EXHIBIT 10.1
[Execution Copy]
LOAN AND SECURITY AGREEMENT
by and among
J. CREW OPERATING CORP.
J. CREW INC.
XXXXX XXXXXX, INC. d/b/a J. CREW RETAIL
H.F.D. NO. 55, INC. d/b/a J. CREW FACTORY
as Borrowers
and
J. CREW GROUP, INC.
J. CREW INTERNATIONAL, INC.
as Guarantors
WACHOVIA BANK, NATIONAL ASSOCIATION
as Arranger
CONGRESS FINANCIAL CORPORATION
as Administrative and Collateral Agent
and
THE LENDERS FROM TIME TO TIME PARTY HERETO
as Lenders
Dated: December 23, 2002
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................................................... 1
SECTION 2. CREDIT FACILITIES...............................................................................30
2.1 Revolving Loans................................................................................30
2.2 Letter of Credit Accommodations................................................................30
2.3 Supplemental Loans.............................................................................35
2.4 Commitments....................................................................................36
2.5 Loan Limits....................................................................................36
2.6 Mandatory Prepayments..........................................................................37
2.7 Special Availability Reserve...................................................................38
2.8 Joint and Several Liability....................................................................38
SECTION 3. INTEREST AND FEES...............................................................................39
3.1 Interest.......................................................................................39
3.2 Fees...........................................................................................41
3.3 Changes in Laws and Increased Costs of Loans...................................................41
SECTION 4. CONDITIONS PRECEDENT............................................................................43
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations......................43
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations..........................46
4.3 Conditions Precedent to Supplemental Loans.....................................................47
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.......................................................47
5.1 Grant of Security Interest.....................................................................47
5.2 Perfection of Security Interests...............................................................49
SECTION 6. COLLECTION AND ADMINISTRATION...................................................................53
6.1 Borrowers' Loan Accounts.......................................................................53
6.2 Statements.....................................................................................53
6.3 Collection of Accounts.........................................................................54
6.4 Payments.......................................................................................55
6.5 Authorization to Make Loans....................................................................58
6.6 Use of Proceeds................................................................................58
6.7 Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of
Loans and Statements...........................................................................59
6.8 Pro Rata Treatment.............................................................................59
6.9 Sharing of Payments, Etc.......................................................................60
6.10 Settlement Procedures..........................................................................61
6.11 Obligations Several; Independent Nature of Lenders' Rights.....................................63
(i)
SECTION 7. COLLATERAL REPORTING AND COVENANTS..............................................................63
7.1 Collateral Reporting...........................................................................63
7.2 Accounts Covenants.............................................................................64
7.3 Inventory Covenants............................................................................65
7.4 Equipment and Real Property Covenants..........................................................66
7.5 Power of Attorney..............................................................................67
7.6 Right to Cure..................................................................................68
7.7 Access to Premises.............................................................................68
7.8 Intellectual Property Appraisal................................................................69
SECTION 8. REPRESENTATIONS AND WARRANTIES..................................................................69
8.1 Corporate Existence, Power and Authority.......................................................69
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations......................69
8.3 Financial Statements; No Material Adverse Change...............................................70
8.4 Priority of Liens; Title to Properties.........................................................70
8.5 Tax Returns....................................................................................70
8.6 Litigation.....................................................................................71
8.7 Compliance with Other Agreements and Applicable Laws...........................................71
8.8 Environmental Compliance.......................................................................71
8.9 Credit Card Agreements.........................................................................72
8.10 Interrelated Businesses........................................................................73
8.11 Employee Benefits..............................................................................73
8.12 Bank Accounts..................................................................................74
8.13 Intellectual Property..........................................................................74
8.14 Subsidiaries; Affiliates; Capitalization; Solvency; Inactive Entities..........................74
8.15 Labor Disputes.................................................................................75
8.16 Restrictions on Subsidiaries...................................................................76
8.17 Material Contracts.............................................................................76
8.18 Accuracy and Completeness of Information.......................................................76
8.19 Survival of Warranties; Cumulative.............................................................76
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..............................................................76
9.1 Maintenance of Existence.......................................................................76
9.2 New Collateral Locations.......................................................................77
9.3 Compliance with Laws, Regulations, Etc.........................................................77
9.4 Payment of Taxes and Claims....................................................................79
9.5 Insurance......................................................................................79
9.6 Financial Statements and Other Information.....................................................80
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................82
9.8 Encumbrances...................................................................................85
9.9 Indebtedness...................................................................................87
(ii)
9.10 Loans, Investments, Etc....................................................................... 95
9.11 Restricted Payments........................................................................... 97
9.12 Transactions with Affiliates.................................................................. 98
9.13 Compliance with ERISA. ...................................................................... 98
9.14 End of Fiscal Years; Fiscal Quarters.......................................................... 99
9.15 Credit Card Agreements........................................................................ 99
9.16 Change in Business............................................................................ 99
9.17 Limitation of Restrictions Affecting Subsidiaries.............................................100
9.18 Minimum EBITDA................................................................................100
9.19 Capital Expenditures..........................................................................100
9.20 License Agreements............................................................................101
9.21 After Acquired Real Property..................................................................102
9.22 Costs and Expenses............................................................................102
9.23 Further Assurances............................................................................103
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................................103
10.1 Events of Default.............................................................................103
10.2 Remedies......................................................................................106
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW..................................110
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.........................110
11.2 Waiver of Notices.............................................................................111
11.3 Amendments and Waivers. .....................................................................111
11.4 Waiver of Counterclaims.......................................................................113
11.5 Indemnification...............................................................................113
SECTION 12. THE AGENT.....................................................................................114
12.1 Appointment, Powers and Immunities............................................................114
12.2 Reliance by Agent.............................................................................114
12.3 Events of Default.............................................................................115
12.4 Congress in its Individual Capacity...........................................................115
12.5 Indemnification...............................................................................116
12.6 Non-Reliance on Agent and Other Lenders.......................................................116
12.7 Failure to Act................................................................................116
12.8 Additional Loans..............................................................................116
12.9 Concerning the Collateral and the Related Financing Agreements................................117
12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.................117
12.11 Collateral Matters............................................................................118
12.12 Agency for Perfection.........................................................................119
12.13 Successor Agent...............................................................................120
12.14 Co-Agent......................................................................................120
(iii)
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS..............................................................120
13.1 Term..........................................................................................120
13.2 Interpretative Provisions.....................................................................122
13.3 Notices.......................................................................................124
13.4 Partial Invalidity............................................................................125
13.5 Confidentiality...............................................................................125
13.6 Successors....................................................................................126
13.7 Assignments; Participations...................................................................126
13.8 Entire Agreement..............................................................................128
13.9 Counterparts, Etc.............................................................................128
(iv)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Compliance Certificate
Schedule 1.31 Customs Brokers
Schedule 1.51 Existing Lenders
Schedule 1.52 Existing Letters of Credit
Schedule 2.7 Special Availability Reserve
Schedule 4.3 Required Supplemental Loan EBITDA
Schedule 8.9 Credit Card Agreements
Schedule 9.18 Minimum EBITDA
(v)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated December 23, 2002 is entered into
by and among J. Crew Operating Corp., a Delaware corporation ("Operating"), J.
Crew Inc., a New Jersey corporation ("J. Crew "), Xxxxx Xxxxxx, Inc., a Delaware
corporation doing business as J. Crew Retail ("Retail"), H.F.D. No. 55, Inc., a
Delaware corporation doing business as J. Crew Factory ("Factory", and together
with J. Crew, Retail, Operating, each individually a "Borrower" and
collectively, "Borrowers" ), J. Crew Group, Inc., a New York corporation
("Parent"), and J. Crew International, Inc. ("JCI" and together with Parent,
each individually a "Guarantor" and collectively, "Guarantors"), the parties
hereto as lenders, whether by execution of this Agreement or an Assignment and
Acceptance (each individually, a "Lender" and collectively, "Lenders"), Wachovia
Bank, National Association, in its capacity as arranger (in such capacity,
"Arranger"), Congress Financial Corporation, a Delaware corporation, in its
capacity as administrative and collateral agent for Lenders (in such capacity,
"Agent").
W I T N E S S E T H :
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
enter into financing arrangements with Borrowers pursuant to which Lenders may
make loans and provide other financial accommodations to Borrowers; and
WHEREAS, 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 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, as to each Borrower and Guarantor, all
present and future rights of such Borrower and Guarantor 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) consisting of Credit Card Receivables.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one- sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period 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 a Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
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
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "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 ten (10%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person and (b) any Person
of which such Person beneficially owns or holds ten (10%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds ten
(10%) percent or more of the equity interests. 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.
1.4 "Agent" shall mean Congress Financial Corporation, in its
capacity as administrative agent and collateral agent on behalf of Lenders
pursuant to the terms hereof and any replacement or successor agent hereunder.
1.5 "Agent Payment Account" shall mean account no. 5000000030279 of
Agent at Wachovia Bank, National Association, Charlotte, North Carolina, or such
other account of Agent as Agent may from time to time designate to Borrower
Agent as the Agent Payment Account for purposes of this Agreement and the other
Financing Agreements.
1.6 "Applicable Margin" shall mean, at any time, as to the interest
rate for Prime Rate Loans and the interest rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if, as to the
percentages set forth for Tier 1, both the Quarterly Average Excess Availability
for the immediately preceding fiscal quarter is at or within the amounts
indicated for such percentages and the EBITDA of Parent and its Subsidiaries as
of the last day of the immediately preceding twelve (12) consecutive months is
at or within the levels indicated for such percentages or if, as to the
percentages set forth for Tiers 2, 3 or 4, the Quarterly Average Excess
Availability for the immediately preceding fiscal quarter is at or within the
amounts indicated for such percentage:
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Applicable
Prime Applicable
Quarterly Average Rate Eurodollar
Tier Excess Availability EBITDA Margin Rate Margin
---- ------------------- ------ ---------- -----------
1 $60,000,000 or more $60,000,000 or more 0% 2%
2 Greater than or equal N/A 1/4% 2 1/4%
to $40,000,000 and
less than $60,000,000
3 Greater than or equal N/A 1/2% 2 1/2%
to $15,000,000 and
less than $40,000,000
4 Less than $15,000,000 N/A 3/4% 2 3/4%
Provided, that, (i) the Applicable Margin shall be calculated and established
once each fiscal quarter (commencing with the fiscal quarter ending April 30,
2003) and shall remain in effect until adjusted thereafter after the end of the
next fiscal quarter, (ii) for purposes of Tier 1, unless both the Quarterly
Average Excess Availability and the EBITDA of Parent and its Subsidiaries are at
or within the levels indicated, the next lower percentages shall apply, and
(iii) notwithstanding anything to the contrary contained herein, the Applicable
Margin with respect to Revolving Loans which are Eurodollar Rate Loans shall be
two and three-quarters (2 3/4%) percent at all times during the period from
April 15 through and including August 15 of each year.
1.7 "Assignment and Acceptance" shall mean an 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 in accordance with the provisions of Section 13.7
hereof.
1.8 "Blocked Accounts" shall have the meaning set forth in Section
6.3 hereof.
1.9 "Borrower Agent" shall mean J. Crew Operating Corp., a Delaware
corporation, in its capacity as Borrower Agent on behalf of the Borrowers
pursuant to Section 6.7 hereof and its successors and assigns in such capacity.
1.10 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) the lesser of:
(i) the sum of:
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(A) the amount equal to eight-five (85%) percent
of Eligible Credit Card Receivables of Borrowers, plus
(B) the amount equal to:
(1) during the period from August 1 of any
year through and including November 30 of such year, the lesser of eighty (80%)
percent multiplied by the Value of each category of Eligible Inventory
(including Eligible In-Transit Inventory) of Borrowers other than Factory or
ninety (90%) percent of the Net Recovery Percentage as to each category of
Eligible Inventory (including Eligible In-Transit Inventory) of Borrowers other
than Factory multiplied by the Value of such category of Eligible Inventory,
(2) during the month of December of any
year, the lesser of eighty (80%) percent multiplied by the Value of each
category of Eligible Inventory (including Eligible In-Transit Inventory) of
Borrowers other than Factory or eighty-five (85%) percent of the Net Recovery
Percentage as to each category of Eligible Inventory (including Eligible
In-Transit Inventory) of Borrowers other than Factory multiplied by the Value of
such category of Eligible Inventory (and for purposes of this clause (2), the
Net Recovery Percentage shall be based on such percentage as set forth in the
applicable appraisal for the period from January through July), and
(3) at all other times, the lesser of
eighty (80%) percent multiplied by the Value of each category of Eligible
Inventory (including Eligible In-Transit Inventory) of Borrowers other than
Factory or eighty-five (85%) percent of the Net Recovery Percentage as to each
category of Eligible Inventory (including Eligible In-Transit Inventory) of
Borrowers other than Factory multiplied by the Value of such category of
Eligible Inventory, plus
(C) the amount equal to:
(1) during the period from August 1 of any
year through and including November 30 of such year, the lesser of: (aa) eighty
(80%) percent multiplied by the Value of Eligible Inventory (including Eligible
In-Transit Inventory) of Factory, or (bb) ninety (90%) percent of the Net
Recovery Percentage for the Eligible Inventory (including Eligible In-Transit
Inventory) of Factory multiplied by the Value of such Eligible Inventory, or
(cc) $20,000,000,
(2) during the month of December of any
year, the lesser of eighty (80%) percent multiplied by the Value of Eligible
Inventory (including Eligible In-Transit Inventory) of Factory or eighty-five
(85%) percent of the Net Recovery Percentage for Eligible Inventory (including
Eligible In-Transit Inventory) of Factory multiplied by the Value of such
Eligible Inventory (and for purposes of this clause (2), the Net Recovery
Percentage shall be based on such percentage as set forth in the applicable
appraisal for the period from January through July), and
(3) at all other times, the lesser of: (aa)
eighty (80%) percent multiplied by the Value of Eligible Inventory (including
Eligible In-Transit Inventory) of Factory, (bb) eighty-five
4
(85%) percent of the Net Recovery Percentage for Eligible Inventory of Factory
(including Eligible In-Transit Inventory) multiplied by the Value of such
Eligible Inventory, or (cc) $20,000,000, plus
(D) the Real Property Availability, and
(ii) the Revolving Loan Limit
minus
(b) Reserves.
1.11 "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 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 Eurodollar 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
Eurodollar Rate market.
1.12 "Capital Expenditures" shall mean all expenditures for, or
contracts for expenditures for, any fixed or capital assets or improvements, or
for replacements, substitutions or additions thereto, which have a useful life
of more than one (1) year, including, but not limited to, the direct or indirect
acquisition of such assets by way of offset items or otherwise and shall include
the principal amount of capitalized lease payments during the applicable period.
1.13 "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.
1.14 "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).
1.15 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America or 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 one hundred
eighty (180) 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 one hundred eighty (180) days or less issued by
a corporation (except an Affiliate of
5
any Borrower or Guarantor) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-2 by Standard
& Poor's Ratings Service, a division of The XxXxxx-Xxxx Companies, Inc. or at
least P-2 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 one hundred eighty (180) 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.
1.16 "Change in Law" shall mean (a) the adoption of any law, rule or
regulation after the date of this Agreement or (b) any change in any law, rule
or regulation or in the interpretation or application thereof by any Government
Authority after the date of this Agreement.
1.17 "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 any Borrower or Guarantor to any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7
hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the
adoption of a plan by the stockholders of any Borrower or Guarantor relating to
the dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) (i) TPG Partners shall cease to own in the
aggregate, directly or indirectly, beneficially and of record, shares
representing at least forty (40%) percent of the voting power of the total
outstanding Voting Stock of Parent and/or (ii) any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act), other than TPG Partners, shall
beneficially own, directly or indirectly, shares of Voting Stock of Parent
representing more than the percentage of voting power of the total outstanding
Voting Stock of Parent represented by the shares beneficially owned, directly or
indirectly, by TPG Partners at such time, unless in the case of either clause
(i) or (ii), TPG Partners shall directly, or indirectly, whether through the
ownership of Voting Stock, by contract or otherwise, have the ability to elect a
majority of the Board of Directors of Parent; (d) occupation of a majority of
the seats (other than vacant seats) on the Board of Directors of Parent by
Persons who were neither (i) nominated by members of TPG Partners or the Board
of Directors of Parent nor (ii) appointed by directors so nominated; (e) the
failure of Parent to own directly or indirectly one hundred (100%) percent of
the voting power of the total outstanding Voting Stock of any Borrower or other
Guarantor, except to the extent permitted under Section 9.7 hereof and (f) so
long as any of the Senior Discount Debentures or Subordinated Notes are
outstanding, a "Change of Control" as such term is defined in the Senior
Debenture Indenture or the Subordinated Note Indenture.
6
1.18 "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.
1.19 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.20 "Collateral Access Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Agent, from any lessor
of premises to any Borrower or Guarantor, 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 (excluding any retail store location), pursuant to
which such lessor, consignee or other person, inter alia, acknowledges the first
priority security interest of Agent in such Collateral, agrees to waive 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.
1.21 "Commercial Letter of Credit" shall mean any Letter of Credit
Accommodation consisting of a letter of credit issued for the purpose of
providing the primary manner of payment for the purchase price of goods or
services by a Borrower in the ordinary course of the business of such Borrower.
1.22 "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".
1.23 "Congress" shall mean Congress Financial Corporation, a Delaware
corporation, in its individual capacity, and its successors and assigns.
1.24 "Consolidated Net Income" shall mean, with respect to any Person
for any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary or non-recurring gains other than up to an
aggregate of $5,000,000 of cash insurance proceeds received by Borrowers and
Guarantors in each fiscal year of Borrowers and Guarantors with respect to
Inventory losses, fixed-asset losses and business interruption, and
extraordinary non-cash charges and up to $5,000,000 in respect of severance
charges taken in the fiscal quarter ended in April of 2002) after deducting all
charges which should be deducted before arriving at the net income (loss) for
such period and after deducting the Provision for Taxes for such period, all as
determined in accordance with GAAP; provided, that, (a)
7
the net income of any Person that is not a wholly-owned Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid or payable to such
Person or a wholly-owned Subsidiary of such Person; (b) except to the extent
included pursuant to the foregoing clause, the net income of any Person accrued
prior to the date it becomes a wholly-owned Subsidiary of such Person or is
merged into or consolidated with such Person or any of its wholly-owned
Subsidiaries or that Person's assets are acquired by such Person or by any of
its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change in
accounting principles adopted by such Person or its Subsidiaries after the date
hereof shall be excluded; (d) net income shall exclude interest accruing, but
not paid on indebtedness owing to a Subsidiary or parent corporation of such
Person, which is subordinated in right of payment to the payment in full of the
Obligations, on terms and conditions acceptable to Agent; and (e) the net income
(if positive) of any wholly-owned Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by such wholly-owned Subsidiary
to such Person or to any other wholly-owned Subsidiary of such Person is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such wholly-owned Subsidiary shall be excluded. For the purposes
of this definition, net income excludes any gain and non-cash loss (but not any
cash loss) together with any related Provision for Taxes for such gain and
non-cash loss (but not any cash loss) realized upon the sale or other
disposition of any assets that are not sold in the ordinary course of business
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or of any Capital Stock of such Person or a Subsidiary of such
Person and any net income realized as a result of changes in accounting
principles or the application thereof to such Person.
1.25 "Credit Card Acknowledgments" shall mean, collectively, the
agreements by Credit Card Issuers or Credit Card Processors who are parties to
Credit Card Agreements in favor of Agent acknowledging Agent's first priority
security interest, for and on behalf of Lenders, in the monies due and to become
due to a Borrower or Guarantor (including, without limitation, credits and
reserves) under the Credit Card Agreements, and agreeing to transfer all such
amounts to the Blocked Accounts, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced,
sometimes being referred to herein individually as a "Credit Card
Acknowledgment".
1.26 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by any Borrower or any Guarantor for the benefit of any
Borrower, in each case 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, but not limited to, the
agreements set forth on Schedule 8.9 hereto.
1.27 "Credit Card Issuer" shall mean any person (other than a
Borrower) who issues or whose members issue credit cards, including, without
limitation, 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, without limitation, credit
or debit cards issued by or through
8
American Express Travel Related Services Company, Inc., Novus Services, Inc. and
the J. Crew Card.
1.28 "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 or Guarantor's sales transactions
involving credit card or debit card purchases by customers using credit cards or
debit cards issued by any Credit Card Issuer.
1.29 "Credit Card Receivables" shall mean, collectively, (a) all
present and future rights of any Borrower or Guarantor to payment from any
Credit Card Issuer, Credit Card Processor or other third party arising from
sales of goods or rendition of services to customers who have purchased such
goods or services using a credit or debit card and (b) all present and future
rights of any Borrower or Guarantor to payment from any Credit Card Issuer,
Credit Card Processor or other third party in connection with the sale or
transfer of Accounts arising pursuant to the sale of goods or rendition of
services to customers who have purchased such goods or services using a credit
card or a debit card, including, but not limited to, all amounts at any time due
or to become due from any Credit Card Issuer or Credit Card Processor under the
Credit Card Agreements or otherwise.
1.30 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1, 2.2 and 2.3 hereof.
1.31 "Customs Broker" shall mean the persons listed on Schedule 1.31
hereto or such other person selected by any Borrower after written notice by
such Borrower to Agent who are reasonably acceptable to Agent to perform port of
entry services to process Inventory imported by such Borrower from outside the
United States of America and to supply facilities, labor and materials to such
Borrower in connection therewith.
1.32 "Default" shall mean an act, condition or event which with
notice or passage of time or both would constitute an Event of Default.
