Accordingly, this Agreement
and the other Financing Agreements shall not be construed against Agent or
Lenders merely because of Agent's or any Lender's involvement in their
preparation.
13.3 Notices.
All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing. All notices, requests and demands upon the parties
are to be given to the following addresses (or to such other address as any
party may designate by notice in accordance with this Section):
If to Borrowers: Kirkland's Stores, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to: Kirkland's Stores, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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and to: Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
If to Agent: Fleet Retail Group, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxx, Vice President
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
With a copy to: Xxxxx Xxxxxxx Xxxxxxx Israels LLP
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
13.4 Partial Invalidity.
If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by Applicable Law.
13.5 Confidentiality.
(a) Agent and each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by any Borrower pursuant to this Agreement, provided,
that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii) to bank examiners and other regulators, auditors and/or
accountants, (iii) in connection with any litigation to which Agent or such
Lender is a party relating to this Agreement, (iv) to any Lender or any
Affiliate of any Lender or to any Participant (or prospective Lender or
Participant) so long as such Lender or Participant (or prospective Lender or
Participant) shall have been instructed to treat such information as
confidential in accordance with this SECTION 13.5, or (v) to counsel for Agent
or any Participant or Lender (or prospective Participant or Lender so long as
clause (iv) of this Section is satisfied as to such Person).
(b) In the event that Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such
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Lender, as the case may be, agrees (i) to the extent permitted by Applicable Law
or if permitted by Applicable Law, statute, rule or regulation to the extent
Agent determines in good faith that it will not create any risk of liability to
Agent or such Lender, that Agent or such Lender will promptly notify Borrower
Agent of such request so that Borrowers may seek a protective order or other
appropriate relief or remedy and (ii) if disclosure of such information is
required, disclose such information and, subject to reimbursement by Borrowers
of Agent's or such Lender's reasonable expenses, cooperate with Borrowers in
reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the disclosed
information which Borrowers so designate, to the extent permitted by Applicable
Law or if permitted by Applicable Law, to the extent Agent or such Lender
determines in good faith that it will not create any risk of liability to Agent
or such Lender.
(c) In no event shall this SECTION 13.5 or any other provision of
this Agreement or Applicable Law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by any Borrower or any
third party, (ii) to apply to or restrict disclosure of information that was or
becomes available to Agent or any Lender from a Person other than a Borrower,
(iii) require Agent or any Lender to return any materials furnished by any
Borrower to Agent or (iv) prevent Agent from responding to routine informational
requests in accordance with the Code of Ethics for the Exchange of Credit
Information promulgated by The Xxxxxx Xxxxxx Associates or other applicable
industry standards relating to the exchange of credit information. The
obligations of Agent and Lenders under this SECTION 13.5 shall supersede and
replace the obligations of Agent and Lenders under any confidentiality letter
signed prior to the date hereof.
13.6 Successors.
This Agreement, the other Financing Agreements and any other document
referred to herein or therein shall be binding upon and inure to the benefit of
and be enforceable by Agent, Lenders, each Borrower, and their respective
successors and assigns, except that no Borrower may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Agent and Lenders. Any
such purported assignment without such express prior written consent shall be
void. No Lender may assign its rights and obligations under this Agreement
without the prior written consent of Agent, except as provided in SECTION 13.7
below. The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrowers, Agent and Lenders with respect to the transactions contemplated
hereby and there shall be no third party beneficiaries of any of the terms and
provisions of this Agreement or any of the other Financing Agreements.
13.7 Assignments; Participations.
(a) Each Lender may assign all or, if less than all, a portion
equal to at least $5,000,000 in the aggregate for the assigning Lender (other
than an assignment by a Lender to an Affiliate of such Lender which shall not be
subject to such minimum amount) of such rights and obligations under this
Agreement to one or more Eligible Transferees (but not including for this
purpose any assignments in the form of a participation), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Acceptance; provided,
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that, such transfer or assignment to an Eligible Transferee that is not a Lender
or an Affiliate of a Lender will not be effective until recorded by Agent on the
Register; and provided, further, that so long as no Event of Default exists,
Fleet Retail Group, Inc. and WFRF shall hold not less than fifty percent (50%)
each of all outstanding Revolving Loans.
(b) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and all Obligors, Agent and
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by Borrowers and any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (i)
the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower, any other Obligor or any of their Subsidiaries or the
performance or observance by any Borrower or any other Obligor of any of the
Obligations; (iii) such assignee confirms that it has received a copy of this
Agreement and the other Financing Agreements, together with such other documents
and information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (iv) such assignee will,
independently and without reliance upon the assigning Lender, Agent and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Financing Agreements, (v) such assignee appoints
and authorizes Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Financing Agreements as are
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto, and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Financing Agreements are required to be
performed by
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it as a Lender. Agent and Lenders may furnish any information concerning any
Borrower or any other Obligor in the possession of Agent or any Lender from time
to time to assignees and Participants.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Accommodations, without the consent of
Agent or the other Lenders); provided, that, (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers and Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Financing Agreements, (iii) the Participant shall
not have any rights under this Agreement or any of the other Financing
Agreements (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the Participant relating thereto) and all amounts payable by Borrowers
or any other Obligor hereunder shall be determined as if such Lender had not
sold such participation,
(f) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank,
(g) Each Borrower shall assist Agent or any Lender permitted to
sell assignments or participations under this SECTION 13.7 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential Lenders or Participants. Each Borrower shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of each Borrower and its affairs provided, prepared or reviewed
by such Borrower that are contained in any selling materials and all other
information provided by it and included in such materials.
13.8 Entire Agreement.
This Agreement, the other Financing Agreements, any supplements hereto
or thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and
understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
13.9 Counterparts, Etc.
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This Agreement or any of the other Financing Agreements may be executed
in any number of counterparts, each of which shall be an original, but all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Agreement or any of the other Financing Agreements
by telefacsimile shall have the same force and effect as the delivery of an
original executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability or binding effect
of such agreement.
[Signatures will commence on following page]
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IN WITNESS WHEREOF, Agent, Lenders and Borrowers have caused these
presents to be duly executed under seal on the day and year first above written.
BORROWERS:
ATTEST: KIRKLAND'S STORES, INC.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------- -----------------------------
XXXXXX X. XXXX, XX. Secretary XXXXXXXX X. XXXXXXXX,
Executive Vice President
and Chief Financial Officer
Address:
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
ATTEST: XXXXXXXX'X, INC.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------- -----------------------------
XXXXXX X. XXXX, XX. Secretary XXXXXXXX X. XXXXXXXX,
Executive Vice President
and Chief Financial Officer
Address:
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
ATTEST: xxxxxxxxx.xxx, inc.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------- -----------------------------
XXXXXX X. XXXX, XX. Secretary XXXXXXXX X. XXXXXXXX,
Executive Vice President
and Chief Financial Officer
Address:
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
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AGENT:
FLEET RETAIL GROUP INC., as AGENT:
By: /s/ Xxxxxxxxx Xxxxx
-----------------------------
Title: Vice President
Address:
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxx, VP
Telecopier No. (000) 000-0000
LENDERS:
FLEET RETAIL GROUP INC., a Lender
Revolving Loan Commitment: $22,500,000/$15,000,000
By: /s/ Xxxxxxxxx Xxxxx
-----------------------------
Title: Vice President
Address:
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxx, VP
Telecopier No. (000) 000-0000
Revolving Loan Commitment: XXXXX FARGO RETAIL FINANCE, LLC,
$22,500,000/$15,000,000 a Lender
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Title:
Address:
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Senior
Vice President
Telecopier No. (000) 000-0000
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