1.33 "Defaulting Lender" shall have the meaning set forth in Section
6.10 hereof.
1.34 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, the
Borrower or Guarantor 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
Guarantor 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,
that the 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 (except as Agent may otherwise specifically agree) and that
the bank will wire, or otherwise transfer, in immediately
9
available funds, on a daily basis to the Agent Payment Account all funds
received or deposited into the Blocked Accounts.
1.35 "EBITDA" shall mean, as to any Person, with respect to any
period, an amount equal to: (a) the Consolidated Net Income of such Person and
its Subsidiaries for such period, plus (b) depreciation and amortization and
other non-cash charges including imputed interest and deferred compensation for
such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), all in accordance with GAAP, plus (c) Interest Expense
for such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), plus (d) the Provision for Taxes for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person).
1.36 "Eligible Credit Card Receivables" shall mean, as to each
Borrower, Credit Card Receivables of such Borrower which are and continue to be
acceptable to Agent based on the criteria set forth below. Credit Card
Receivables shall be Eligible Credit Card Receivables if:
(a) such Credit Card Receivables arise from the actual and bona
fide sale and delivery of goods or rendition of services by such Borrower in the
ordinary course of the business of such Borrower which transactions are
completed in accordance with the terms and provisions contained in any
agreements binding on such Borrower or the other party or parties related
thereto;
(b) such Credit Card Receivables are not past due (beyond any
stated applicable grace period, if any, therefor) pursuant to the terms set
forth in the Credit Card Agreements with the Credit Card Issuer or Credit Card
Processor of the credit card or debit card used in the purchase which give rise
to such Credit Card Receivables;
(c) such Credit Card Receivables are not unpaid more than five
(5) Business Days after the date of the sale of Inventory giving rise to such
Credit Card Receivables;
(d) all material procedures required by the Credit Card Issuer
or the Credit Card Processor of the credit card or debit card used in the
purchase which gave rise to such Credit Card Receivables shall have been
followed by such Borrower and all documents required for the authorization and
approval by such Credit Card Issuer or Credit Card Processor shall have been
obtained in connection with the sale giving rise to such Credit Card
Receivables;
(e) the required authorization and approval by such Credit Card
Issuer or Credit Card Processor shall have been obtained for the sale giving
rise to such Credit Card Receivables;
(f) such Borrower or Guarantor, on behalf of such Borrower,
shall have submitted all materials required by the Credit Card Issuer or Credit
Card Processor obligated in respect of such Credit Card Receivables in order for
such Borrower to be entitled to payment in respect thereof;
10
(g) the Credit Card Issuer or Credit Card Processor obligated in
respect of such Credit Card Receivable has not failed to remit any monthly
payment in respect of such Credit Card Receivable;
(h) such Credit Card Receivables comply with the applicable
terms and conditions contained in Section 7.2 of this Agreement;
(i) the Credit Card Issuer or Credit Card Processor with respect
to such Credit Card Receivables has not asserted a counterclaim, defense or
dispute and does not have, and does not engage in transactions which may give
rise to, any right of setoff against such Credit Card Receivables (other than
setoffs to fees and chargebacks consistent with the practices of such Credit
Card Issuer or Credit Card Processor with such Borrower as of the date hereof or
as such practices may change as a result of changes to the policies of such
Credit Card Issuer or Credit Card Processor applicable to its customers
generally and unrelated to the circumstance of such Borrower), but the portion
of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card
Processor in excess of the amount owing by such Borrower to such Credit Card
Issuer or Credit Card Processor pursuant to such fees and chargebacks may be
deemed Eligible Credit Card Receivables;
(j) the Credit Card Issuer or Credit Card Processor with respect
to such Credit Card Receivables has not setoff against amounts otherwise payable
by such Credit Card Issuer or Credit Card Processor to such Borrower for the
purpose of establishing a reserve or collateral for obligations of such Borrower
to such Credit Card Issuer or Credit Card Processor (notwithstanding that the
Credit Card Issuer or Credit Card Processor may have setoffs for fees and
chargebacks consistent with the practices of such Credit Card Issuer or Credit
Card Processor with such Borrower as of the date hereof or as such practices may
hereafter change as a result of changes to the policies of such Credit Card
Issuer or Credit Card Processor applicable to its customers generally and
unrelated to the circumstances of such Borrower);
(k) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Credit Card Receivables
or reduce the amount payable or delay payment thereunder (other than for setoffs
for fees and chargebacks consistent with the practices of such Credit Card
Issuer or Credit Card Processor with such Borrower or any Guarantor as of the
date hereof or as such practices may hereafter change as a result of changes to
the policies of such Credit Card Issuer or Credit Card Processor applicable to
its customers generally and unrelated to the circumstances of such Borrower or
any Guarantor);
(l) such Credit Card Receivables are subject to the first
priority, valid and perfected security interest and lien of Agent, for and on
behalf of itself and Lenders, as to such Credit Card Receivables of such
Borrower and any goods giving rise thereto are not, and were not at the time of
the sale thereof, subject to any security interest or lien in favor of any
person other than Agent except as otherwise permitted in this Agreement, in each
case subject to and in accordance with the terms and conditions applicable
hereunder to any such permitted security interest or lien;
11
(m) there are no proceedings or actions which are pending or to
the best of any Borrower's knowledge threatened, against the Credit Card Issuers
or Credit Card Processors with respect to such Credit Card Receivables which
would reasonably be expected to result in any material adverse change in the
financial condition of any such Credit Card Issuer or Credit Card Processor;
(n) such Credit Card Receivables are owed by Credit Card Issuers
or Credit Card Processors deemed creditworthy at all times by Agent in good
faith;
(o) no event of default has occurred under the Credit Card
Agreement of such Borrower with the Credit Card Issuer or Credit Card Processor
who has issued the credit card or debit card or handles payments under the
credit card or debit card used in the sale which gave rise to such Credit Card
Receivables which event of default gives such Credit Card Issuer or Credit Card
Processor the right to cease or suspend payments to such Borrower or any
Guarantor and no event shall have occurred which gives such Credit Card Issuer
or Credit Card Processor the right to setoff against amounts otherwise payable
to such Borrower, including on behalf of a Guarantor (other than for then
current fees and chargebacks consistent with the current practices of such
Credit Card Issuer or Credit Card Processor as of the date hereof or as such
practices may hereafter change as a result of changes to the policies of such
Credit Card Issuer or Credit Card Processor applicable to its customers
generally and unrelated to the circumstances of such Borrower or any Guarantor),
except as may have been waived in writing on terms and conditions reasonably
satisfactory to Agent pursuant to the Credit Card Acknowledgment by such Credit
Card Issuer or Credit Card Processor) or the right to establish reserves or
establish or demand collateral, and the Credit Card Issuer or Credit Card
Processor has not sent any written notice of default and/or notice of its
intention to cease or suspend payments to such Borrower in respect of such
Credit Card Receivables or to establish reserves or cash collateral for
obligations of such Borrower to such Credit Card Issuer or Credit Card
Processor, and such Credit Card Agreements are otherwise in full force and
effect and constitute the legal, valid, binding and enforceable obligations of
the parties thereto;
(p) the terms of the sale giving rise to such Credit Card
Receivables and all practices of such Borrower and Guarantors with respect to
such Credit Card Receivables comply in all material respects with applicable
Federal, State, and local laws and regulations; and
(q) the customer using the credit card or debit card giving rise
to such Credit Card Receivable shall not have returned the merchandise purchased
giving rise to such Credit Card Receivable.
Credit Card Receivables which would otherwise constitute Eligible Credit Card
Receivables pursuant to this Section will not be deemed ineligible solely by
virtue of the Credit Card Agreements with respect thereto having been entered
into by any Guarantor, for the benefit of Borrowers. General criteria for
Eligible Credit Card Receivables may only be changed and any new criteria for
Eligible Credit Card Receivables may only be established by Agent in good faith,
upon notice to Borrower Agent, based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) existing on the date hereof
to the extent Agent has no written notice thereof from a Borrower prior to the
date hereof,
12
in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Credit Card Receivables in the
good faith determination of Agent. Any Credit Card Receivables which are not
Eligible Credit Card Receivables shall nevertheless be part of the Collateral.
1.37 "Eligible In-Transit Inventory" shall mean Inventory that would
be Eligible Inventory other than for its location that: (a) is located in the
United States; (b) has cleared U.S. Customs and for which all duty, freight and
similar charges for import to the United States have been paid in full; (c) is
in transit to one of the locations of assets permitted hereunder or between such
locations; and (d) has not been in transit more than seven (7) days.
1.38 "Eligible Inventory" shall mean, as to each Borrower, Inventory
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower which are acceptable to Agent based on the criteria
set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) raw materials; (c) spare parts for equipment; (d) packaging
and shipping materials; (e) supplies used or consumed in such Borrower's
business; (f) Inventory at premises other than those owned or leased and
controlled by any Borrower; provided, that, (i) as to retail store locations
(including factory store locations) which are leased by a Borrower, Agent may,
at its option, establish Reserves in respect of rental payments and other
amounts in respect of such leased location of the type and to the extent set
forth in Section 1.103 hereof, (ii) as to all other locations leased by any
Borrower, if Agent shall not have received a Collateral Access Agreement from
the owner and lessor with respect to such location, duly authorized, executed
and delivered by such owner and lessor (or Agent shall determine to accept a
Collateral Access Agreement that does not include all required provisions or
provisions in the form otherwise required by Agent), Agent may, at its option,
upon notice to any Borrower or Borrower Agent, establish such Reserves in
respect of amounts at any time due or to become due to the owner and lessor
thereof as Agent shall determine and (iii) as to locations owned and operated by
a person other than a Borrower or Guarantor, if Agent shall not have received a
Collateral Access Agreement from the owner and operator with respect to such
location, duly authorized, executed and delivered by such owner and operator (or
Agent shall determine to accept a Collateral Access Agreement that does not
include all required provisions or provisions in the form otherwise required by
Agent), Agent may, at its option, establish such Reserves in respect of amounts
at any time due or to become due to the owner and operator thereof as Agent
shall determine; provided, that, in addition, if required by Agent, in order for
such Inventory at locations owned and operated by a third person to be Eligible
Inventory, Agent shall have received: (A) UCC financing statements between the
owner and operator, as consignee or bailee and such Borrower, as consignor or
xxxxxx, in form and substance satisfactory to Agent, which are duly assigned to
Agent and (B) a written notice to any lender to the owner and operator of the
first priority security interest in such Inventory of Agent; (g) Inventory
subject to a security interest or lien in favor of any person other than Agent
except those permitted in this Agreement that are subordinate to the security
interest of Agent pursuant to an intercreditor agreement in form and substance
satisfactory to Agent between Agent and the holder of such other security
interest or lien; (h) xxxx and hold goods; (i) obsolete or slow moving
Inventory; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Agent; (k) damaged and/or defective Inventory;
(l) returned inventory which is not held for sale in the
13
ordinary course of business; and (m) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may only be changed and any new criteria
for Eligible Inventory may only be established by Agent in good faith, upon
notice to Borrower Agent, based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) 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.
1.39 "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 otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank 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
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Agent; 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 (which approval shall not be
unreasonably withheld), provided, that, (i) neither any Borrower nor any
Guarantor or any Affiliate of any Borrower or Guarantor 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 Guarantor shall qualify as an Eligible Transferee, except as Agent may
otherwise specifically agree.
1.40 "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 or
Guarantor 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 (c) 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 Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act 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 counterparts to such laws and (iii) any common law or
14
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.
1.41 "Equipment" shall mean, as to each Borrower and Guarantor, all
of such Borrower's and Guarantor'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.
1.42 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.43 "ERISA Affiliate" shall mean any person required to be
aggregated with any Borrower, any Guarantor or any of its or their respective
Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.44 "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 (other than a reportable event for which the notice provision has been
waived); (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, Guarantor 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, Guarantor or
any of its or their respective Subsidiaries could otherwise be liable; (f) a
complete or partial withdrawal by any Borrower, Guarantor 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 would 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, Guarantor or
any ERISA Affiliate in excess of $5,000,000 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 $500,000.
1.45 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum
15
(rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%)
percent) at which a Reference Bank is offered deposits of United States dollars
in the London interbank market (or other Eurodollar Rate market selected by a
Borrower or Borrower Agent on behalf of such Borrower and approved by Agent) on
or about 9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to such
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by or on behalf of a Borrower.
1.46 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.47 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.48 "Excess Availability" shall mean, as to Borrowers (as a whole),
the amount, as determined by Agent in good faith, calculated at any date, equal
to: (a) the Borrowing Base (giving effect to any Reserves other than any
Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of:
(i) the amount of all then outstanding and unpaid Obligations (but not including
for this purpose Obligations of any Borrower arising pursuant to any guarantees
in favor of Agent and Lenders of the Obligations of the other Borrowers or any
outstanding Letter of Credit Accommodations), plus (ii) the amount of all
Reserves then established in respect of Letter of Credit Accommodations, plus
(iii) the aggregate amount of all then outstanding and unpaid trade payables and
other obligations of any Borrower 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 any Borrower in good faith), plus (iv) without
duplication, the amount of checks issued by any Borrower 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 any Borrower in good faith), but not yet sent.
1.49 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.50 "Excluded Taxes" shall mean, with respect to the Agent, any
Lender, any Participant, any Transferee or any other recipient of any payment to
be made by or on account of any obligation of any Borrower or Guarantor
hereunder, (a) income, branch profits or franchise taxes imposed on (or measured
by) its net income (other than any such taxes imposed solely as a result of a
Borrower's activities in a jurisdiction) and (b) in the case of a Foreign
Lender, any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender's
failure to comply with Section 6.4(h) (it being understood and agreed, for the
avoidance of doubt, that any withholding tax imposed on a Foreign Lender as a
result of a Change in Law or regulation or interpretation thereof occurring
after the time such Foreign Lender becomes a party to this Agreement shall not
be an Excluded Tax).
16
1.51 "Existing Lenders" shall mean the lenders to Operating or its
Affiliates listed on Schedule 1.51 hereto (and including JPMorgan Chase Bank in
its capacity as agent acting for such lenders) and their respective
predecessors, successors and assigns.
1.52 "Existing Letters of Credit" shall mean, collectively, the
letters of credit issued for the account of a Borrower or Guarantor or for which
such Borrower or Guarantor is otherwise liable listed on Schedule 1.52 hereto,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.53 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Guarantors and Agent, setting forth certain
fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.54 "Financing Agreements" shall mean, collectively, this Agreement
and all 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 Obligor in connection with this
Agreement.
1.55 "Foreign Lender" shall mean any Lender, Participant or
Transferee that is not a "United States person" within the meaning of Section
7701(a)(30) of the Code.
1.56 "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 9.18 and 9.19 hereof and the calculation of EBITDA of
Parent and its Subsidiaries (or any component thereof) for purposes of this
Agreement, 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.
1.57 "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, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.58 "Guarantors" shall mean, collectively, the following (together
with their respective successors and assigns): (a) J. Crew Group, Inc., a New
York corporation; and (b) J. Crew International, Inc., a Delaware corporation;
each sometimes being referred to herein individually as a "Guarantor".
17
1.59 "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,
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 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).
1.60 "Inactive Subsidiary" shall mean any Subsidiary, direct or
indirect, that (a) has total assets not in excess of $50,000; (b) conducts no
business; and (c) has no Indebtedness; provided, that, if more than one
Subsidiary is deemed an Inactive Subsidiary pursuant to this definition, all
Inactive Subsidiaries shall be considered to be a single consolidated subsidiary
for purposes of determining whether the conditions specified above are
satisfied.
1.61 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (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;
provided, that, to the extent that such Indebtedness is non-recourse to such
Person, the amount of such Indebtedness shall not be deemed to exceed the lesser
of the amount of such Indebtedness and the value of the assets securing such
Indebtedness; (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
18
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.
1.62 "Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
1.63 "Information Certificate" shall mean the Information Certificate
of Borrowers and Guarantors constituting Exhibit B hereto.
1.64 "Intellectual Property" shall mean, as to each Borrower and
Guarantor, such Borrower's and Guarantor'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.
1.65 "Intercompany Note" shall mean the Revolving Line of Credit
Note, dated as of July 18, 1998, by Operating, as maker, in favor of JCI, as
payee, in the original principal amount of $50,000,000, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.66 "Interest Expense" shall mean, for any period, as to any Person,
as determined in accordance with GAAP, the total interest expense of such
Person, whether paid or accrued during such period (including the interest
component of Capital Leases for such period), including discounts in connection
with the sale of any Accounts, but excluding interest paid in property other
than cash and any other interest expense not payable in cash.
1.67 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as any
Borrower (or Borrower Agent on behalf of such Borrower) may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, such Borrower (or Borrower
Agent on behalf of such Borrower) may not elect an Interest Period which will
end after the last day of the then-current term of this Agreement.
1.68 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
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(i) as to Prime Rate Loans (other than Supplemental
Loans), a rate equal to one-half (1/2%) percent per annum in excess of the Prime
Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to two
and one-half (2 1/2%) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the Eurodollar Rate applicable for the relevant
Interest Period, whether such rate is higher or lower than any rate previously
quoted to a Borrower);
(iii) as to Supplemental Loans, a rate equal to three
(3%) percent per annum in excess of the Prime Rate.
(b) Subject to clause (c) of this definition below, effective as
of the first (1st) day of the second month of each fiscal quarter (commencing
with the fiscal quarter ending on or about April 30, 2003), the Interest Rate
payable by Borrowers in respect of all Loans other than Supplemental Loans shall
be increased or decreased, as the case may be, (i) as to Prime Rate Loans, to
the rate equal to the Applicable Margin for Prime Rate Loans on a per annum
basis in excess of the Prime Rate, and (ii) as to Eurodollar Rate Loans, to the
rate equal to the Applicable Margin for Eurodollar Rate Loans on a per annum
basis in excess of the Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained in
clauses (a) and (b) of this definition, Agent may, at its option, and Agent
shall, at the direction of the Required Lenders, increase the Applicable Margin
otherwise used to calculate the Interest Rate for Prime Rate Loans (other than
Supplemental Loans) and Eurodollar Rate Loans in each case to the highest
percentage set forth in the definition of the term Applicable Margin for each
category of Loans (without regard to the amount of Quarterly Average Excess
Availability or EBITDA of Parent and its Subsidiaries) plus two (2%) percent per
annum, and to five (5%) percent per annum in excess of the Prime Rate as to the
Supplemental Loans: (i) for the period (A) from and after the effective date of
termination or non-renewal hereof until Agent and Lenders have received full and
final payment of all outstanding and unpaid Obligations which are not contingent
and cash collateral or letter of credit, as Agent may specify, in the amounts
and on the terms required under Section 13.1 hereof for contingent Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and (B)
from and after the date of the occurrence of an Event of Default and for so long
as such Event of Default is continuing and (ii) on Revolving Loans at any time
outstanding in excess of the Borrowing Base (whether or not such excess(es)
arise or are made with or without the knowledge or consent of Agent or any
Lender and whether made before or after an Event of Default), but only to the
extent of such excess.
1.69 "Inventory" shall mean, as to each Borrower and Guarantor, all
of such Borrower's and Guarantor's now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by such Borrower or Guarantor as
lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be
furnished under a contract of service; (c) are furnished by such Borrower or
Guarantor under a contract of service; or (d) consist of raw materials, work in
process, finished goods or materials used or consumed in its business.
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1.70 "Investment Property Control Agreement" shall mean an agreement
in writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or Guarantor (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 Guarantor 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 Guarantor
and including such other terms and conditions as Agent may require.
1.71 "J. Crew Card" shall mean the private label credit card issued
by World Financial Network National Bank pursuant to the Credit Card Agreement
of Operating with such Bank (or any subsequent Credit Card Issuer with respect
to such private label credit card as to which there has been compliance with
Section 9.15 hereof) to customers or prospective customers of Borrowers.
1.72 "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".
1.73 "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, including the
Existing Letters of Credit; sometimes being referred to herein individually as
"Letter of Credit Accommodation".
1.74 "License Agreements" shall have the meaning set forth in Section
8.13 hereof.
1.75 "Loans" shall mean, collectively, the Revolving Loans and the
Supplemental Loans.
1.76 "Material Adverse Effect" shall mean a material adverse effect
on (a) the financial condition, business, performance or operations of
Borrowers, taken as a whole, or the legality, validity or enforceability of this
Agreement or any of the other Financing Agreements; (b) the legality, validity,
enforceability, perfection or priority of the security interests and liens of
Agent upon the Collateral; (c) the Collateral or its value (which shall not
include for this purpose a material adverse effect on the value of the
Collateral of less than $1,000,000), (d) the ability of Borrowers to repay the
Obligations or of Borrowers or Guarantors to perform their obligations under
this Agreement or any of the other Financing Agreements as and when to be
performed; or (e) 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 (taken as a whole).
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1.77 "Material Contract" shall mean (a) any contract or other
agreement (other than the Financing Agreements or purchase orders for
merchandise entered into in the ordinary course of the business of any Borrower
or Guarantor), written or oral, of any Borrower or Guarantor involving monetary
liability of or to any Person in an amount in excess of $5,000,000 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 or Guarantor is a
party as to which the breach, nonperformance, cancellation or failure to renew
by any party thereto would have a Material Adverse Effect.
1.78 "Maximum Credit" shall mean $180,000,000.
1.79 "Mortgages" shall mean, individually and collectively, each of
the following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated of
even date herewith, by Retail in favor of Agent with respect to the Real
Property and related assets of such Borrower located in Asheville, North
Carolina and (b) the Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated of even date herewith, by J. Crew and Parent
in favor of Agent with respect to the Real Property and related assets of such
Borrower and Parent located in Lynchburg, Virginia.
1.80 "Multiemployer Plan" shall mean a "multiemployer 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, Guarantor or any ERISA Affiliate.
1.81 "Net Recovery Percentage" shall mean the fraction, expressed as
a percentage, (a) the numerator of which is the amount equal to the recovery on
the aggregate amount of the Inventory at such time on a "going out of business
sale" basis as set forth in the most recent 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 applicable
original cost of the aggregate amount of the Inventory subject to appraisal.
Except for the month of December as provided in Section 1.10(a)(i)(B) and (C),
the Net Recovery Percentage for any category of Inventory used in Section 1.10
shall be based on the percentage in the appraisal for the time period for which
the Borrowing Base is being calculated.
1.82 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of 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 such Borrower
under the United States 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
22
or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, or secured or unsecured. Without limiting the
generality of the foregoing, the Obligations shall also include, in addition and
not in limitation, any obligations, liabilities or Indebtedness of any other
Borrower or Guarantor to Agent and Lenders resulting from the exercise by Agent
of its remedies with respect to any Indebtedness or other obligations of any
Borrower or Guarantor to any other Borrower or Guarantor, whether such
Indebtedness or other obligations of a Borrower or Guarantor to any other
Borrower or Guarantor arose from the sale or transfer of Inventory, the payment
of the purchase price of Inventory by a Borrower or Guarantor on behalf of such
other Borrower or Guarantor, loans or other extensions of credit for the benefit
of such other Borrower or Guarantor or otherwise.
1.83 "Obligor" shall mean any guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations (including, without
limitation, Guarantors), other than Borrowers.
1.84 "Other Taxes" shall mean any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Financing Agreements.
1.85 "Parent" shall mean J. Crew Group, Inc., a New York corporation,
and its successors and assigns.
1.86 "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.
1.87 "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 stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.88 "Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, including a
Multiemployer Plan.
1.89 "Prime Rate" shall mean the rate from time to time publicly
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank.
1.90 "Prime Rate Loans" shall mean any Loans or portion thereof
(other than the Supplemental Loans) on which interest is payable based on the
Prime Rate in accordance with the terms thereof.
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1.91 "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 amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.92 "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.
1.93 "Quarterly Average Excess Availability" shall mean, at any time,
the daily average of the aggregate amount of the Excess Availability of
Borrowers for the immediately preceding fiscal quarter.
1.94 "Real Property" shall mean all now owned and hereafter acquired
real property of each Borrower and Guarantor, including leasehold interests
(other than with respect to retail store locations), together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgages.
1.95 "Real Property Availability" shall mean $5,820,000, provided,
that, the Real Property Availability shall be reduced automatically and without
further action by the parties effective as of the first day of each month
commencing June 1, 2003 by an amount equal to $97,000.
1.96 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of each Borrower and Guarantor: (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 or Guarantor; (d) letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account or any
Credit Card Receivables; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations
owing to any Borrower or Guarantor, 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
any Borrower or Guarantor or to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of any Borrower
or Guarantor) or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower or Guarantor (including, without limitation, choses
in action, causes of action, tax refunds, tax refund claims, any funds which may
become payable to any Borrower or Guarantor in connection with the termination
of any Plan or other employee benefit plan and any other amounts payable to any
Borrower or Guarantor 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
24
proceeds thereof and proceeds of insurance covering the lives of employees on
which any Borrower or Guarantor is a beneficiary).
1.97 "Records" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor'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 any Borrower or Guarantor with respect to the
foregoing maintained with or by any other person).
1.98 "Reference Bank" shall mean Wachovia Bank, National Association,
or such other bank as Agent may from time to time designate.
1.99 "Refinancing Indebtedness" shall have meaning set forth in
Section 9.9 hereof.
1.100 "Renewal Date" shall the meaning set forth in Section 13.1
hereof.
1.101 "Register" shall have the meaning set forth in Section 13.7
hereof.
1.102 "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent 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 (66
2/3%) percent of the then outstanding Obligations are owing.
1.103 "Reserves" shall mean as of any date of determination, such
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 any Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which adversely affect, or would have a reasonable likelihood of adversely
affecting, either (i) any of the Collateral of the types or categories included
in the Borrowing Base or related thereto or its value or (ii) the assets or
business of any Borrower or 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 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. Without limiting the generality of the foregoing, Reserves may
be established to reflect any of the following: (i) that dilution with respect
to the Credit Card Receivables (based on the ratio of the aggregate amount of
non-cash reductions in Credit Card Receivables for any period to the aggregate
dollar amount of the sales of Borrowers giving rise to Credit Card Receivables
for such period) as calculated by Agent for any period is or is reasonably
anticipated to be greater than five (5%) percent, (ii) to the extent that the
fair market value of any of the Real Property subject to the
25
Mortgages as set forth in the most recent acceptable appraisals received by
Agent with respect thereto has declined so that the amount of the Real Property
Availability is greater than sixty (60%) percent of such appraised fair market
value, (iii) inventory shrinkage, (iv) reserves in respect of markdowns and cost
variances (pursuant to discrepancies between the purchase order price of
Inventory and the actual cost thereof), (v) the aggregate amount of deposits, if
any, received by any Borrower from its retail customers in respect of unfilled
orders for merchandise, (vi) amounts due or to become due in respect of sales,
use and/or withholding taxes, (vii) any rental payments, service charges or
other amounts to become due to lessors of real property to the extent Inventory
or Records are located in or on such property or such Records are needed to
monitor or otherwise deal with the Collateral, provided, that, the Reserves
established pursuant to this clause (vii) as to retail store locations
(including factory store locations) that are leased shall not exceed at any time
the aggregate of amounts payable for the next three (3) months to the lessors of
such retail store locations (including factory store locations) located in those
States where any right of the lessor to Collateral may have priority over the
security interest and lien of Agent therein, provided, that, such limitation on
the amount of the Reserves pursuant to this clause (vii) shall only apply so
long as: (A) no Event of Default shall exist or have occurred and be continuing,
(B) neither a Borrower, Guarantor nor Agent shall have received notice of any
event of default by the lessee under the lease with respect to such location and
(C) no Borrower has granted to the lessor a security interest or lien upon any
assets of such Borrower, (viii) any rental payments, service changes or other
amounts due or to become due to lessors of personal property; (ix) amounts owing
by Borrowers to Credit Card Issuers or Credit Card Processors in connection with
the Credit Card Agreements, (x) up to fifty (50%) percent of the aggregate
amount of merchandise gift certificates and coupons, (xi) the purchase price of
layaway goods, (xii) an increase in the number of days of the turnover of
Inventory or a change in the mix of the Inventory that results in an overall
decrease in the value thereof or a deterioration in its nature or quality (but
only to the extent not addressed by the lending formulas in a manner
satisfactory to Agent), and (xiii) variances between the perpetual inventory
records of Borrowers and the results of the test counts of Inventory conducted
by Agent with respect thereto in excess of the percentage acceptable to Agent.
The amount of any Reserve (other than the Special Availability 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. In the event that based on the calculation of the Borrowing
Base by Agent at the time, the establishment of a Reserve (other than the
Special Availability Reserve) at such time will result in there being no Excess
Availability at such time, Agent shall give Borrower Agent one (1) Business
Day's notice prior to establishing such new Reserves. Promptly upon the receipt
of such notice, Borrowers shall take such action as may be required so that the
event, condition or matters that is the basis for the Reserve no longer exists
in a manner and to the extent satisfactory to Agent. In no event shall such
notice and opportunity limit the right of Agent to establish such Reserve unless
Agent shall have determined that the event, condition or other matter that is
the basis for such new Reserve no longer exists or has otherwise been addressed
in a manner and to the extent satisfactory to Agent so that Agent determines
that such Reserve does not need to be established. The term "Reserves" includes
the Special Availability Reserve.
1.104 "Restricted Payment" shall mean any dividend or other
distribution (whether in cash, securities or other property) with respect to any
shares of any class of Capital Stock of Parent,
26
Operating or any Subsidiary of either of them, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of Capital Stock of Parent, Operating or any
Subsidiary or any option, warrant or other right to acquire any such shares of
Capital Stock of Parent, Operating or any such Subsidiary.
1.105 "Revolving Loan Limit" shall mean $160,000,000.
1.106 "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.
1.107 "Senior Debenture Indenture" shall mean the Indenture, dated as
of October 17, 1997, between Parent, as issuer, and State Street Bank and Trust
Company, as trustee, with respect to the Senior Discount Debentures as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.108 "Senior Discount Debentures" shall mean, collectively, the 13
1/8% Senior Discount Debentures due 2008 issued by Parent pursuant to the Senior
Debenture Indenture, as the same now exist or may hereafter be amended,
modified, supplemented, extended, modified, supplemented, extended, renewed,
restated or replaced.
1.109 "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 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).
1.110 "Special Agent Advances" shall have the meaning set forth in
Section 12.11 hereof.
1.111 "Special Availability Reserve" shall have the meaning set forth
in Section 2.7 hereof.
1.112 "Standby Letter of Credit" shall mean all Letter of Credit
Accommodations other than Commercial Letters of Credit.
1.113 "Store Accounts" shall have the meaning set forth in Section 6.3
hereof.
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1.114 "Subordinated Note Indenture" shall mean the Indenture, dated as
of October 17, 1997, by and among Operating, as issuer, Borrowers, and certain
Affiliates of Borrowers, as guarantors, and State Street Bank and Trust Company,
as trustee, with respect to the Subordinated Notes, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated,
or replaced.
1.115 "Subordinated Notes" shall mean, collectively, the 10 3/8%
Senior Subordinated Notes due 2007 issued by Operating pursuant to the
Subordinated Note Indenture, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed or replaced.
1.116 "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.
1.117 "Supplemental Loan Limit" shall mean the lesser of (a) during
the period from April 15 of any year through and including September 15 of such
year, $20,000,000 and at all other times, zero and (b) the amount equal to (i)
one hundred ten (110%) percent of the applicable Net Recovery Percentage for
each category of Inventory multiplied by the Value of such category of Eligible
Inventory minus (ii) the amount included in the Borrowing Base pursuant to
Sections 1.10(a)(i)(B) and 1.10(a)(i)(C) hereof.
1.118 "Supplemental Loan Period" shall mean, as to each year, any
consecutive day period commencing on the later of April 15 of such year or the
date of the initial advance of the Supplemental Loans in accordance with Section
2.3 hereof and ending on the earlier of the date one hundred twenty (120)
consecutive days after the initial advance or September 15 of such year.
1.119 "Supplemental Loans" shall mean the loans 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 2.3 hereof.
1.120 "Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of Agent or any Lender, such taxes (including
income taxes, franchise taxes or capital taxes) as are imposed on or measured by
such Lender's net income or capital by any jurisdiction (or any political
subdivision thereof).
1.121 "Total Borrowing Base" shall mean, at any time, the amount equal
to the sum of: (a) the Borrowing Base (after giving effect to all Reserves other
than the Reserves in respect of Letter of
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Credit Accommodations) at such time plus (b) the Value of the Inventory to be
purchased with Letter of Credit Accommodations at such time that are Commercial
Letters of Credit where the documents of title with respect thereto are
consigned to the issuer or delivered to and in the possession of a Customs
Broker (provided, that, as to such Customs Broker, Agent shall have received a
Collateral Access Agreement duly authorized, executed and delivered by such
person, such agreement shall be in full force and effect and such person shall
be in compliance in all material respects with the terms thereof) multiplied by
(i) during the period from August 1 through and including November 30 of any
year, the percentage equal to the lesser of: seventy (70%) percent or the then
applicable percentage with respect to the category of Eligible Inventory to be
purchased with such Letter of Credit Accommodation set forth in the definition
of the term Borrowing Base and (ii) at all other times, the percentage equal to
the lesser of: sixty-eight (68%) percent or the then applicable percentage with
respect to the category of Eligible Inventory to be purchased with such Letter
of Credit Accommodation set forth in the definition of the term Borrowing Base.
1.122 "TPG Partners" shall mean (a) TPG Partners II, L.P.; (b) any
managing director, principal, officer or employee of TPG Partners II, L.P. who
control it as of the date of this Agreement; and (c) any other Person controlled
by any of the Persons included in clauses (a) and (b) of this definition. 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.
1.123 "Transferee" shall mean any transferee or assignee of a Lender
or a Participant.
1.124 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York, 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 State of New York 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).
1.125 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the Value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received by Agent prior to the date hereof, if
any.
1.126 "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 Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency,
29
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.
1.127 "Weighted Average Life to Maturity" shall mean, when applied to
any Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans. Subject to and upon the terms and conditions
contained herein, each Lender severally (and not jointly) agrees to make its Pro
Rata Share of Revolving Loans to Borrowers from time to time in amounts
requested by Borrowers (or Borrower Agent on behalf of Borrowers) up to the
amount outstanding at any time equal to the Borrowing Base at such time.
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, monthly a letter of credit fee
at a rate equal to two and one-quarter (2 1/4%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations during the
immediately preceding month (or part thereof), payable in arrears as of the
first of each succeeding month, provided, that, effective as of the first (1st)
day of the second month of each fiscal quarter commencing with the fiscal
quarter ending on or about April 30, 2003, such percentage shall be increased or
decreased, as the case may be, to the percentage (on a per annum basis) set
forth below if, as to the percentages set forth for Tier 1 below, the Quarterly
Average Excess Availability for the immediately preceding fiscal quarter is at
or within the amounts indicated for such percentage or the EBITDA of Parent and
its Subsidiaries as of the last day of the immediately preceding fiscal quarter
for the immediately preceding twelve (12) consecutive months is at or within the
level indicated for such percentage or if, as to the percentages set forth for
Tiers 2, 3 or 4 below, the Quarterly Average
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Excess Availability for the immediately preceding fiscal quarter is at or within
the amounts indicated for such percentages:
Applicable Letter
Quarterly Average of Credit
Tier Excess Availability EBITDA Fee Margin
---- ------------------- -------------- -----------------
1 $60,000,000 or $60,000,000 or 2%
more more
2 Greater than or N/A 2%
equal to
$40,000,000 and
less than
$60,000,000
3 Greater than or N/A 2 1/4%
equal to
$15,000,000 and
less than
$40,000,000
4 Less than N/A 2 1/2%
$15,000,000
Provided, that, (i) the applicable percentage shall be calculated and
established once each fiscal quarter (commencing with the fiscal quarter ending
April 30, 2003) and shall remain in effect until adjusted thereafter after the
end of the next fiscal quarter, (ii) for purposes of Tier 2, 3 and 4 above, the
applicable percentage shall be based on the Quarterly Average Excess
Availability, (iii) for purposes of Tier 1 above, unless both the Quarterly
Average Excess Availability and the EBITDA of Parent and its Subsidiaries are at
or within the levels indicated the next lower tier shall apply and (iv)
notwithstanding anything to the contrary contained herein, Agent may, and upon
the written direction of Required Lenders shall, require Borrowers to pay to
Agent for the benefit of Lenders, such letter of credit fee at a rate equal to
four and one-half (4 1/2%) percent per annum on such daily outstanding balance
(A) for the period (1) from and after the effective date of termination or
non-renewal hereof until Agent and Lenders have received full and final payment
of all outstanding and unpaid Obligations which are not contingent and cash
collateral or letter of credit, as Agent may specify, in the amounts and on the
terms required under Section 13.1 hereof for contingent Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and (2)
from and after the date of the occurrence of an Event of Default and for so long
as such Event of Default is continuing.
(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
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requested, the effective date (which date shall be a Business Day ) 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 and in no event shall the expiration date of any Letter of Credit
Accommodation be a date less than five (5) Business Days prior to the end of the
then current term of this Agreement), the 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 form 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, 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 a Commercial Letter of Credit for the purpose
of purchasing Inventory and the documents of title with respect thereto are
consigned to the issuer or delivered to and in the possession of a Customs
Broker (provided, that, as to such Customs Broker, Agent shall have received a
Collateral Access Agreement duly authorized, executed and delivered by such
person, such agreement shall be in full force and effect and such person shall
be in compliance in all material respects with the terms thereof), the sum of
(1) the Value of the Inventory to be purchased with such Letter of Credit
Accommodation multiplied by (aa) during the period from August 1 through and
including November 30 of any year, the percentage equal to one hundred (100%)
percent minus the lesser of: seventy (70%) percent or the then applicable
percentage with respect to the category of Eligible Inventory to be purchased
with such Letter of Credit Accommodation and (bb) at all other times, the
percentage equal to one hundred (100%) percent minus the lesser of: sixty-eight
(68%) percent or the then applicable percentage with respect to the category of
Eligible Inventory to be purchased with such Letter of Credit Accommodation,
plus (2) freight, taxes, duty and other amounts which Agent estimates must be
paid in connection with such
32
Inventory upon arrival and for delivery to one of such Borrower's locations for
Eligible Inventory within the United States of America and (B) if the proposed
Letter of Credit Accommodation is a Standby Letter of Credit or for any other
purpose or the documents of title are not consigned to the issuer or are not
delivered to and in the possession of a Customs Broker (or if delivered to and
in the possession of a Customs Broker, any of the conditions set forth in clause
(A) above are not satisfied as to such Customs Broker) 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 (except as otherwise provided herein), (i) 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 $85,000,000 and (ii) the amount of all outstanding Letter of Credit
Accommodations consisting of Standby Letters of Credit and all other commitments
and obligations made or incurred by Agent or any Lender in connection therewith
shall not at any time exceed $10,000,000.
(f) Borrowers and Guarantors 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 wilful misconduct of Agent or any Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and Guarantor 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 Guarantor 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 Guarantor hereby
releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor,
by any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation, except for the gross negligence or wilful
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 Guarantors 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
33
subject to Agent's order, and if they shall come into such Borrower's or
Guarantor's possession, to deliver them, upon Agent's request, to Agent in their
original form; provided, that, Agent shall not exercise the rights under this
clause (g) to have such persons deliver any cash, checks, Inventory, documents
or instruments (but as to such documents and instruments, Agent shall not
exercise such rights only so long as the same are held by a Customs Broker and
the conditions set forth in Section 2.2(d)(iii)(A) hereof as to such Customs
Broker are satisfied), unless an Event of Default shall exist or have occurred
and be continuing. Borrowers and Guarantors 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 Guarantor hereby irrevocably authorizes
and directs any issuer of a Letter of Credit Accommodation to name such Borrower
or Guarantor 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 Guarantor 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 Guarantors 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 Guarantor.
(i) 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 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.
(j) At any time, so long as no Event of Default exists or has
occurred and is continuing, a Borrower may, with Agent's consent, (i) grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents, and (ii) 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; provided, that, Borrowers may approve or resolve any
34
questions of non-compliance of documents following notice to Agent thereof and
without Agent's consent except as otherwise provided in Section 2.2(i).
(k) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or Guarantor 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 Guarantor 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 Guarantors to Agent for the ratable benefit of Lenders and to
apply in all respects to Borrowers and Guarantors.
(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 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 Supplemental Loans.
(a) Subject to and upon the terms and conditions contained
herein, each Lender severally (and not jointly) agrees to make its Pro Rata
Share of Supplemental Loans to Borrowers from time to time in amounts requested
by Borrowers (or Borrower Agent on behalf of Borrowers) up to two (2) times
during any Supplemental Loan Period as provided below so long as the aggregate
amount of all
35
Supplemental Loans at any time outstanding do not exceed the Supplemental Loan
Limit as then in effect. No Supplemental Loans shall be available to Borrowers
unless and until the outstanding amount of the Revolving Loans equals the
Borrowing Base as of such time. In the event that at any time during the
Supplemental Loan Period, the Revolving Loans exceed the Borrowing Base, the
amount of such excess shall be deemed to constitute an advance of a Supplemental
Loan, subject to the satisfaction of the conditions precedent set forth in
Section 4.3 hereof, but shall not be deemed to constitute one of the two times
that Borrower Agent may request an advance of the Supplemental Loans hereunder.
(b) Subject to the terms and conditions hereof, Borrowers (and
Borrower Agent on behalf of Borrowers) shall not have any right to request, and
Agent and Lenders shall not make, any Supplemental Loans in excess of the
Supplemental Loan Limit as then in effect or at any time other than during a
Supplemental Loan Period. The Supplemental Loans shall be secured by all
Collateral.
(c) Borrowers may request (i) the initial advance of the
Supplemental Loans in any Supplemental Loan Period at any time on or after April
15 of any year and prior to and including May 15 of such year, in an amount
equal to the lesser of (A) the Supplemental Loan Limit and (B) $10,000,000 (and
in the case of either (A) or (B), less the amount of any advances of
Supplemental Loans previously made under Section 2.3(a) above), (ii) if there
has been no initial advance made pursuant to clause (i) or otherwise pursuant to
Section 2.3(a) above, the advance of the Supplemental Loans in any Supplemental
Loan Period after May 15 of any year and prior to September 15 of such year in
an amount equal to the lesser of (A) the Supplemental Loan Limit and (B)
$20,000,000 (or $10,000,000 at the option of Borrower Agent), and (iii) if an
initial advance pursuant to clause (i) or otherwise pursuant to Section 2.3(a)
above has been made, the second advance of the Supplemental Loans during such
Supplemental Loan Period at any time after May 15 of any year and prior to
September 15 of such year in an amount equal to the lesser of (A) the
Supplemental Loan Limit minus the amount of the prior advance during such
Supplemental Loan Period and (B) $20,000,000 minus the amount of the prior
advance during such Supplemental Loan Period. Each Supplemental Loan Period
shall commence on the date of the initial advance of the Supplemental Loans in
any year and shall end on the earlier of the date that is one hundred twenty
(120) days after the date of the initial advance of the Supplemental Loans or
September 15 of such year.
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 Loan Limits.
(a) Notwithstanding anything to the contrary contained herein,
except in Agent's discretion, with the consent of all Lenders, or as otherwise
provided herein, (i) the aggregate principal amount of the Revolving Loans and
the Letter of Credit Accommodations outstanding at any time shall not exceed the
Revolving Loan Limit, (ii) the aggregate principal amount of the Supplemental
Loans outstanding at any time shall not exceed the Supplemental Loan Limit as
then in effect, (iii) the aggregate principal amount of the Loans and Letter of
Credit Accommodations outstanding at any time shall not
36
exceed the Maximum Credit, and (iv) the aggregate principal amount of the
Revolving Loans and the Letter of Credit Accommodations outstanding at any time
shall not exceed the Total Borrowing Base at such time.
(b) To the extent that the Subordinated Note Indenture is in
effect and contains a limitation upon the amount of Loans and Letter of Credit
Accommodations (and, in each case, interest and fees thereon) that may be
incurred hereunder by Borrowers other than Operating, then, notwithstanding any
other provision of this Agreement (including, without limitation, Sections 2.1,
2.2, 2.3 and 2.8) and the books and records of Lenders or Agent or any Borrower,
(i) at any date, all Loans (and interest thereon) and Letter of Credit
Accommodations (and fees thereon) in excess of the amounts permitted to be
incurred by Borrowers other than Operating in accordance with the Subordinated
Note Indenture (including amounts permitted under Section 4.09 of the
Subordinated Note Indenture other than under subsection (i) thereof) are deemed
made and shall be made solely to Operating and (ii) in no event at any date
shall the amount of Indebtedness (as defined in the Subordinated Note Indenture)
arising pursuant to Loans and Letter of Credit Accommodations to Borrowers other
than Operating exceed the amount thereof that such Borrowers (other than
Operating) are permitted to incur at such time under the terms of the
Subordinated Note Indenture and (iii) Borrowers shall determine that the
Indebtedness of Borrowers hereunder (other than Operating) is, and the
Indebtedness of Borrowers hereunder (other than Operating) shall be deemed,
permitted under such subsections of Section 4.09 of the Subordinated Note
Indenture, other than subsection (i) thereof, to the extent that the amounts
permitted under such other subsections are not otherwise then the basis for
permitting Indebtedness of Borrowers (other than the Indebtedness hereunder) and
to the extent that such other subsections are applicable to the Indebtedness of
Borrowers hereunder (other than Operating). The limitation on Loans and Letter
of Credit Accommodations of Borrowers other than Operating set forth in Section
2.5(b) above shall automatically be adjusted from time to time upon the
incurrence or repayment of any Indebtedness (as defined in the Subordinated Note
Indenture) permitted under the applicable subsections of Section 4.09 of the
Subordinated Note Indenture.
2.6 Mandatory Prepayments.
(a) In the event that at any time (i) the aggregate principal
amount of the Revolving Loans and the Letter of Credit Accommodations
outstanding exceed the Total Borrowing Base, or (ii) the aggregate principal
amount of the Supplemental Loans outstanding exceed the Supplemental Loan Limit
(except to the extent Section 2.6(c) below is applicable), or (iii) the
aggregate principal amount of the Revolving Loans and Letter of Credit
Accommodations outstanding to all of Borrowers exceed the Revolving Loan Limit,
or (iv) the aggregate amount of the outstanding Letter of Credit Accommodations
exceed the sublimit for Letter of Credit Accommodations set forth in Section
2.2(e) hereof, or (v) the aggregate amount of the Loans and Letter of Credit
Accommodations exceed the Maximum Credit, any 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, upon 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. Except to the
extent Agent is
37
permitted to make certain additional Loans and Letter of Credit Accommodations
as provided in Section 12.8 hereof, Agent shall make such demand upon the
request of the Required Lenders.
(b) Without limiting any of the rights of Agent or Lenders
pursuant hereto or otherwise, on each date when any reduction in the Real
Property Availability becomes effective pursuant to the terms hereof, regardless
of the value of the Real Property, Borrowers shall, absolutely and
unconditionally, automatically and without demand make a payment to Agent, for
the benefit of Lenders, in respect of the Revolving Loans in an amount equal to
the excess, if any, of the aggregate unpaid principal amount of the Revolving
Loans over the Borrowing Base as so reduced.
(c) Without limiting any of the rights of Agent or Lenders
pursuant hereto or otherwise, on each date when any reduction in the
Supplemental Loan Limit becomes effective pursuant to the terms hereof,
Borrowers shall, absolutely and unconditionally, automatically and without
demand make a payment to Agent, for the benefit of Lenders, in respect of the
Supplemental Loans in an amount equal to the excess, if any, of the aggregate
unpaid principal amount of the Supplemental Loans over the amounts available to
Borrowers pursuant to the Supplemental Loan Limit as so reduced.
(d) Subject to Section 13.1(c) and Section 3.3(d) hereof, all
such payments in respect of the Loans pursuant to this Section 2.6 shall be
without premium or penalty. All interest accrued on the principal amount of the
Loans paid pursuant to this Section 2.6 shall be paid, or may be charged by
Agent to any loan account(s) of Borrowers, at Agent's option, on the date of
such payment. Interest shall accrue and be due, until the next Business Day, if
the amount so paid by Borrowers to the bank account designated by Agent for such
purpose is received in such bank account after 12:00 noon, New York City time.
2.7 Special Availability Reserve. Without limiting the rights and
remedies of Agent and Lenders under this Agreement or any of the Financing
Agreements with respect to the establishment of Reserves or otherwise, Agent
shall establish a special Reserve in an amount equal to the amounts set forth on
Schedule 2.7 hereto at all times with respect to each of the periods specified
on such Schedule (the "Special Availability Reserve").
2.8 Joint and Several Liability. Subject to Section 2.5(b) hereof,
all Borrowers shall be jointly and severally liable for all amounts due to Agent
and Lenders under this Agreement and the other Financing Agreements, regardless
of which Borrower actually receives the Loans or Letter of Credit Accommodations
hereunder or the amount of such Loans received 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. Subject to Section 2.5(b) hereof,
all references herein or in any of the other Financing Agreements to any of the
obligation of Borrowers to make any payment hereunder or thereunder shall
constitute joint and several obligations of Borrowers. The Obligations with
respect to Loans made to a Borrower, and the Obligations arising as a result of
the joint and several liability of a Borrower hereunder, with respect to Loans
made to the other Borrowers, shall be separate and distinct obligations, but all
such other Obligations shall be primary obligations of all Borrowers. Subject to
Section 2.5(b) hereof, the Obligations arising as a result of the joint and
several liability of a Borrower
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hereunder with respect to Loans, Letter of Credit Accommodations or other
extensions of credit made to the other Borrowers shall, to the fullest extent
permitted by law, be unconditional irrespective of (a) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrowers or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrowers, (b) the absence of any attempt to
collect the Obligations from the other Borrowers, any Guarantor or any other
security therefor, or the absence of any other action to enforce the same, (c)
the waiver, consent, extension, forbearance or granting of any indulgence by
Agent or any Lender with respect to any provisions of any instrument evidencing
the Obligations of the other Borrowers, or any part thereof, or any other
agreement now or hereafter executed by the other Borrowers and delivered to
Agent or any Lender, (d) the failure by Agent or any Lender to take any steps to
perfect and maintain its security interest in, or to preserve its rights and
maintain its security or collateral for the Obligations of the other Borrowers,
(e) the election of Agent and Lenders in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (f) the disallowance of all or any portion of the claim(s) of Agent or any
Lender for the repayment of the Obligations of the other Borrowers under Section
502 of the Bankruptcy Code, or (g) any other circumstances which might
constitute a legal or equitable discharge or defense of a Guarantor or of the
other Borrowers other than the gross negligence or wilful misconduct of Agent or
a Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction. With respect to the Obligations arising as a result of
the joint and several liability of a Borrower hereunder with respect to Loans,
Letter of Credit Accommodations or other extensions of credit made to the other
Borrowers hereunder, each Borrower waives, until the Obligations shall have been
paid in full and this Agreement shall have been terminated, any right to enforce
any right of subrogation or any remedy which Agent or any Lender now has or may
hereafter have against any Borrower or Guarantor and any benefit of, and any
right to participate in, any security or collateral given to Agent or any
Lender. Upon any Event of Default, and for so long as such Event of Default is
continuing, Agent may proceed directly and at once, without notice, against any
Borrower to collect and recover the full amount, or any portion of the
Obligations, without first proceeding against the other Borrowers or any other
Person, or against any security or collateral for the Obligations. Each Borrower
consents and agrees that Agent and Lenders shall be under no obligation to
xxxxxxxx any assets in favor of Borrower(s) or against or in payment of any or
all of the Obligations.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Agent, for the benefit of itself and
Lenders, interest on the outstanding principal amount of the Loans at the
Interest Rate. All interest accruing hereunder on and after the date of any
Event of Default or termination hereof shall be payable on demand.
(b) Each Borrower (or Borrower Agent on behalf of such Borrower)
may from time to time request Eurodollar Rate Loans or may request that Prime
Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar
Rate Loans continue for an additional Interest Period. Such
39
request from a Borrower (or Borrower Agent on behalf of such Borrower) shall
specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate
Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar
Rate Loans to be continued (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Agent of such a request from a Borrower (or Borrower Agent on behalf of such
Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Event of Default shall exist or have
occurred and be continuing, (ii) no party hereto shall have sent any notice of
termination of this Agreement, (iii) such Borrower (or Borrower Agent on behalf
of such Borrower) shall have complied with such customary procedures as are
reasonably established by Agent and specified by Agent to Borrower Agent from
time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more
than eight (8) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (vi)
Agent and each Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Agent and such Lender and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by such
Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate Loans or
to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar 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
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent and Lenders had purchased such
deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Agent has received and obtained bank approval with respect to a request to
continue such Eurodollar Rate Loan at least three (3) Business Days prior to
such last day in accordance with the terms hereof. Any Eurodollar Rate Loans
shall, at Agent's option, upon notice by Agent to Borrower Agent, be
subsequently converted to Prime Rate Loans on the effective date of the
termination of this Agreement in the event that this Agreement shall terminate
or not be renewed. Borrowers shall pay to Agent, for the benefit of Lenders,
upon demand by Agent (or Agent may, at its option, charge any loan account of
any Borrower) any amounts required to compensate any Lender or Participant for
any loss, cost or expense incurred by such person, as a result of the conversion
of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
At the request of Borrower Agent, Agent shall provide to Borrower Agent all
available supporting documentation with respect to such loss, cost or expense.
No loss, cost or expense will arise upon the conversion of a Eurodollar Rate
Loan to a Prime Rate Loan on the last day of the Interest Period for such
Eurodollar Rate Loan.
(d) Interest shall be payable by Borrowers to Agent, for the
account of Lenders, monthly in arrears not later than the first day of each
calendar month and shall 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 Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each
40
increase or decrease in the Prime Rate effective on the first day of the month
after any 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 or
regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Fees.
(a) Borrowers shall pay to Agent, for the account of Lenders,
monthly an unused line fee at a rate equal to three-eighths of one (3/8%)
percent per annum calculated upon the amount by which the Maximum Credit during
the period from April 15 through and including September 15 of each year and the
Revolving Loan Limit at all other times exceeds the average daily principal
balance of the outstanding Loans and Letter of Credit Accommodations during the
immediately preceding month (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 month in arrears.
(b) Borrowers agree to pay to Agent the other fees and amounts
set forth in the Fee Letter in the amounts and at the times specified therein.
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 Agent 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, rule or regulation 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, the Letter of Credit Accommodations or its
Commitment, then Borrowers and Guarantors 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
41
increased cost shall be submitted to Borrower Agent by Agent and shall be
conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i) Agent
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has
received notice from the Required Lenders that the Eurodollar Rate determined or
to be determined for such Interest Period will not adequately and fairly reflect
the cost to Lenders of making or maintaining Eurodollar Rate Loans during such
Interest Period, or (iii) Dollar deposits in the principal amounts of the
Eurodollar Rate Loans to which such Interest Period is to be applicable are not
generally available in the London interbank market, Agent shall give telecopy or
telephonic notice thereof to Borrower Agent as soon as practicable thereafter,
and will also give prompt written notice to Borrower Agent when such conditions
no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested
to be made on the first day of such Interest Period shall be made as Prime Rate
Loans, (B) any Loans that were to have been converted on the first day of such
Interest Period to or continued as Eurodollar Rate Loans shall be converted to
or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan
shall be converted, on the last day of the then-current Interest Period thereof,
to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further
Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower
(or Borrower Agent on behalf of any Borrower) have the right to convert Prime
Rate Loans to Eurodollar 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 Eurodollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly
give written notice of such circumstances to Borrower Agent (which notice shall
be withdrawn whenever such circumstances no longer exist), (ii) the commitment
of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate
Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then
have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) such Lender's Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, Borrowers and Guarantors shall pay
to such Lender such amounts, if any, as may be required pursuant to Section
3.3(d) below.
(d) Borrowers and Guarantors shall indemnify Agent and each
Lender and hold Agent and each Lender harmless from any loss or expense which
Agent or such Lender may sustain or incur as a consequence of (i) default by
Borrower in making a borrowing of, conversion into or extension of Eurodollar
Rate Loans after such Borrower (or Borrower Agent on behalf of such Borrower)
has given
42
a notice requesting the same in accordance with the provisions of this Loan
Agreement, (ii) default by any Borrower in making any prepayment of a Eurodollar
Rate Loan after such Borrower has given a notice thereof in accordance with the
provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar
Rate Loans on a day which is not the last day of an Interest Period with respect
thereto. With respect to Eurodollar Rate Loans, such indemnification may include
an amount equal to the excess, if any, of (A) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
extended, for the period from the date of such prepayment or of such failure to
borrow, convert or extend to the last day of the applicable Interest Period (or,
in the case of a failure to borrow, convert or extend, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Rate Loans provided for herein over (B) the
amount of interest (as determined by such Agent or such Lender) which would have
accrued to Agent or such Lender on such amount by placing such amount on deposit
for a comparable period with leading banks in the interbank Eurodollar market.
This covenant shall survive the termination or non-renewal of this Loan
Agreement and the payment of the Obligations.
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 providing the initial Letter of Credit
Accommodations hereunder:
(a) Agent shall have received, in form and substance reasonably
satisfactory to Agent, all releases, terminations and such other documents as
Agent may reasonably request to evidence and effectuate the termination by the
Existing Lenders of their respective financing arrangements with Borrowers and
Guarantors 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 Guarantor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) the authorization by or on behalf of the Existing Lenders
for Agent to file UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or Guarantor, as debtor; and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by any Borrower or
Guarantor 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 reasonably
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
Guarantor certified by the Secretary of State (or equivalent Governmental
Authority) which shall set forth the same complete corporate name of such
Borrower or Guarantor as is set forth herein and such
43
document as shall set forth the organizational identification number of each
Borrower or Guarantor, if one is issued in its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets
or businesses of Borrowers and Obligors, taken as a whole, 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 Borrowers and Obligors, taken as a
whole, to perform their obligations hereunder or under any of the other
Financing Agreements to which any of them 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 reasonably
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 reasonably 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 in 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, projected consolidated and consolidating financial
statements of Parent and its Subsidiaries (including forecasted income
statements, cash flow statements and balance sheets) all in reasonable detail
for each of the fiscal years of Parent ending on or about January 2004, January
2005 and January 2006 prepared on a monthly basis for the fiscal year ending on
or about January 2004 and on a quarterly basis thereafter, together with a
statement of all assumptions related thereto (which shall be fair and reasonable
as of the date of preparation in view of current and reasonably foreseeable
business conditions) and monthly projections of availability under the Credit
Facility for the period from December 2002 through and including January 2004,
together with a statement of all assumptions related thereto (which shall be
fair and reasonable in view of current and reasonably foreseeable business
conditions), which projected financial statements and projections of
availability shall be based on the reasonable, good faith opinion of Borrowers
and Guarantors (it being understood that actual results may differ from those
set forth in such projected financial statements);
(f) Agent shall have received, in form and substance reasonably
satisfactory to Agent, all consents, waivers, acknowledgments and other
agreements from third persons which Agent may deem necessary 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;
(g) 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 made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
44
(h) Agent shall have received, in form and substance reasonably
satisfactory to Agent, Deposit Account Control Agreements by and among Agent,
each Borrower and Guarantor, as the case may be and each bank where such
Borrower (or Guarantor) has a deposit account for which it is required to obtain
a Deposit Account Control Agreement pursuant to Section 6.3 hereof, in each
case, duly authorized, executed and delivered by such bank and Borrower or
Guarantor, as the case may be;
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral;
(j) Agent shall have received (i) Credit Card Acknowledgments,
in each case duly authorized, executed and delivered by the Credit Card Issuers
(other than American Express) and Credit Card Processors and (ii) an instruction
letter with respect to the routing of proceeds of American Express credit card
sales, duly authorized, executed and delivered by Parent, in the case of all
such Credit Card Acknowledgments and such instruction letter, in form and
substance satisfactory to Agent;
(k) Agent shall have received and reviewed lien and judgment
search results for the jurisdiction of incorporation of each Borrower and
Guarantor, the jurisdiction of the chief executive office of each Borrower and
Guarantor and all jurisdictions in which assets of Borrowers and Guarantors are
located (except as to jurisdictions in which only certain retail stores are
located as Agent may specifically agree), which search results shall be in form
and substance satisfactory to Agent;
(l) Agent shall have received environmental audits of the Real
Property to be subject to the Mortgages conducted by an independent
environmental engineering firm acceptable to Agent, and in form, scope,
substance and methodology satisfactory to Agent;
(m) Agent shall have received, in form and substance
satisfactory to Agent, a valid and effective title insurance policy (whether in
the form of a pro forma policy or a marked up title policy commitment) issued by
a company and agent acceptable to Agent: (i) insuring the priority, amount and
sufficiency of the Mortgages, (ii) insuring against matters that would be
disclosed by surveys and (iii) containing any legally available endorsements,
assurances or affirmative coverage requested by Agent for protection of its
interests;
(n) Agent shall have received a written appraisal as to the
Intellectual Property of Borrowers and Guarantors by an appraiser acceptable to
Agent, in form, scope and methodology reasonably acceptable to Agent, addressed
to Agent and upon which Agent and Lenders are expressly permitted to rely;
(o) Agent shall have received the original 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;
45
(p) Agent shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance reasonably satisfactory to Agent, and certificates of
insurance policies and/or endorsements naming Agent as loss payee;
(q) Agent shall have received, in form and substance reasonably
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; and
(r) 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 reasonably satisfactory to Agent.
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/or providing 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 though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation 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 correct in all material respects 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 in each case in the good faith
judgment of Agent (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the making of the Loans or providing the 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 Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
4.3 Conditions Precedent to Supplemental Loans. In addition to the
conditions precedent to all Loans and Letter of Credit Accommodations set forth
in Section 4.2 above, for each advance of any Supplemental Loans during each
Supplement Loan Period, each of the following is an additional condition
precedent to the making of such advance during any such Supplemental Loan
Period:
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(a) Agent shall have received (i) the financial statements of
Parent and its Subsidiaries for the most recent preceding fiscal month for which
financial statements are required to have been delivered hereunder as of the
time of such advance and (ii) the fiscal year end financial statements of Parent
and its Subsidiaries, certified by their independent public accountants
reasonably acceptable to Agent, with respect to the immediately preceding fiscal
year, in each case as to clause (i) and (ii) above as required in accordance
with Section 9.6 hereof;
(b) the EBITDA of Parent and its Subsidiaries for the
immediately preceding twelve (12) consecutive month period (treated as a single
accounting period) on the last day of the most recent month prior to the
commencement of the Supplemental Loan Period and prior to each borrowing of
amounts in respect of Supplemental Loans, as applicable, in each case for which
financial statements of Parent and its Subsidiaries are required to have been
delivered hereunder, shall be not less than the amount set forth in Schedule 4.3
hereto with respect to such period then ending;
(c) the EBITDA of Parent and its Subsidiaries for the
immediately preceding fiscal year of Parent and its Subsidiaries as reflected in
the audited year-end financial statements provided to Agent pursuant to Section
9.6 hereof shall have been not less than: (i) in the case of the fiscal year of
Parent and its Subsidiaries ending on or about January 31, 2003, $42,000,000;
(ii) in the case of the fiscal year of Parent and its Subsidiaries ending on or
about January 31, 2004, $50,000,000; and (iii) in the case of the fiscal year of
Parent and its Subsidiaries ending on or about January 31, 2005, $68,000,000.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest.
(a) To secure payment and performance of all Obligations, each
Borrower and Guarantor hereby grants to Agent, for itself and the 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 benefit of Lenders, as
security, all personal property and real property subject to the Mortgages and
fixtures, and interests in property and fixtures, of each Borrower and
Guarantor, 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"), including:
(i) all Accounts;
(ii) all general intangibles, including, without
limitation, all Intellectual Property;
(iii) all goods, including, without limitation, Inventory
and Equipment;
(iv) all Real Property subject to the Mortgages and
fixtures;
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(v) all chattel paper, including, without limitation, all
tangible and electronic chattel paper;
(vi) all instruments, including, without limitation, all
promissory notes;
(vii) all documents;
(viii) all deposit accounts;
(ix) all letters of credit, banker's acceptances and
similar instruments and including all letter-of-credit rights;
(x) 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 (A) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (B) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (C) 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 (D) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(xi) all (A) investment property (including securities,
whether certificated or uncertificated, securities accounts, security
entitlements, commodity contracts or commodity accounts) and (B) monies, credit
balances, deposits and other property of any Borrower or Guarantor 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 any Borrower or Guarantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise;
(xii) all commercial tort claims, including, without
limitation, those identified in the Information Certificate;
(xiii) to the extent not otherwise described above, all
Receivables;
(xiv) all Records; and
(xv) 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.
(b) Notwithstanding anything to the contrary set forth in
Section 5.1(a) above, the types or items of Collateral described in such Section
shall not include any rights or interests in any contract, lease, permit,
license, charter or license agreement covering real or personal property, as
such, if under
48
the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Agent is prohibited and such prohibition has not
been or is not waived or the consent of the other party to such contract, lease,
permit, license, charter or license agreement has not been or is not otherwise
obtained or under applicable law such prohibition cannot be waived; provided,
that, the foregoing exclusion shall in no way be construed (i) to apply if any
such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the
UCC or other applicable law or (ii) so as to limit, impair or otherwise affect
Agent's unconditional continuing security interests in and liens upon any rights
or interests of a Borrower or Guarantor in or to monies due or to become due
under any such contract, lease, permit, license, charter or license agreement
(including any Receivables).
5.2 Perfection of Security Interests.
(a) Each Borrower and Guarantor 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 or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor 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
and Guarantor hereby ratifies and approves all financing statements naming Agent
or its designee as secured party and such Borrower or Guarantor, as the case may
be, 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 and Guarantor
hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor 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 any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor 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 or Guarantor at any time file, or permit or cause to be
filed, 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 or Guarantor as debtor.
(b) Each Borrower and Guarantor does not have 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 any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify Agent
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by
49
any agent or representative), such Borrower or Guarantor shall deliver, or cause
to be delivered to Agent, all tangible chattel paper and instruments that such
Borrower or Guarantor 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, each Borrower and Guarantor shall, or Agent may at any time on
behalf of any Borrower or Guarantor, 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 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 or Guarantor 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 or Guarantor shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, such Borrower or Guarantor shall take,
or cause to be taken, such actions as Agent may reasonably 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) Each Borrower and Guarantor does not have any deposit
accounts as of the date hereof, except as set forth in the Information
Certificate. Borrowers and Guarantors shall not, 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 any
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity reasonably 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 or Guarantor is dealing and the purpose of the
account, except as to any Store Account opened or established after the date
hereof, so long as no Event of Default shall exist or have occurred, Agent shall
only have received such information as to such Store Account on the next monthly
report with respect to deposit accounts in accordance with Section 7.1(a)
hereof, (ii) the bank where such account is opened or maintained shall be
reasonably acceptable to Agent, and (iii) on or before the opening of such
deposit account (other than as to a Store Account so long as no Event of Default
shall exist or have occurred and be continuing), such Borrower or Guarantor
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 or Guarantor and the bank at which such deposit
account is opened and maintained or (B) arrange for Agent to become the customer
of the bank with respect to the deposit account on terms and conditions
reasonably acceptable to Agent. The terms of this subsection (d) shall not apply
to deposit accounts specifically and exclusively used for payroll, payroll taxes
and
50
other employee wage and benefit payments to or for the benefit of any Borrower's
or Guarantor's salaried employees or the escrow of security deposits with
respect to Real Property subject to lease.
(e) No Borrower or Guarantor 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 or Guarantor shall be
entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, such Borrower or Guarantor shall promptly endorse,
assign and deliver the same to Agent, for itself and the benefit of Lenders,
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 or Guarantor are uncertificated and are issued to such
Borrower or Guarantor or its nominee directly by the issuer thereof, such
Borrower or Guarantor 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 any Borrower or
Guarantor or such nominee, or (B) arrange for Agent to become the registered
owner of the securities.
(ii) Borrowers and Guarantors shall not, 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 two (2) Business Days prior written notice of
the intention of such Borrower or Guarantor 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 or Guarantor 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 reasonably 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 or Guarantor 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 or Guarantor 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) Borrowers and Guarantors are not the 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 or Guarantor shall
be entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any
51
similar instrument, whether as beneficiary thereof or otherwise after the date
hereof, such Borrower or Guarantor shall promptly notify Agent thereof in
writing. Such Borrower or Guarantor shall immediately, as Agent may 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 or Guarantor 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) Borrowers and Guarantors do not have any commercial tort
claims as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall at any time after
the date hereof have any commercial tort claims in excess of $1,000,000, such
Borrower or Guarantor (or Borrower Agent) 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 or Guarantor 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 or
Guarantor 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 such Borrower or Guarantor 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 such Borrower or Guarantor as
debtor, or any amendments to any financing statements, covering any such
commercial tort claim as Collateral. In addition, each Borrower and Guarantor
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) Borrowers and Guarantors do not have 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 a
Borrower or Guarantor permitted herein in the ordinary course of business of
such Borrower or Guarantor 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 and Guarantors shall promptly notify Agent thereof in writing.
Promptly upon Agent's request, Borrowers and Guarantors shall deliver to Agent a
Collateral Access Agreement duly authorized, executed and delivered by such
person and the Borrower or Guarantor that is the owner of such Collateral.
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(i) Borrowers and Guarantors 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 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 any Borrower's or Guarantor'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 interest of Agent in such Collateral (other than motor vehicles, if
any), (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, for and on behalf of Lenders,
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 Borrowers and (c)
all other appropriate debits and credits as provided in this Agreement,
including, without limitation, 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, as agent for
Borrowers, each month a statement setting forth the balance in Borrowers' loan
account(s) maintained by Agent for Borrowers 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 Guarantors and conclusively binding upon Borrowers and Guarantors
as an account stated except to the extent that Agent receives a written notice
from Borrower Agent of any specific exceptions of Borrower Agent thereto within
sixty (60) days after the date such statement has been received by Borrower
Agent. Until such time as Agent shall have rendered to any Borrower or Borrower
Agent, a written statement as provided above, the balance in a Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Agent
by Borrowers.
6.3 Collection of Accounts.
(a) Each Borrower and Guarantor shall establish and maintain, at
its expense, deposit account arrangements and merchant payment arrangements with
the banks set forth on Schedule 8.10 to the Information Certificate and subject
to Section 5.2(d) hereof such other banks as such Borrower
53
or Guarantor may hereafter select. The banks set forth on Schedule 8.10 to the
Information Certificate constitute all of the banks with which Borrowers and
Guarantors have deposit account arrangements and merchant payment arrangements
as of the date hereof and identifies each of the deposit accounts at such banks
that are used solely for receiving store receipts from a retail store location
of a Borrower ((together with any other deposit accounts at any time established
or used by any Borrower for receiving such store receipts from any retail store
location, collectively, the "Store Accounts" and each individually, a "Store
Account") or otherwise describes the nature of the use of such deposit account
by such Borrower.
(i) Each Borrower shall deposit all proceeds from sales of
Inventory in every form, including, without limitation, 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 Store Account of such Borrower used solely for such
purpose. All such funds deposited into the Store Accounts shall be sent by wire
transfer or other electronic funds transfer no less frequently than weekly or
more frequently upon Agent's request at any time that an Event of Default exists
or has occurred and is continuing to the Blocked Accounts as provided in Section
6.3(a)(ii) below, except nominal amounts which are required to be maintained in
such Store Accounts under the terms of such Borrower's arrangements with the
bank at which such Store Accounts are maintained, which nominal amounts shall
not exceed $5,000 as to any individual Store Account at any time.
(ii) Each Borrower shall establish and maintain, at its
expense, deposit accounts with such banks as are reasonably acceptable to Agent
(the "Blocked Accounts") into which each Borrower shall promptly either cause
all amounts on deposit in the Store Accounts of such Borrower to be sent as
provided in Section 6.3(a)(i) above or shall itself deposit or cause to be
deposited all proceeds from sales of Inventory, all amounts payable to each
Borrower from Credit Card Issuers and Credit Card Processors and all other
proceeds of Collateral. Borrowers and Guarantors shall deliver, or cause to be
delivered to Agent a Deposit Account Control Agreement duly authorized, executed
and delivered by each bank where a Blocked Account is maintained as provided in
Section 5.2 hereof or at any time and from time to time Agent may become the
bank's customer with respect to any of the Blocked Accounts and promptly upon
Agent's request, Borrowers shall execute and deliver such agreements and
documents as Agent may reasonably require in connection therewith. Each Borrower
and Guarantor agrees that all payments made to such Blocked Accounts or other
funds received and collected by Agent or any Lender, whether in respect of the
Receivables, as proceeds of Inventory or other Collateral or otherwise shall be
treated as payments to Agent, for the benefit of Lenders, in respect of the
Obligations and therefore shall constitute the property of Agent and Lenders to
the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans
available to each Borrower and for purposes of calculating interest on the
Obligations, such payments will be applied (conditional upon final collection)
to the Obligations 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 customary practices as
in effect from time to time and within
54
sufficient time to credit such Borrower's loan account on such day, and if not,
then on the next Business Day.
(c) Each Borrower and Guarantor and their respective
shareholders, directors, employees, agents, Subsidiaries or other Affiliates
shall, acting as trustee for Agent, receive, as the property of Agent, any
monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Receivables or other Collateral which come into their possession or under
their control and immediately upon receipt thereof, shall deposit or cause the
same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Agent. In no event shall the same be commingled
with a Borrower's own funds. Each Borrower agrees to reimburse Agent and Lenders
on demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of the payments by Agent or any Lender to
or indemnification of such bank or person in connection with such Blocked
Account or any amounts received therein or transferred therefrom. The obligation
of Borrowers to reimburse Agent and Lenders for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
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. Agent shall apply payments received or collected from any
Borrower or Guarantor or for the account of any Borrower or Guarantor (including
the monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest due
in respect of any Loans (and including any Special Agent Advances); third, to
pay or prepay principal in respect of Special Agent Advances; fourth, to pay
principal due in respect of the Loans; fifth, to pay or prepay any other
Obligations whether or not then due, in such order and manner as Agent
determines. Notwithstanding anything to the contrary contained in this
Agreement, (i) unless so directed by Borrower Agent, or unless an Event of
Default shall exist or have occurred and be continuing, Agent shall not apply
any payments which it receives to any Eurodollar Rate Loans, except (A) on the
expiration date of the Interest Period applicable to any such Eurodollar Rate
Loans or (B) in the event that there are no outstanding Prime Rate Loans or
Supplemental Loans and (ii) to the extent any Borrower uses 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 and Letter of Credit Accommodations
that were not used for such purposes and second to the Obligations arising from
Loans and 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 such Borrower acquired such rights in or the use of such Collateral. So
long as no Event of Default shall exist or have occurred and be continuing and
there is Excess Availability after giving effect thereto, amounts received by
Agent from Borrowers pursuant to this Section 6.4(a) that are not applied to the
Obligations in accordance herewith shall, at the request of Borrower Agent
received by Agent on or before 12:00 noon
55
New York City time on any Business Day, be remitted to Borrower Agent or any
Borrower as Borrower Agent may direct.
(b) 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 any Borrower
maintained by Agent.
(c) Except as otherwise required by law, any and all payments by
or on behalf of any Borrower or Guarantor hereunder and under any other
Financing Agreement shall be made, in accordance with Section 6.4 hereof, free
and clear of and without deduction for any and all Indemnified Taxes. In
addition, Borrowers agree to pay to the relevant Governmental Authority in
accordance with applicable law any Other Taxes.
(d) If any Borrower or Guarantor shall be required by law to
deduct or withhold in respect of any Indemnified Taxes or Other Taxes from or in
respect of any sum payable hereunder to Agent or any Lender, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender (or Agent on behalf of such Lender) receives an amount equal to the sum
it would have received had no such deductions or withholdings been made;
(ii) such Borrower or Guarantor shall make such deductions
and withholdings;
(iii) such Borrower or Guarantor shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant to
clause (i) above, such Borrower or Guarantor shall also pay to Agent or any
Lender, at the time interest is paid, all additional amounts which Agent or any
Lender specifies as necessary to preserve the after-tax yield such Lender would
have received if such Indemnified Taxes or Other Taxes had not been imposed.
(e) Within thirty (30) days after the date of any payment by any
Borrower or Guarantor of Indemnified Taxes or Other Taxes, upon Agent's request,
such Borrower or Guarantor shall furnish to Agent the original or a certified
copy of a receipt evidencing payment thereof, or other evidence of payment
reasonably satisfactory to Agent.
(f) Borrowers will indemnify Agent and each Lender (or
Transferee) for the full amount of Indemnified Taxes and Other Taxes paid by
Agent or such Lender (or Transferee, as the case may be). If Agent or such
Lender (or Transferee) receives a refund in respect of any Indemnified Taxes or
Other Taxes for which Lender (or Transferee) has received payment from any
Borrower or Guarantor hereunder, so long as no Default or Event of Default shall
exist or have occurred and be continuing, Agent or such Lender (as the case may
be) shall credit to the loan account of Borrowers the amount of
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such refund plus any interest received (but only to the extent of indemnity
payments made, or additional amounts paid, by Borrowers or Guarantors under this
Section 6.4 with respect to the Indemnified Taxes or Other Taxes giving rise to
such refund). If a Lender (or any Transferee) claims a tax credit in respect of
any Indemnified Taxes or Other Taxes for which it has been indemnified by
Borrowers or Guarantors pursuant to this Section 6.4, such Lender will apply the
amount of the actual dollar benefit received by such Lender as a result thereof,
as reasonably calculated by Lender and net of all expenses related thereto, to
the Loans. If Indemnified Taxes or Other Taxes were not correctly or legally
asserted, Agent or such Lender shall, upon Borrower Agent's request and at
Borrowers' expense, provide such documents to Borrower Agent in form and
substance reasonably satisfactory to both Borrower Agent and Agent, as Borrower
Agent may reasonably request, to enable Borrowers to contest such Indemnified
Taxes or Other Taxes pursuant to appropriate proceedings then available to such
Borrower (so long as providing such documents shall not, in the good faith
determination of Agent, have a reasonable likelihood of resulting in any
liability of Agent or any Lender).
(g) 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 and Guarantors shall be liable to pay to Agent,
and do hereby indemnify and hold Agent and Lenders harmless for the amount of
any payments or proceeds surrendered or returned. This Section 6.4(g) 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.
(h) Each Foreign Lender, on or prior to the date of its
execution and delivery of this Agreement, or on or prior to the date on which it
first becomes a Lender in the case of each Transferee, and from time to time
thereafter if requested in writing by Borrower Agent or the Agent, shall provide
Borrower Agent and Agent with (i) two duly completed copies of Internal Revenue
Service Form W-8BEN, or any successor form prescribed by the Internal Revenue
Service, certifying that such Foreign Lender is entitled to benefits under any
income tax treaty to which the United States is a party which reduces to zero
the rate of withholding tax on payments of interest, or (ii) two duly completed
copies of Internal Revenue Service Form W-8ECI, or any successor form prescribed
by the Internal Revenue Service, certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States. Each Foreign Lender (or Transferee) also
agrees to deliver to Borrower Agent and Agent two further copies of Form W-8BEN
or W-8ECI or successor applicable forms on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event (including,
without limitation, a change in such Foreign Lender's (or Transferee's) lending
office) requiring a change in the most recent form previously delivered by it to
Borrower Agent and Agent, and to obtain such extensions of the time for filing
and to renew such forms as may reasonably be requested by Borrower Agent or
Agent. Notwithstanding the foregoing provisions of this Section 6.4(h), no
Foreign Lender (or Transferee) shall be required to deliver or provide any form
pursuant to this Section 6.4 if such Foreign Lender (or Transferee) is not
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then legally able to do so as a result of a Change in Law that occurs following
the date such Foreign Lender (or Transferee) becomes a party hereto. From time
to time if requested in writing by Borrower Agent, Agent shall provide Borrower
Agent with Internal Revenue Service Form W-8ECI, or any successor form
prescribed by the Internal Revenue Service, certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States. Each Lender or Transferee that is a
"United States person," as defined under Section 7701(a)(30) of the Code, and
that is not a corporation, agrees that it will deliver to Borrower Agent and
Agent a Form W-9 stating that it is entitled to an exemption from United States
backup withholding tax.
6.5 Authorization to Make Loans. Agent and Lenders are authorized to
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower Agent or any Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Loan. Requests received after 12:00 noon New York City 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, any Borrower or Guarantor
when deposited to the credit of any Borrower or Guarantor or otherwise disbursed
or established in accordance with the instructions of any Borrower or Guarantor
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 or about the date hereof 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 made or Letter of
Credit Accommodations provided to or for the benefit of any Borrower pursuant to
the provisions hereof shall be used by such Borrower only for general operating,
working capital and other corporate purposes of such Borrower 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 Appointment of Borrower Agent as Agent for Requesting Loans and
Receipts of Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Borrower Agent as its agent to request and receive Loans and Letter of Credit
Accommodations pursuant to this Agreement and the other Financing Agreements
from Agent or any Lender in the name or on behalf of such
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Borrower. Agent and Lenders may disburse the Loans to such bank account of
Borrower Agent or a Borrower or otherwise make such Loans to a Borrower and
provide such Letter of Credit Accommodations to a Borrower as Borrower Agent may
designate or direct, without notice to any other Borrower or Obligor.
Notwithstanding anything to the contrary contained herein, Agent may at any time
and from time to time require that Loans to or for the account of any Borrower
be disbursed directly to an operating account of such Borrower.
(b) Borrower Agent hereby accepts the appointment by Borrowers
to act as the agent of Borrowers pursuant to this Section 6.7.
(c) Borrower Agent shall ensure that the disbursement of any
Loans to each Borrower requested by or paid to or for the account of Parent, or
the issuance of any Letter of Credit Accommodations for a Borrower hereunder,
shall be paid to or for the account of such Borrower.
(d) Each Borrower and other Guarantor hereby irrevocably
appoints and constitutes Borrower Agent as its agent to receive statements on
account and all other notices from Agent and Lenders with respect to the
Obligations or otherwise under or in connection with this Agreement and the
other Financing Agreements.
(e) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by Borrower
Agent shall be deemed for all purposes to have been made by such Borrower or
Guarantor, as the case may be, and shall be binding upon and enforceable against
such Borrower or Guarantor to the same extent as if made directly by such
Borrower of Guarantor.
(f) No purported termination of the appointment of Borrower
Agent as agent as aforesaid shall be effective, except after ten (10) days'
prior written notice to Agent.
6.8 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.
6.9 Sharing of Payments, Etc.
(a) Each Borrower and Guarantor 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 such Borrower or
Guarantor 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
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(regardless of whether such balances are then due to such Borrower or
Guarantor), 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 or Guarantor 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 or Guarantor
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 and Guarantor 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 or Guarantor. 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.
6.10 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 hereof, make available, on behalf of
Lenders, the full amount of the Loans requested or charged to any Borrower's
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.
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(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 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 City 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
City 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 Borrowers, Agent 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
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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 (or
Borrower Agent for the benefit of 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 such Borrower
on such day. If Agent makes such corresponding amount available to a Borrower
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 any Borrower 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 a Borrower 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 any Borrower or Obligor of their duties and obligations
hereunder.
(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 any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
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6.11 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.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrowers, or Borrower Agent on behalf of Borrowers, shall
provide Agent with the following documents in a form reasonably satisfactory to
Agent:
(i) as soon as possible after the end of each calendar week
(but in any event within five (5) Business Days after the end thereof), or more
frequently as Agent may request, (A) a report of credit card sales during such
week, including the amount of the chargebacks, fees and credits issued during
such week and providing an aging of Credit Card Receivables identifying those
outstanding more than five (5) Business Days since the sale date giving rise
thereto and (B) an inventory summary report by category (consisting of retail,
factory outlet, direct, and letter of credit inventory and identifying in the
case of each of retail, factory outlet and direct, the applicable store and
warehouse were such Inventory is located);
(ii) as soon as possible after the end of each month (but in
any event within ten (10) Business Days after the end thereof), on a monthly
basis or more frequently as Agent may request, (A) perpetual inventory reports
by location and category (and including the amounts of Inventory and the value
thereof at any leased locations and at premises of warehouses, processors or
other third parties), (B) list of outstanding accounts payable (and including
information indicating the amounts owing to owners and lessors of leased
premises, warehouses, fulfillment centers, processors and other third parties
from time to time in possession of any Collateral), and (C) reports on sales and
use tax collections, deposits and payments, including monthly sales and use tax
accruals;
(iii) as soon as possible after the end of each month (but
in any event ten (10) Business Days after the end thereof), in each case
certified by the chief financial officer or controller of Borrowers or Borrower
Agent as true and correct: (A) a statement confirming the payment of rent and
other amounts due to owners and lessors of real property used by Borrower in the
immediately preceding month, subject to year-end or monthly percentage rent
payment adjustments, (B) the addresses of all new retail store locations
(including factory store locations) of Borrowers and Guarantors opened and
existing retail store locations (including factory store locations) closed or
sold,
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in each case since the date of the most recent certificate delivered to Agent
containing the information required under this clause, and (C) a report of any
new deposit account established or used by any Borrower or Guarantor with any
bank or other financial institution, including the Borrower or Guarantor in
whose name the account is maintained, the account number, the name and address
of the financial institution at which such account is maintained, the purpose of
such account and, if any, the amount held in such account on or about the date
of such report;
(iv) upon Agent's request, (A) reports of sales for each
category of Inventory, (B) reports of aggregate Inventory purchases (including
all costs related thereto, such as freight, duty and taxes) and identifying
items of Inventory in transit to any Borrower or Guarantor related to the
applicable documentary letter of credit and/or xxxx of lading number, (C) copies
of remittance advices and reports, and copies of deposit slips and bank
statements, (D) copies of shipping and delivery documents, (E) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by Borrowers and Guarantor, and (F) reports by retail store location of
sales and operating profits for each such retail store location;
(v) upon Agent's request, the monthly statements received by
any Borrower or any of its Affiliates from any Credit Card Issuers or Credit
Card Processors, together with such additional information with respect thereto
as shall be sufficient to enable Agent to monitor the transactions pursuant to
the Credit Card Agreements;
(vi) such other reports as to the Collateral as Agent shall
reasonably request from time to time.
(b) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower and Guarantor 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 (i) any 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, to the extent any
of the foregoing exceeds $75,000 in any one case or $200,000 in the aggregate
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 such Borrower as in effect on the date hereof. So long as
no Event of Default exists or has occurred and is continuing, no Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor, Credit Card Issuer, Credit Card Processor. At any time that an
Event of
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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) 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 in any material respect 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.
(c) 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 has a reasonable likelihood of resulting 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 which
has a reasonable likelihood of resulting in the Credit Card Issuer or Credit
Card Processor ceasing or suspending payments to such Borrower.
(d) 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 Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct a physical count of the Inventory
either through periodic cycle counts or wall to wall counts, so that all
Inventory is subject to such counts at least once each year, but at any time or
times as Agent may request at any time an Event of Default exists or has
occurred and is continuing, and promptly following such physical inventory
(whether through periodic cycle counts or wall to wall counts) 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) Borrowers and
Guarantors shall not 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 Borrowers' business and except to move
Inventory directly from one location set forth or permitted herein to another
such location and except for Inventory shipped from the manufacturer thereof to
such Borrower or Guarantor which is in transit to the locations set forth or
permitted herein; (d) upon Agent's request, Borrowers shall, at their expense,
no more than three (3) times in any twelve (12) month period, but at
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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 at any time an Event of Default
exists or has occurred and is continuing, deliver or cause to be delivered to
Agent written reports or appraisals 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 and Lenders are 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 two (2) times in any twelve (12)
month period, but at any time or times as Agent may request at any time an Event
of Default exists or has occurred and is continuing or at any time or times as
Agent may request in the event of test count variances in excess of the
shrinkage reserve established by any Borrower, 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 Borrowers to
reconcile the inventory count to Borrowers' inventory records; (f) each Borrower
and Guarantor 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 laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (g) none of the Inventory or other
Collateral constitutes farm products or the proceeds thereof; (h) each Borrower
and Guarantor assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (i)
Borrowers and Guarantors shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate any
Borrower or Guarantor to repurchase such Inventory except for the right of
return given to retail customers of such Borrower in the ordinary course of the
business of such Borrower in accordance with the then current return policy of
such Borrower; (j) Borrowers and Guarantors shall keep the Inventory in good and
marketable condition; (k) Borrowers and Guarantors shall not, without prior
written notice to Agent or the specific identification of such Inventory in a
report with respect thereto provided by Borrower Agent to Agent pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property subject to the Mortgages: (a) Borrowers and
Guarantors shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (b) Borrowers and
Guarantors shall use the Equipment and Real Property with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
material conformity with all applicable laws; (c) the Equipment is and shall be
used in the business of Borrowers and Guarantors and not for personal, family,
household or farming use; (d) Borrowers and Guarantors shall not remove any
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
its business or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of such Borrower or Guarantor in the
ordinary course of business; (e) the Equipment is now and shall remain personal
property and Borrowers and Guarantors shall not permit any of the Equipment to
be or become a part of or affixed to real property; and (f) each
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Borrower and Guarantor assumes all responsibility and liability arising from the
use of the Equipment and Real Property.
7.5 Power of Attorney. Each Borrower and Guarantor hereby
irrevocably designates and appoints Agent (and all persons designated by Agent)
as such Borrower's and Guarantor's true and lawful attorney-in-fact, and
authorizes Agent, in such Borrower's, Guarantor'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 such Borrower's or
Guarantor'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 or Guarantor'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 or Guarantor and handle and store all mail relating
to the Collateral; (ix) sign any Borrower's or Guarantor's name on any
verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof, and (x) do all acts and
things which are necessary, in Agent's determination, to fulfill such Borrower's
or Guarantor'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
or Guarantor'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 or Guarantor'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, and (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 Borrower's or Guarantor's 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 or Guarantor's name for such purpose, and to
complete in such Borrower's or Guarantor's or Agent's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof. Each Borrower and Guarantor 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 wilful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
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7.6 Right to Cure. Agent may, at its option, upon notice to Borrower
Agent, (a) cure any default by any Borrower or Guarantor 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 Guarantor to perform its obligations hereunder or under any of the
other Financing Agreements, (b) pay or bond on appeal any judgment entered
against any Borrower or Guarantor, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and pay any amount, incur any expense or perform any act
which, in Agent's good faith 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 any Borrower's 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 Guarantor. 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, at
the cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower's and Guarantor's premises during normal business
hours and after reasonable notice to Parent, or at any time and without notice
to Borrower Agent 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 each Borrower's and Guarantor's books and records,
including the Records, and (b) each Borrower and Guarantor shall promptly
furnish to Agent such copies of such books and records or extracts therefrom as
Agent may reasonably request, and Agent or any Lender or Agent's designee may
use during normal business hours such of any Borrower's and Guarantor's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing (provided, that, Borrowers and Guarantors shall make such
personnel, equipment, supplies and premises available to Agent or its designee
in such manner so as to minimize any interference with the operations of
Borrowers and Guarantors) 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 Intellectual Property Appraisal. At Agent's request, no more
than once in any twelve (12) month period, but at any time or times as Agent may
request at Agent's expense, or at any time as Agent may request at Borrowers'
expense on or after an Event of Default, deliver or cause to be delivered to
Agent written appraisals as to the Intellectual Property by an appraiser
acceptable to Agent, in form, scope and methodology acceptable to Agent,
addressed to Agent and upon which Agent and Lenders are expressly permitted to
rely.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor 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
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which are a continuing condition of the making of Loans and providing Letter of
Credit Accommodations to Borrowers:
8.1 Corporate Existence, Power and Authority. Each Borrower and
Guarantor is a corporation duly organized and in good standing under the laws of
its state of incorporation 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 each
Borrower's and Guarantor's corporate powers, (b) have been duly authorized, (c)
are not in contravention of law or the terms of any Borrower's or Guarantor's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower or Guarantor is a
party or by which any Borrower or Guarantor 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 any Borrower or Guarantor. This Agreement and the other
Financing Agreements to which any Borrower or Guarantor is a party constitute
legal, valid and binding obligations of such Borrower and Guarantor 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 and Guarantor is as
set forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor 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 and Guarantor is an organization of the type
and organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each
Borrower and Guarantor and each Borrower's and Guarantor'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, subject to the rights of any Borrower or
Guarantor to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof.
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8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor 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 such Borrower
and Guarantor as at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrowers and
Guarantors 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
any Borrower or Guarantor furnished by any Borrower or Guarantor 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 upon the filing of a financing statement,
control or possession by Agent, as applicable, 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 and Guarantor has good and
marketable fee simple title to or valid leasehold interests in all of its Real
Property and good, valid and merchantable title to all of its other properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges 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 and Guarantor 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, where the failure to so file has or could reasonably
be expected to have a Material Adverse Effect. All information in such tax
returns, reports and declarations is complete and accurate in all material
respects. Each Borrower and Guarantor has paid or caused to be paid all material
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 or
Guarantor 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 any Borrower's or Guarantor's knowledge
threatened, against or affecting any Borrower or Guarantor, 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 any Borrower's or Guarantor's knowledge threatened,
against any Borrower or Guarantor or its or their assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, in each case,
which has a reasonable possibility of being adversely determined and which, if
adversely determined against such Borrower or Guarantor, has or could reasonably
be expected to have a Material Adverse Effect.
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8.7 Compliance with Other Agreements and Applicable Laws. To
Borrowers' and Guarantors' knowledge, no Borrower or Guarantor is in default in
any respect under, or in violation in any respect of any 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 where such default or
violation has or could reasonably be expected to have a Material Adverse Effect.
To Borrowers' and Guarantors' knowledge, each Borrower is in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority relating to its 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, all
Federal, State and local statutes, regulations, rules and orders relating to
consumer credit (including, without limitation, as each has been amended, the
Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Fair Credit Reporting Act, and regulations, rules and orders
promulgated thereunder), all Federal, State and local states, regulations, rules
and orders pertaining to sales of consumer goods (including, without limitation,
the Consumer Products Safety Act of 1972, as amended, and the Federal Trade
Commission Act of 1914, as amended, and all regulations, rules and orders
promulgated thereunder) where the failure to so comply has or could reasonably
be expected to have a Material Adverse Effect.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not 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 any
applicable Environmental Law or Permit that is required under any applicable
Environmental Laws where such violation has or could reasonably be expected to
have a Material Adverse Effect, and the operations of Borrowers, Guarantors and
any Subsidiary of any Borrower or Guarantor complies with all Environmental Laws
and all Permits that are required under any applicable Environmental Law where
the failure to so comply has or could reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, 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 any
Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or Guarantor and any Subsidiary of any Borrower or Guarantor 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 has or could reasonably be expected to have a
Material Adverse Effect.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and their Subsidiaries have no liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
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storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials, which has had or could reasonably be
expected to have a Material Adverse Effect.
(d) Borrowers, Guarantors and their Subsidiaries have all
Permits required to be obtained or filed in connection with the operations of
Borrowers and Guarantors 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, where failure to have obtained or filed such could
reasonably be expected to have a Material Adverse Effect.
8.9 Credit Card Agreements. Set forth in Schedule 8.9 hereto is a
correct and complete list of all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among any Borrower, any of its Affiliates, the Credit Card Issuers, the Credit
Card Processors and any of their Affiliates. 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 Receivables 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 such Borrower has entered into one of the Credit Card
Agreements set forth on Schedule 8.9 hereto or with whom Borrower has entered
into a Credit Card Agreement in accordance with Section 9.16 hereof. Each of the
Credit Card Agreements constitutes the legal, valid and binding obligations of
the Borrower that is party thereto and to the best of each Borrower's and
Guarantor's knowledge, the other parties thereto, enforceable in accordance with
their respective terms and is 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. Each Borrower and the other parties
thereto have complied in all material respects with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower to be entitled to receive all payments thereunder. Borrowers have
delivered, or caused to be delivered to Agent, true, correct and complete copies
of all of the Credit Card Agreements.
8.10 Interrelated Businesses. Borrowers and Guarantors make up a
related organization of various entities constituting a single economic and
business enterprise so that Borrowers and Guarantors share an identity of
interests such that any benefit received by any one of them benefits the others.
Borrowers and Guarantors render services to or for the benefit of the other
Borrowers and/or Guarantors, as the case may be, purchase or sell and supply
goods to or from or for the benefit of the others, make loans, advances and
provide other financial accommodations to or for the benefit of the other
Borrowers and Guarantors (including inter alia, the payment by Borrowers and
Guarantors of creditors of the other Borrowers or Guarantors and guarantees by
Borrowers and Guarantors of indebtedness of the other Borrowers and Guarantors
and provide administrative, marketing, payroll and management services to or for
the benefit of the other Borrowers and Guarantors). Substantially all of the
Inventory is paid for pursuant to Letter of Credit Accommodations funded by
Operating on behalf of the other Borrowers or are otherwise paid for by
Operating, and Borrowers use substantially all of the proceeds from the
disposition of the Inventory so purchased to repay the amounts owing to
Operating as a result of such arrangements. Borrowers and Guarantors (other than
JCI) have the same
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chief executive office, centralized accounting and legal services, certain
common officers and directors and generally do not provide consolidating
financial statements to creditors. Nothing contained herein should be construed
to mean that each Borrower and Guarantor is not a separate corporate entity and
entitled to the rights and privileges thereof, and except to the extent
contractually agreed or required under applicable law, no Borrower or Guarantor
is obligated for the liabilities of any other Borrower or Guarantor.
8.11 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 letter from the Internal Revenue Service and to the
best of any Borrower's or Guarantor'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 any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan, which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan, which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets are not less than such
Plan's liabilities under Section 4001(a)(16) of ERISA; (iii) each Borrower and
Guarantor, and their ERISA Affiliates, have not 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)
each Borrower and Guarantor, and their ERISA Affiliates, have not 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) each Borrower and Guarantor, and their ERISA
Affiliates, have not engaged in a transaction that would be subject to Section
4069 or 4212(c) of ERISA.
8.12 Bank Accounts. All of the deposit accounts, investment accounts
or other accounts in the name of or used by any Borrower or Guarantor 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 and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.13 Intellectual Property. Each Borrower and Guarantor 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, Borrowers and Guarantors do not
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have 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. To the
best of any Borrower's and Guarantor'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 any Borrower or Guarantor infringes any patent,
trademark, servicemark, 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 any Borrower or Guarantor contesting
its right to sell or use any such Intellectual Property except as set forth on
Schedule 8.11 to the Information Certificate. Schedule 8.11 to the Information
Certificate sets forth all of the agreements or other arrangements of each
Borrower and Guarantor pursuant to which such Borrower or Guarantor 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 such Borrower or Guarantor as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be entered into by
any Borrower or Guarantor after the date hereof, collectively, the "License
Agreements" and individually, a "License Agreement"). No trademark, servicemark,
copyright or other Intellectual Property at any time used by any Borrower or
Guarantor which is owned by another person, or owned by such Borrower or
Guarantor 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 or Guarantor under applicable
law (including the United States Copyright Act of 1976).
8.14 Subsidiaries; Affiliates; Capitalization; Solvency; Inactive
Entities.
(a) Each Borrower and Guarantor does not have any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by such Borrower or Guarantor 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 and Guarantor 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 and International 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.
(e) Each of C&W Outlet Inc., a New York corporation, J. Crew
Services, Inc., a Delaware corporation, and ERL, Inc., a New Jersey corporation,
is an Inactive Subsidiary and does not and will not engage in any business or
commercial activities and each does not and will not own or hold any assets or
properties. The only activity of J.Crew Virginia, Inc., a Virginia corporation,
is in connection with the issuance of gift cards and store credits for and on
behalf of Borrowers. J. Crew Virginia, Inc. does not and will not engage in any
other business or activity and does not and will not hold any assets or
properties.
8.15 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is
a list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or Guarantor or, to the best of any Borrower's or
Guarantor'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 Guarantor or, to best of any
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Borrower or Guarantor or, to the best of any Borrower's or Guarantor's
knowledge, threatened against any Borrower or Guarantor.
8.16 Restrictions on Subsidiaries. Except for restrictions contained
in this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of
cash or other assets (i) between any Borrower or Guarantor and any of its or
their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor
or (b) the ability of any Borrower or Guarantor or any of its or their
Subsidiaries to incur Indebtedness or grant security interests to Agent or any
Lender in the Collateral.
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8.17 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which any Borrower or Guarantor is a party
or is bound as of the date hereof. Agent has received true, correct and complete
copies of such Material Contracts on or before the date hereof. To Borrowers'
and Guarantors' knowledge, Borrowers and Guarantors are not in breach (for a
period equal to the lesser of ten (10) days or the applicable cure period, if
any, with respect thereto) or in default in any material respect of or under any
Material Contract and have not received any notice of the intention of any other
party thereto to terminate any Material Contract.
8.18 Accuracy and Completeness of Information. All written
information furnished by or on behalf of any Borrower or Guarantor 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 prior to the date hereof which
has had or could reasonably be expected to have a Material Adverse Affect, which
has not been disclosed to Agent in writing prior to the date hereof.
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 or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower and Guarantor 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, except as to any Guarantor other than Parent as permitted in Section
9.7 hereof or to the extent that the failure to maintain the same has or could
reasonably be expected to have a Material Adverse Effect.
(b) No Borrower or Guarantor 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 Borrower Agent 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 or Guarantor providing for the
name change certified by the Secretary
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of State of the jurisdiction of incorporation or organization of such Borrower
or Guarantor as soon as it is available.
(c) No Borrower or Guarantor 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 Borrower Agent 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 or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New Collateral Locations. Each Borrower and Guarantor may only
open any new location within the continental United States provided such
Borrower or Guarantor (a) gives Agent ten (10) days prior written notice of the
intended opening of any such new location and (b) executes and delivers, or
causes to be executed and delivered, 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; provided, that, without limiting
the obligations of Borrowers and Guarantors pursuant to Section 7.1 hereof or
otherwise hereunder, Borrowers and Guarantors shall not be required to comply
with the foregoing conditions with respect to the opening by them of any new
retail or factory store locations.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary 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 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, as
amended, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all Federal, State and local statutes,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended, and
the Federal Trade Commission Act of 1914, as amended, and all regulations, rules
and orders promulgated thereunder) and all applicable Environmental Laws, in
each case where the failure to so comply or observe has or could reasonably be
expected to have a Material Adverse Effect.
(b) Borrowers and Guarantors shall give written notice to Agent
promptly upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor's otherwise obtaining knowledge of, with respect to the
Real Property subject to the Mortgages, (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 any Borrower or Guarantor or
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(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 which is reasonably likely to
result in a material liability. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations of such
matters shall be promptly furnished, or caused to be furnished, by such Borrower
or Guarantor to Agent. Each Borrower and Guarantor shall take action in a
commercially reasonable manner to respond to any material non-compliance with
any of the Environmental Laws as required by law and shall regularly report to
Agent on such response.
(c) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that, with respect to the Real Property subject to
the Mortgages, there is non-compliance, or any condition which requires any
action by or on behalf of any Borrower or Guarantor in order to avoid any
non-compliance, with any Environmental Law which is reasonably likely to result
in a material liability, Borrowers shall, at Agent's request and Borrowers'
expense: (i) cause an independent environmental engineer reasonably acceptable
to Agent to conduct such tests of any such Real Property subject to the
Mortgages 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 requirements of Environmental
Laws with respect to the findings of such tests 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 or Guarantor's
response thereto or the estimated costs thereof, shall change in any material
respect.
(d) Each Borrower and Guarantor shall indemnify 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 at the Real Property subject to the Mortgages, including the
costs of any required or necessary repair, cleanup or other remedial work with
respect to any Real Property of any Borrower or Guarantor subject to the
Mortgages and the preparation and implementation of any closure, remedial or
other plans required by Environmental Laws. 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 and Guarantor shall,
and shall cause any Subsidiary 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, Guarantor or Subsidiary, as the case may be, and with respect to
which adequate reserves have been set aside on its books. Each Borrower and
Guarantor shall be liable for any Tax or penalties other than Excluded Taxes
imposed on Agent or any Lender as a result of the financing arrangements
provided for herein and each Borrower and Guarantor agrees to indemnify and hold
Agent harmless with respect to the
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foregoing, and to repay to Agent, for the benefit of Lenders, on demand the
amount thereof, and until paid by such Borrower or Guarantor such amount shall
be added and deemed part of the Loans, provided, that, nothing contained herein
shall be construed to require any Borrower or Guarantor to pay any income or
franchise taxes attributable to the income of Agent or Lenders from any amounts
charged or paid hereunder to Agent or Lenders. The foregoing indemnity shall
survive the payment of the Obligations and the termination of this Agreement. If
Agent or any Lender receives a tax refund or credit ("Tax Benefit"), or
otherwise would have received a Tax Benefit in respect of Agent's or such
Lender's Taxes which, in the good faith determination of Agent or such Lender,
as the case may be, is allocable to a Borrower or Guarantor, Agent shall
promptly remit such Tax Refund to such Borrower or Guarantor; provided, that, no
Event of Default exists or has occurred and is continuing.
9.5 Insurance. Each Borrower and Guarantor shall, and shall cause
any Subsidiary 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. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Agent as
Agent shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor 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 and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors 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 and Guarantors 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, Guarantor or
any of its or their Affiliates. Without limiting any other rights of Agent or
Lenders, any insurance proceeds received by Agent at any time may be applied to
payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine. Upon application of such proceeds to the
Revolving Loans, Revolving Loans may be available subject and pursuant to the
terms hereof to be used for the costs of repair or replacement of the Collateral
lost or damages resulting in the payment of such insurance proceeds.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary 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, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall furnish or cause to be
furnished to Agent, the following: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited
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consolidated financial statements (including balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and unaudited consolidating financial statements (consisting of balance
sheets and statements of income and loss), all in reasonable detail, fairly
presenting in accordance with GAAP the financial position and the results of the
operations of Parent and its Subsidiaries as of the end of and through such
fiscal month, certified by the chief financial officer or controller of Parent,
subject to normal year-end adjustments and no footnotes and accompanied by a
compliance certificate substantially in the form of Exhibit C hereto, along with
a schedule in a form satisfactory to Agent of the calculations used in
determining, as of the end of such month, whether Borrowers and Guarantors are
in compliance with the covenants set forth in Sections 9.18 and 9.19 of this
Agreement for such month and (ii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements (including in each case,
balance sheets and statements of income and loss, statements of cash flow and
statements of shareholders' equity) of Parent and its Subsidiaries, and the
accompanying notes thereto (including in each case, balance sheets and
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Parent and its Subsidiaries as of
the end of and for such fiscal year, together with the unqualified opinion 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 Parent
and its Subsidiaries as of the end of and for the fiscal year then ended.
(b) At such time as available, but in no event later than five
(5) days prior to the end of each fiscal year (commencing with the fiscal year
of Parent ending in January of 2003), projected consolidated financial
statements (including in each case, balance sheets and statements of income and
loss, statements of cash flow, and statements of shareholders' equity) of Parent
and its Subsidiaries for the next fiscal year (including forecasted income
statements, cash flow statements and balance sheets and statements of income and
loss), all in reasonable detail, and in a format consistent with the projections
delivered by Parent to Agent prior to the date hereof, together with such
supporting information as Agent may reasonably request. Such projected financial
statements shall be prepared on a monthly basis for the next succeeding year.
Such projections shall represent Borrowers' reasonable best estimate of the
future financial performance of Borrowers for the periods set forth therein and
shall have been prepared on the basis of the assumptions set forth therein which
Borrowers believe are fair and reasonable as of the date of preparation in light
of current and reasonably foreseeable business conditions (it being understood
that actual results may differ from those set forth in such projected financial
statements). Each year Borrowers shall provide to Agent a semi-annual update
with respect to such projections.
(c) At such time as available, but in no event later than thirty
(30) days after the end of each fiscal quarter, Borrower Agent shall furnish to
Agent a profit and loss summary analysis on a store-by-store basis for all store
locations with respect to the immediately preceding twelve (12) months.
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(d) Borrowers and Guarantors 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
$1,000,000 or which if adversely determined would have a Material Adverse
Effect, (ii) any Material Contract being terminated or amended or any new
Material Contract entered into (in which event Borrowers and Guarantors shall
provide Agent with a copy of such Material Contract), (iii) any order, judgment
or decree in excess of $1,000,000 shall have been entered against any Borrower
or Guarantor any of its or their properties or assets, (iv) any written
notification of a material violation of laws or regulations received by any
Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any
Default or Event of Default.
(e) Borrowers and Guarantors shall promptly after the sending or
filing thereof furnish or cause to be furnished to Agent copies of all reports
which any Borrower or Guarantor sends to its stockholders generally and copies
of all reports and registration statements which any Borrower or Guarantor files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(f) Borrowers and Guarantors shall furnish or cause to be
furnished to Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrowers and Guarantors, 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 Borrowers and Guarantors 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. Each Borrower and Guarantor
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, at Borrowers' expense, copies of the financial statements of any
Borrower and Guarantor and any reports or management letters prepared by such
accountants or auditors on behalf of any Borrower or Guarantor and to disclose
to Agent and Lenders such information as they may have regarding the business of
any Borrower and Guarantor. Any documents, schedules, invoices or other papers
delivered to Agent or any Lender may be destroyed or otherwise disposed of by
Agent or such Lender one (1) year after the same are delivered to Agent or such
Lender, except as otherwise designated by Borrower Agent to Agent or such Lender
in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary 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 that
any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with
and into or consolidate with any other wholly-owned Subsidiary of Parent (other
than any Borrower), and any Borrower may merge with and into or consolidate with
any other Borrower, provided, that, each of the following conditions is
satisfied as determined by Agent in good faith: (i) Agent shall have received
not less than ten (10) Business Days' prior written notice of the intention of
such Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Agent, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the
assets of the persons that are merging or consolidating, and the
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material agreements and documents relating to such merger or consolidation, (ii)
Agent shall have received such other information with respect to such merger or
consolidation as Agent may reasonably request, (iii) as of the effective date of
the merger or consolidation and after giving effect thereto, no Default or Event
of Default shall exist or have occurred, (iv) Agent shall have received, true,
correct and complete copies of all agreements, documents and instruments
relating to such merger or consolidation, including, but not limited to, the
certificate or certificates of merger to be filed with each appropriate
Secretary of State (with a copy as filed promptly after such filing), (v) the
surviving corporation shall expressly confirm, ratify and assume the Obligations
and the Financing Agreements to which it is a party in writing, in form and
substance reasonably satisfactory to Agent, and Borrowers and Guarantors shall
execute and deliver such other agreements, documents and instruments as Agent
may request in connection therewith;
(b) sell, issue, assign, lease, license, 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 any Borrower or Guarantor) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $4,000,000 for all such Equipment disposed of in any fiscal year of
Borrowers or as Agent may otherwise agree,
(iii) the issuance and sale by any Borrower or Guarantor
of Capital Stock of such Borrower or Guarantor after the date hereof; provided,
that, (A) Agent shall have received not less than ten (10) Business Days' prior
written notice of such issuance and sale by such Borrower or Guarantor, which
notice shall specify the parties to whom such shares are to be sold, the terms
of such sale, the total amount which it is anticipated will be realized from the
issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
such Borrower or Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, except as otherwise permitted in Section 9.11 hereof and except after
the end of the then current term of this Agreement and the payment in full in
cash or other immediately available funds of all of the Obligations, (C) the
terms of such Capital Stock, and the terms and conditions of the purchase and
sale thereof, shall not include any terms that include any limitation on the
right of any Borrower to request or receive Loans or Letter of Credit
Accommodations or the right of any Borrower and Guarantor to amend or modify any
of the terms and conditions of this Agreement or any of the other Financing
Agreements or otherwise in any way relate to or affect the arrangements of
Borrowers and Guarantors with Agent and Lenders or are more restrictive or
burdensome to any Borrower or Guarantor than the terms of any Capital Stock in
effect on the date hereof, (D) except with respect to any sale and issuance of
Capital Stock of Parent or Operating and as to the other Borrowers and
Guarantors and their respective Subsidiaries, except as Agent may otherwise
agree in writing, all of the proceeds of the sale and issuance of such Capital
Stock shall be paid to Agent for application to the Obligations in accordance
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with Section 6.4(a) hereof and (E) as of the date of such issuance and sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred,
(iv) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for
the benefit of its employees, directors and consultants, provided, that, in no
event shall such Borrower or Guarantor be required to issue, or shall such
Borrower or Guarantor 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,
(v) sales or other dispositions by any Borrower of
assets in connection with the closing or sale of a retail store location of such
Borrower in the ordinary course of such Borrower's business which 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 sales and closings, (A) on the date of, and after giving effect to, any
such closing or sale, the number of (1) retail store locations operated by
Retail closed or sold by Borrowers in any fiscal year minus the number of retail
stores operated by Retail opened by Borrowers in such fiscal year, shall not
exceed the amount equal to ten (10%) percent of the number of retail store
locations of Borrowers operated by Retail and (2) retail store locations
operated by Factory closed or sold by Borrowers in any fiscal year minus the
number of retail stores operated by Factory opened by Borrowers in such fiscal
year, shall not exceed the amount equal to thirty (30%) percent of the number of
retail store locations of Borrowers operated by Factory, in each case as of the
end of the immediately preceding fiscal year, but in no event shall the
aggregate amount of all sales at all of the store locations (including both
stores operated by Retail and Factory) closed or sold by Borrowers in any fiscal
year have been more than $50,000,000 in the immediately preceding fiscal year,
(B) Agent shall have received not less than ten (10) Business Days prior written
notice of such sale or closing, which notice shall set forth in reasonable
detail satisfactory to Agent, the parties to such sale or other disposition, 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, (C) as of the date of such sale or other disposition and after giving
effect thereto, no Event of Default shall exist or have occurred and be
continuing, (D) such sale shall be on commercially reasonable prices and terms
in a bona fide arm's length transaction, and (E) any and all proceeds payable or
delivered to such Borrower in respect of such sale or other disposition shall be
paid or delivered, or caused to be paid or delivered, to Agent in accordance
with the terms of this Agreement (except to the extent such proceeds reflect
payment in respect of Indebtedness secured by a properly perfected first
priority security interest in the assets sold, in which case, such proceeds
shall be applied to such indebtedness secured thereby),
(vi) the grant by any Borrower or Guarantor after the
date hereof of a non- exclusive license or an exclusive license to any person
for the use of any Intellectual Property consisting of trademarks owned by such
Borrower or Guarantor; provided, that, as to any such license, each of the
following conditions is satisfied, (A) such license is only for the use of
trademarks in the manufacture, distribution or sale of products outside the
United States of America and Canada or, if such license is for the use of such
trademarks in the manufacture, distribution or sale of products within the
United
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States of America or Canada, it is only for categories or types of Inventory
other than men's or women's wearing apparel of the type or category being sold
by any Borrower or Guarantor as of the date of this Agreement or that Borrower
and Guarantors do not manufacture, distribute or sell, (B) such licenses shall
be on commercially reasonable prices and terms in a bona fide arms' length
transactions, (C) in the case of a non-exclusive license, the rights of the
licensee shall be subject to the rights of Agent, and in the case of any
license, shall not adversely affect, limit or restrict the rights of Agent to
use any Intellectual Property of a Borrower or Guarantor to sell or otherwise
dispose of any Inventory or other Collateral, (D) Agent shall have received,
true, correct and complete copies of the executed license agreement, promptly
upon the execution thereof and (E) as of the date of the grant of any such
license, and after giving effect thereto, no Event of Default shall exist or
have occurred and be continuing,
(vii) sales, transfers and dispositions to Operating or
a Subsidiary of Operating (other than an Inactive Subsidiary); provided, that,
any such sales, transfers or dispositions involving a Subsidiary that is not a
Borrower or Guarantor shall be made in compliance with Section 9.12 hereof,
(c) wind up, liquidate or dissolve except that any Guarantor
(other than Parent) may wind up, liquidate and dissolve, provided, that, each of
the following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor shall not violate any law or any order or decree
of any court or other Governmental Authority in any material respect and shall
not conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or any other agreement or instrument to
which any Borrower or Guarantor is a party or may be bound, (ii) such winding
up, liquidation or dissolution shall be done in accordance with the requirements
of all applicable laws and regulations, (iii) effective upon such winding up,
liquidation or dissolution, all of the assets and properties of such Guarantor
shall be duly and validly transferred and assigned to its shareholders, free and
clear of any liens, restrictions or encumbrances other than the security
interest and liens of Agent (and Agent shall have received such evidence thereof
as Agent may require) and Agent shall have received such deeds, assignments or
other agreements as Agent may request to evidence and confirm the transfer of
such assets to of such Guarantor to such shareholders, (iv) Agent shall have
received all documents and agreements that any Borrower or Guarantor has filed
with any Governmental Authority or as are otherwise required to effectuate such
winding up, liquidation or dissolution, (v) no Borrower or Guarantor shall
assume any Indebtedness, obligations or liabilities as a result of such winding
up, liquidation or dissolution, or otherwise become liable in respect of any
obligations or liabilities of the entity that is winding up, liquidating or
dissolving, unless such Indebtedness is otherwise expressly permitted hereunder,
(vi) Agent shall have received not less than ten (10) Business Days prior
written notice of the intention of such Guarantor to wind up, liquidate or
dissolve, and (vii) as of the date of such winding up, liquidation or
dissolution and after giving effect thereto, no Event of Default shall exist or
have occurred; or
(d) agree to any of the foregoing set forth in subsections (a)
through (c) of this Section 9.7.
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9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, create, incur, assume or suffer to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties, including the Collateral,
or file or permit the filing of, or permit to remain in effect, any financing
statement or other similar notice of any security interest or lien with respect
to any such assets or properties, except:
(a) the security interests and 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 such Borrower, or Guarantor or Subsidiary, 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 such Borrower's,
Guarantor's or Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or which is being contested in good faith and
by appropriate proceedings, diligently pursued and available to such Borrower,
Guarantor or Subsidiary or (ii) such liens secure Indebtedness relating to
claims or liabilities that 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,
Guarantor or such Subsidiary, but in each case under clause (i) and (ii) hereof,
(A) prior to the commencement of foreclosure or other similar proceedings, (B)
with respect to which adequate reserves have been set aside on its books, (C)
subject to the right of Agent, at its option, to establish a Reserve in respect
thereof (which Reserve shall be terminated upon the payment and satisfaction in
full of such Indebtedness and the receipt by Agent of evidence thereof
satisfactory to Agent or may be used by Agent to pay such Indebtedness after
notice to Borrower Agent in the event of the commencement or threatened
commencement (to the extent such threat is imminent as determined in good faith
by Agent) of any action by the party to whom such Indebtedness is owed to
exercise its remedies with respect thereto or to the extent necessary for Agent
to exercise any of its rights or remedies); and (D) as to any such liens (or the
Indebtedness secured thereby) that are being contested, the aggregate amount of
the Indebtedness secured by all such liens at any time outstanding shall not
exceed $1,000,000;
(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 such Borrower, Guarantor or such Subsidiary as presently
conducted thereon or, in the case of Real Property subject to the Mortgages,
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;
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(f) pledges and deposits of cash by any Borrower or Guarantor
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 or Guarantor as
of the date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor
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 or Guarantor 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 in good faith;
(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 any Borrower or Guarantor
located on the premises of such Borrower or Guarantor (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 or
Guarantor and the precautionary UCC financing statement filings in respect
thereof;
(i) liens or rights of setoff against credit balances of
Borrowers with Credit Card Issuers or Credit Card Processors or amounts owing by
such Credit Card Issuers or Credit Card Processors to Borrower in the ordinary
course of business, but not liens on or rights of setoff against any other
property or assets of Borrowers, pursuant to the Credit Card Agreements (as in
effect on the date hereof) to secure the obligations of Borrowers to the Credit
Card Issuers or Credit Card Processors as a result of fees and chargebacks;
(j) statutory or common law liens or rights of setoff of
depository banks with respect to funds of Borrowers or Guarantors at such banks
to secure fees and charges in connection with returned items or the standard
fees and charges of such banks in connection with the deposit accounts
maintained by Borrowers and Guarantors at such banks (but not any other
Indebtedness or obligations);
(k) deposits of cash with the owner or lessor of premises leased
and operated by Borrowers in the ordinary course of the business of Borrowers to
secure the performance by Borrowers of their respective obligations under the
terms of the lease for such premises;
(l) 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 and available to such Borrower, Guarantor or Subsidiary, (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 (which
Reserve shall be terminated simultaneously with the payment and
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satisfaction in full of the Indebtedness secured thereby and the receipt by
Agent of evidence thereof satisfactory to Agent or may be used by Agent to pay
such Indebtedness after notice to Borrower Agent in the event of the
commencement or threatened commencement (to the extent such threat is imminent
as determined in good faith by Agent) of any action by the party to whom such
Indebtedness is owed to exercise its remedies with respect thereto or to the
extent necessary for Agent to exercise any of its rights or remedies); and
(m) the security interests and liens set forth on Schedule 8.4
to the Information Certificate;
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary 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 $10,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of such Borrower, Guarantor or 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 any Borrower or Guarantor of the Obligations
of the other Borrowers or Guarantors in favor of Agent for the benefit of
Lenders;
(d) unsecured guarantees by Parent or a Borrower of the
obligations of a Borrower arising pursuant to a lease or license by a third
party in a bona fide arm's length transaction of real property for use as a
retail store location in the ordinary course of the business of such Borrower;
provided, that, (i) the Person issuing such guarantee is permitted hereunder to
incur directly the obligation that is being guaranteed and (ii) as of the date
on which such guarantee is issued no Event of Default exists or has occurred and
is continuing;
(e) unsecured guarantees by any Borrower or Guarantor of the
obligations to a third party of any other Borrower or Guarantor (other than
Parent); provided, that, (i) the Person issuing such guarantee is permitted
hereunder to incur directly the Indebtedness that is being guaranteed, and (ii)
as of the date on which such guarantee is issued, no Event of Default exists or
has occurred and is continuing;
(f) the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor arising after the date hereof pursuant to loans by any
Borrower or Guarantor permitted under Section 9.10(g) hereof;
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(g) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof to any third party (but not to any other Borrower or
Guarantor and other than any Indebtedness permitted under Sections 9.9(h) or
9.9(i) below) pursuant to loans in cash or other immediately available funds by
such person to such Borrower or Guarantor, provided, that, each of the following
conditions is satisfied as determined by Agent: (i) such Indebtedness shall be
on terms and conditions reasonably acceptable to Agent, (ii) in no event shall
any Borrower or Guarantor make, or be required to make under the terms thereof,
payments in respect of such Indebtedness prior to the date one hundred eighty
(180) days after the end of the then current term of this Agreement (other than
regularly scheduled payments of interest and fees or payments pursuant to the
issuance of additional Indebtedness on substantially the same terms as the
initial Indebtedness), (iii) Agent shall have received not less than ten (10)
Business Days' prior written notice of the intention of such Borrower or
Guarantor 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 reasonably request with respect thereto, (iv) Agent shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, (v) 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,
(vi) the aggregate principal amount of all such Indebtedness shall not exceed
$10,000,000, (vii) as of the date of incurring such Indebtedness and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred, (viii) such Borrower and Guarantor 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, such Borrower
or Guarantor 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 (ix) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;
(h) unsecured Indebtedness of Parent arising after the date
hereof to any Person (but not to any other Borrower or Guarantor and other than
any Indebtedness permitted under Sections 9.9(g) above or 9.9(i) below) pursuant
to loans in cash or other immediately available funds by such person to Parent,
provided, that, each of the following conditions is satisfied as determined by
Agent: (i) such Indebtedness shall be on terms and conditions reasonably
acceptable to Agent, (ii) in no event shall any Borrower or Guarantor make, or
be required to make under the terms thereof, payments in respect of such
Indebtedness prior to the termination of this Agreement and the payment in full
in cash or other immediately available funds of all of the Obligations (other
than payments pursuant to the issuance of additional Indebtedness by Parent on
substantially the same terms as the initial Indebtedness), (iii)
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Agent shall have received prior written notice of the intention of Parent 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 reasonably request with respect thereto, (iv) Agent shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, (v) Parent
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, Parent 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 payments in the form permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vi) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;
(i) unsecured Indebtedness of Operating arising after the date
hereof to TPG Partners, any Affiliate of TPG Partners or any third party to the
extent such Indebtedness of Operating to such third party is guaranteed by TPG
Partners or any Affiliate of TPG Partners (other than any Indebtedness permitted
under Sections 9.9(g) or 9.9(h) above) pursuant to loans in cash or other
immediately available funds by such person to Operating, provided, that, each of
the following conditions is satisfied as determined by Agent: (i) such
Indebtedness shall be on terms and conditions reasonably acceptable to Agent,
and such Indebtedness shall be subject and subordinate in right of payment to
the right of Agent and Lenders to receive the prior indefeasible payment and
satisfaction in full in cash or other immediately available funds of all of the
Obligations pursuant to the terms of an intercreditor agreement between Agent
and the person to whom such Indebtedness is owed, in form and substance
satisfactory to Agent, (ii) Agent shall have received prior written notice of
the intention of Operating 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 reasonably 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) Operating 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, Operating 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 that
may be permitted under the terms of the intercreditor agreement referred to
above), or set aside or otherwise deposit or invest any sums for such purpose,
and (v) Borrowers and
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Guarantors shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;
(j) Indebtedness of Parent evidenced by the Senior Discount
Debentures as in effect on the date hereof or as permitted to be amended
pursuant to the terms hereof, provided, that:
(i) the aggregate amount of such Indebtedness shall not
exceed $142,000,000, less the aggregate amount of all repayments or redemptions,
whether optional or mandatory, in respect thereof, plus interest thereon at the
rate provided for in the Senior Discount Debentures as in effect on the date
hereof,
(ii) the Credit Facility is and shall at all times
continue to be the "New Credit Facility" as such term is defined in the Senior
Debenture Indenture as in effect on the date hereof and is and shall be entitled
to all of the rights and benefits thereof, if any, under the Senior Debenture
Indenture as in effect on the date hereof,
(iii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that they
may make regularly scheduled payments of interest and fees, if any, in respect
of such Indebtedness when due in accordance with the terms of the Senior
Discount Debentures and the Senior Debenture Indenture, in each case as in
effect on the date hereof and any reasonable and customary fees required to be
paid to holders of the Senior Discount Debentures in connection with a consent
solicitation,
(iv) Borrowers and Guarantors shall not, directly or
indirectly, amend, modify, alter or change, in each case, in any material
respect any terms of such Indebtedness or any of the Senior Discount Debentures,
the Senior Debenture Indenture or any related agreements, documents and
instruments, except that Borrowers and Guarantors 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 to eliminate any covenants contained therein, or make
any such covenants less restrictive or otherwise more favorable to any Borrower
or Guarantor, and
(v) Borrowers and Guarantors shall not, directly or
indirectly, redeem, retire, defease, purchase or otherwise acquire all or any
part of such Indebtedness other than at maturity (as set forth in the Senior
Debenture Indenture as in effect on the date hereof or as extended after the
date hereof), or set aside or otherwise deposit or invest any sums for such
purpose, except that
(A) Borrowers or Guarantors may redeem, retire,
defease, purchase or otherwise acquire all or any part of such Indebtedness with
Refinancing Indebtedness with respect thereto to the extent permitted under
Section 9.9(o) hereof,
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(B) Borrowers or Guarantors may redeem, retire,
defease, purchase or otherwise acquire all or any portion of such Indebtedness
with the net proceeds of the issuance and sale of Capital Stock of Parent or
Operating permitted hereunder received by such Borrower or Guarantor in cash or
other immediately available funds, provided, that, as of the date of any such
redemption or purchase or any payment in respect thereof and after giving effect
thereto, (1) Borrowers and Guarantors shall have complied with all of the
requirements of Sections 9.7(b)(iii)(A), (B), (C) and (E) with respect to such
issuance and sale of Capital Stock and in addition to such requirements, the
notice provided to Agent pursuant thereto shall specify that the proceeds are to
be used for the redemption, retirement, defeasance, purchase or acquisition of
all or any part all of such Indebtedness (and shall specify which of the
foregoing is intended), the maximum amount that Borrowers and Guarantors will
pay in respect thereof and the range of the principal amount of the Senior
Discount Debentures that Borrowers and Guarantors anticipate will be so
redeemed, retired, defeased, purchased or otherwise acquired, (2) the
redemption, retirement, defeasance, repurchase or acquisition of all or any part
of such Indebtedness shall be substantially contemporaneous with the issuance
and sale of the Capital Stock of Parent or Operating subject to such notice
provided to Agent, (3) as of the date of any such payment and after giving
effect thereto, there shall be Excess Availability, and (4) as of the date of
any such payment and after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing,
(C) Borrowers or Guarantors may redeem or
repurchase such Indebtedness in cash or other immediately available funds (other
than with proceeds of the issuance and sale of Capital Stock of Parent or
Operating as provided in clause (B) above); provided, that, (1) Borrower Agent
shall have provided to Agent not less than ten (10) Business Days' notice of the
intention of such Borrower or Guarantor to redeem or purchase such Indebtedness
(specifying the amount to be paid by Borrowers or Guarantors and the principal
amount of the Senior Discount Debentures that Borrowers and Guarantors
anticipate will be so redeemed or repurchased), (2) for each of the immediately
preceding thirty (30) consecutive days, Excess Availability shall have been not
less than $50,000,000 and as of the date of any such payment and after giving
effect thereto, Excess Availability shall be not less than $50,000,000 and (3)
as of the date of such payment and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing;
(k) Indebtedness of Operating evidenced by the Subordinated
Notes as in effect on the date hereof or as permitted to be amended pursuant to
the terms hereof, provided, that:
(i) the aggregate amount of such Indebtedness shall not
exceed $150,000,000, less the aggregate amount of all repayments or redemptions,
whether optional or mandatory, in respect thereof, plus interest thereon at the
rate provided for in the Subordinated Notes as in effect on the date hereof,
(ii) the Credit Facility is and shall at all times
continue to be the "New Credit Facility" as such term is defined in the
Subordinated Note Indenture as in effect on the date thereof, and the
Obligations are and shall at all times constitute "Senior Debt" and "Designated
Senior Debt" as each of such terms is defined in the Subordinated Note Indenture
as in effect on the date hereof and Agent and
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Lenders are and shall be entitled to all of the rights and benefits thereof
under the Subordinated Note Indenture as in effect on the date hereof and there
shall be no other "Designated Senior Debt" except as Agent may otherwise agree
in writing,
(iii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that they
may make regularly scheduled payments of interest and fees, if any, in respect
of such Indebtedness when due in accordance with the terms of the Subordinated
Notes and the Subordinated Note Indenture in each case as in effect on the date
hereof and any reasonable and customary fees required to be paid to holders of
the Subordinated Notes in connection with a consent solicitation,
(iv) Borrowers and Guarantors shall not, directly or
indirectly, amend, modify, alter or change in each case, in any material respect
any terms of such Indebtedness or any of the Subordinated Notes, the
Subordinated Indenture or any related agreements, documents and instruments,
except that Borrowers and Guarantors 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 to
eliminate any covenants contained therein, or make any such covenants less
restrictive or otherwise more favorable to any Borrower or Guarantor, and
(v) Borrowers and Guarantors shall not, directly or
indirectly, redeem, retire, defease, purchase or otherwise acquire all or any
part of such Indebtedness other than at maturity (as set forth in the
Subordinated Note Indenture as in effect on the date hereof or as extended after
the date hereof), or set aside or otherwise deposit or invest any sums for such
purpose, except that
(A) Borrowers or Guarantors may redeem, retire,
defease, purchase or otherwise acquire all or any part of such Indebtedness with
Refinancing Indebtedness with respect thereto to the extent permitted under
Section 9.9(o) hereof,
(B) Borrowers or Guarantors may redeem, retire,
defease, purchase or otherwise acquire all or any portion of such Indebtedness
with the net proceeds of the issuance and sale of Capital Stock of Parent or
Operating permitted hereunder received by such Borrower or Guarantor in cash or
other immediately available funds, provided, that, as of the date of any such
redemption or purchase or any payment in respect thereof and after giving effect
thereto, (1) Borrowers and Guarantors shall have complied with all of the
requirements of Sections 9.7(b)(iii)(A), (B), (C) and (E) with respect to such
issuance and sale of Capital Stock and in addition to such requirements, the
notice provided to Agent pursuant thereto shall specify that the proceeds are to
be used for the redemption, retirement, defeasance, purchase or acquisition of
all or any part all of such Indebtedness (and shall specify which of the
foregoing is intended), the maximum amount that Borrowers and Guarantors will
pay in respect thereof and the range of the principal amount of the Subordinated
Notes that Borrowers and Guarantors anticipate will be so redeemed, retired,
defeased, purchased or otherwise acquired, (2) the redemption, retirement,
defeasance, repurchase or acquisition of all or any part of such
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Indebtedness shall be substantially contemporaneous with the issuance and sale
of the Capital Stock of Parent or Operating subject to such notice provided to
Agent, (3) as of the date of any such payment and after giving effect thereto,
there shall be Excess Availability, and (4) as of the date of any such payment
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing,
(C) Borrowers or Guarantors may redeem or
repurchase such Indebtedness in cash or other immediately available funds (other
than with proceeds of the issuance and sale of Capital Stock of Parent or
Operating as provided in clause (B) above); provided, that, (1) Borrower Agent
shall have provided to Agent not less than ten (10) Business Days' notice of the
intention of such Borrower or Guarantor to redeem or purchase such Indebtedness
(specifying the amount to be paid by Borrowers or Guarantors and the principal
amount of the Subordinated Notes that Borrowers and Guarantors anticipate will
be so redeemed or repurchased), (2) for each of the immediately preceding thirty
(30) consecutive days, Excess Availability shall have been not less than
$50,000,000 and as of the date of any such payment and after giving effect
thereto, Excess Availability shall be not less than $50,000,000 and (3) as of
the date of such payment and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing;
(l) contingent Indebtedness arising pursuant to the guarantee
existing on the date hereof by any Subsidiary of Operating of the Indebtedness
of Operating evidenced by the Subordinated Notes to the extent such Indebtedness
of Operating is permitted hereunder, set forth in the Subordinated Note
Indenture as in effect on the date hereof;
(m) Indebtedness incurred in respect of workers' compensation
claims, self- insurance obligations, performance, surety and similar bonds and
completion guarantees provided by a Borrower or Guarantor in the ordinary course
of business consistent with current practices as of the date hereof;
(n) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument (other than
daylight overdrafts and drafts in the controlled disbursement accounts to be
covered by Loans) inadvertently drawn against insufficient funds in the ordinary
course of business; provided, that, such Indebtedness shall be repaid within
five (5) days of its incurrence and shall not exceed $1,000,000 outstanding at
any one time;
(o) Indebtedness of Parent or Operating, as the case may be,
arising after the date hereof issued in exchange for, or the proceeds of which
are used to extend, refinance, replace or substitute for Indebtedness permitted
under Section 9.9(j) and Section 9.9(k) hereof (the "Refinancing Indebtedness");
provided, that, as to any such Refinancing Indebtedness, each of the following
conditions is satisfied: (i) Agent shall have received not less than ten (10)
Business Days' prior written notice of the intention to incur such Indebtedness,
which notice shall set forth in reasonable detail satisfactory to Agent, the
amount of such Indebtedness, the schedule of repayments and maturity date with
respect thereto and such other information with respect thereto as Agent may
reasonably request, (ii) promptly upon Agent's request, Agent shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, as duly
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authorized, executed and delivered by the parties thereto, (iii) the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity and a final maturity
equal to or greater than the Weighted Average Life to Maturity and the final
maturity, respectively, of the Indebtedness being extended, refinanced,
replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in
right of payment no more senior than, and be at least as subordinated (if
subordinated) to, the Obligations as the Indebtedness being extended,
refinanced, replaced or substituted for, (v) the Refinancing Indebtedness shall
not include terms and conditions with respect to any Borrower or Guarantor which
are more burdensome or restrictive in any material respect than those included
in the Indebtedness so extended, refinanced, replaced or substituted for, (vi)
such Indebtedness incurred by any Borrower or Guarantor shall be at rates and
with fees or other charges that are commercially reasonable, (vii) the incurring
of such Indebtedness shall not result in an Event of Default, (viii) the
principal amount of such Refinancing Indebtedness shall not exceed the principal
amount of the Indebtedness so extended, refinanced, replaced or substituted for
(plus the amount of refinancing fees and expenses incurred in connection
therewith outstanding on the date of such event), (ix) Borrowers and Guarantors
may only make payments of principal, interest and fees, if any, in respect of
such Indebtedness to the extent such payments would have been permitted
hereunder in respect of the Indebtedness so extended, refinanced, replaced or
substituted for (and except as otherwise permitted below), (x) Borrowers and
Guarantors shall not, directly or indirectly, (A) amend, modify, alter or change
any terms of the agreements with respect to such Refinancing Indebtedness,
except that Borrowers and Guarantors may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof to the extent permitted with
respect to the Indebtedness so extended, refinanced, replaced or substituted
for, or (B) redeem, retire, defease, purchase or otherwise acquired such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose (other than with Refinancing Indebtedness to the extent permitted herein
and to the extent permitted with respect to the Indebtedness so extended,
refinanced, replaced or substituted for), and (xi) Borrowers and Guarantors
shall furnish to Agent copies of all material notices or demands in connection
with Indebtedness received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be; and
(p) the Indebtedness set forth on Schedule 9.9 to the
Information Certificate; provided, that, (i) Borrowers and Guarantors may only
make regularly scheduled payments of principal and interest in respect of such
Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such Indebtedness as in effect on the date hereof,
(ii) Borrowers and Guarantors 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, Borrowers and Guarantors 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) Borrowers
and Guarantors shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on
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its behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be.
9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not,
and shall not permit any Subsidiary to, directly or indirectly, make any loans
or advance money or property to any person, or invest in (by capital
contribution or otherwise) or purchase or repurchase the Capital Stock 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 equity investments of each Borrower and Guarantor in its
Subsidiaries, provided, that, no Borrower or Guarantor 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 any Borrower or Guarantor to employees
of such Borrower or Guarantor not to exceed the principal amount of $3,000,000
in the aggregate at any time outstanding for: (i) 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 or Guarantor and (ii)
reasonable and necessary relocation expenses of such employees (including home
mortgage financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by
any Person (or the representative of such Person) in respect of Indebtedness of
such Person owing to such Borrower or Guarantor 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 or Guarantor as Agent may
request;
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed;
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(g) loans by Operating to any Subsidiary of Operating (other
than an Inactive Subsidiary) or by any Subsidiary of Operating to Operating or
any other Subsidiary of Operating (other than an Inactive Subsidiary), provided,
that, as to all of such loans, the Indebtedness arising pursuant to any such
loan shall not be evidenced by a promissory note or other instrument, unless the
single original of such note or other instrument is promptly delivered to Agent
upon its request to hold as part of the Collateral, with such endorsement and/or
assignment by the payee of such note or other instrument as Agent may require,
(h) the formation by Parent of a direct wholly-owned Subsidiary
after the date hereof that is incorporated under the laws of a State of the
United States of America; provided, that, each of the following conditions is
satisfied: (i) the only asset of such wholly-owned Subsidiary shall be Capital
Stock of Operating issued after the date hereof to the extent such issuance is
permitted under this Agreement and such Subsidiary shall not engage in any
business or commercial activity or own or hold any other assets or properties,
(ii) Parent shall cause any such Subsidiary to execute and deliver to Agent,
each of the following, in each case in form and substance satisfactory to Agent:
(A) an absolute and unconditional guarantee of payment of the Obligations, (B) a
security agreement granting to Agent a first security interest in and lien upon
all of the assets of any such Subsidiary, and (C) such other agreements,
documents and instruments as Agent may require and (iii) Parent shall (A)
execute and deliver to Agent, a pledge and security agreement, in form and
substance satisfactory to Agent, granting to Agent a first pledge of and lien on
all of the issued and outstanding shares of Capital Stock of any such
Subsidiary, and (B) deliver the original stock certificates evidencing such
shares of Capital Stock (or such other evidence as may be issued in the case of
a limited liability company), together with stock powers with respect thereto
duly executed in blank (or the equivalent thereof in the case of a limited
liability company in which such interests are certificated, or otherwise take
such actions as Agent shall require with respect to Agent's security interests
therein),
(i) other investments in an aggregate amount not to exceed
$1,000,000 at any time outstanding, provided, that, as of the date of any such
investment and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing;
(j) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances,
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change the terms of such loans and advances or any agreement, document or
instrument related thereto and Borrowers and Guarantors shall furnish to Agent
all notices or demands in connection with such loans and advances either
received by any Borrower or Guarantor or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Restricted Payments. Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except:
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(a) Parent or Operating may make Restricted Payments with
respect to its Capital Stock payable solely in additional shares of its Capital
Stock that satisfies the requirements for issuance of Capital Stock by Parent or
Operating under Section 9.7(b)(iii) hereof;
(b) Parent may make Restricted Payments with respect to the
14.50% Series A Preferred Stock of Parent and the 14.50% payment-in-kind Series
B Redeemable Cumulative Preferred Stock of Parent, payable solely in additional
shares of such preferred stock;
(c) Subsidiaries of Operating may make Restricted Payments to
Operating and to wholly owned Subsidiaries of Operating (other than Inactive
Subsidiaries) and may declare and pay dividends ratably with respect to their
common stock;
(d) if at the time thereof and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
Operating may pay cash dividends to Parent, in an aggregate amount not exceeding
$1,500,000 during any fiscal year, at such time and in such amounts as shall be
necessary to permit Parent to (i) pay Taxes imposed upon it and liabilities
incidental to its existence when due and (ii) pay directors' fees and management
compensation to its directors when due; provided, that, any dividends permitted
to be paid to Parent shall not be paid prior to the date that Parent will apply
the proceeds of such dividends to the purposes for which such dividends are
permitted;
(e) Operating and its Subsidiaries may make payments to Parent
pursuant to and in accordance with the tax sharing agreement by and among Parent
and its Subsidiaries to reimburse Parent for their respective shares of income
taxes paid by Parent determined as if Operating or such Subsidiary had filed its
tax returns separately from Parent;
(f) Operating may declare and pay a dividend to Parent from time
to time, in each case, in the amount equal to any payment by Parent of cash
interest permitted to be made by Parent pursuant to Section 9.9(j) hereof in
respect of the Senior Discount Debentures, the proceeds of which shall be used
by Parent only to make a payment of the interest then due and payable in
accordance with the terms of the Senior Discount Debentures as in effect on the
date hereof; provided, that, any such dividend shall not be paid more than
ninety (90) days prior to the date such payment of interest is due and payable
and if such dividend is paid by Operating to Parent prior to the date that such
interest is due and payable, all such funds shall be held in an investment
account subject to an Investment Property Control Agreement in favor of Agent,
as duly authorized, executed and delivered by the financial intermediary where
such funds are held, Parent and Agent;
(g) Operating may declare and pay to a dividend to Parent from
time to time, in each case, in the amount equal to any payment by Parent of cash
interest permitted to be made by Parent pursuant to Section 9.9(o) hereof in
respect of Refinancing Indebtedness with respect to the Senior Discount
Debentures, the proceeds of which shall be used by Parent only to make a payment
of the interest then due and payable in accordance with the terms of such
Refinancing Indebtedness, provided, that, any such dividend shall not be paid
more than ninety (90) days prior to the date such payment of
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interest is due and payable and if such dividend is paid by Operating to Parent
prior to the date that such interest is due and payable, all such funds shall be
held in an investment account subject to an Investment Property Control
Agreement in favor of Agent, as duly authorized, executed and delivered by the
financial intermediary where such funds are held, Parent and Agent;
(h) Borrowers and Guarantors 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 or Guarantor is a
party or by which such Borrower or Guarantor 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 $500,000.
9.12 Transactions with Affiliates. Each Borrower and Guarantor shall
not, and shall not permit any Subsidiary, directly or indirectly, to sell, lease
or otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except: (a) transactions in the
ordinary course of business that do not involve Parent and are at prices and on
terms no less favorable to such Borrower or Guarantor than could be obtained on
an arm's-length basis from unrelated third parties, (b) transactions between and
among Operating and the other Borrowers and Guarantors not involving any other
Affiliate, and (c) any Restricted Payment permitted by Section 9.11.
9.13 Compliance with ERISA. Each Borrower and Guarantor 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 liability to the Pension Benefit
Guaranty Corporation that would have a Material Adverse Effect; (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, Guarantor or such
ERISA Affiliate to a material tax or penalty or other material 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 liability in excess of $5,000,000.
9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and
Guarantor shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on the Saturday
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closest to January 31st of each year and (b) fiscal quarters to end on or around
each of April 30th, July 31st, October 31st, and January 31st of each year.
9.15 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; and (b) 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) any Borrower may terminate or cancel any of the
Credit Card Agreements in the ordinary course of the business of such 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 (i) 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) and (ii) such Borrower delivers, or causes to be delivered
to Agent, a Credit Card Acknowledgment in favor of Agent, (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 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.
9.16 Change in Business. Each Borrower and Guarantor shall not engage
in any business other than the business of such Borrower or Guarantor on the
date hereof and any business reasonably related, ancillary or complimentary to
the business in which such Borrower or Guarantor is engaged on the date hereof.
Operating does and shall continue to fund the payments under the Letter of
Credit Accommodations and issue checks and other payments for the purchase of
substantially all of the Inventory for which the other Borrowers shall repay
Operating on a regular basis in a manner consistent with the current practices
of Borrowers as of the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Each Borrower
and Guarantor shall not, 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 or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; 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 Guarantor or any Subsidiary of such
Borrower or Guarantor, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement
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agreements of such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (v) any agreement relating to permitted Indebtedness incurred by a
Subsidiary of such Borrower or Guarantor prior to the date on which such
Subsidiary was acquired by such Borrower or such Guarantor 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.
9.18 Minimum EBITDA. At all times that the daily average of the
Excess Availability for the immediately preceding thirty (30) days as determined
by Agent is less than $15,000,000, the EBITDA of Parent and its Subsidiaries for
the twelve (12) consecutive month period (treated as a single accounting period)
ending on the last day of the most recent month for which financial statements
of Parent and its Subsidiaries are available shall be not less than the amounts
set forth in Schedule 9.18 hereto with respect to such period then ending.
9.19 Capital Expenditures.
(a) Borrowers and Guarantors shall not permit the aggregate
amount of all Capital Expenditures of Borrowers and Guarantors during the fiscal
year of Borrowers and Guarantors ending on or about:
(i) January 31, 2004 to exceed $15,000,000;
(ii) January 31, 2005 to exceed (A) $25,000,000, if the
EBITDA of Parent and its Subsidiaries reported in the audited year-end financial
statements of Parent and its Subsidiaries delivered to Agent pursuant to Section
9.6 hereof for the fiscal year of Parent and its Subsidiaries ending January 31,
2004 was greater than or equal to $65,000,000; (B) $20,000,000, if such EBITDA
was greater than or equal to $55,000,000, but less than $65,000,000; and (C)
$15,000,000 if such EBITDA was less than $55,000,000; and
(iii) January 31, 2006 to exceed (A) $35,000,000, if the
EBITDA of Parent and its Subsidiaries reported in the audited year-end financial
statements of Parent and its Subsidiaries delivered to Agent pursuant to Section
9.6 hereof for the fiscal year of Parent and its Subsidiaries ending January 31,
2005 was greater than or equal to $75,000,000; (B) $25,000,000, if such EBITDA
was greater than or equal to $65,000,000, but less than $75,000,000; and (C)
$15,000,000 if such EBITDA was less than $65,000,000.
(b) To the extent that the actual amount of Capital Expenditures
in any fiscal year shall be less than the amount otherwise permitted hereunder
for such fiscal year, Capital Expenditures may be made in the immediately
subsequent fiscal year in the amount of up to $5,000,000 of such excess, in
addition to the amount otherwise permitted hereunder for such subsequent fiscal
year.
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9.20 License Agreements.
(a) With respect to a License Agreement applicable to
Intellectual Property that is owned by a third party and licensed to a Borrower
or Guarantor and that is affixed to or otherwise used in connection with the
manufacture, sale or distribution of any Inventory, each Borrower and Guarantor
shall (i) give Agent not less than ninety (90) days prior written notice of its
intention to not renew or to terminate, cancel, surrender or release its rights
under any such License Agreement, or to amend any such License Agreement or
related arrangements to limit the scope of the right of such Borrower or
Guarantor to use the Intellectual Property subject to such License Agreement,
either with respect to product, territory, term or otherwise, or to increase the
amounts to be paid by such Borrower or Guarantor thereunder or in connection
therewith (and Agent may establish such Reserves as a result of any of the
foregoing as Agent may reasonably determine), (ii) give Agent prompt written
notice of any such License Agreement entered into by such Borrower or Guarantor
after the date hereof, or any material amendment to any such License Agreement
existing on the date hereof, in each case together with a true, correct and
complete copy thereof and such other information with respect thereto as Agent
may in good request, (iii) give Agent prompt written notice of any material
breach of any obligation, or any default, by the third party that is the
licensor or by the Borrower or Guarantor that is the licensee or any other party
under any such License Agreement, and deliver to Agent (promptly upon the
receipt thereof by such Borrower or Guarantor in the case of a notice to such
Borrower or Guarantor and concurrently with the sending thereof in the case of a
notice from such Borrower or Guarantor) a copy of each notice of default and any
other notice received or delivered by such Borrower or Guarantor in connection
with any such a License Agreement that relates to the scope of the right, or the
continuation of the right, of such Borrower or Guarantor to use the Intellectual
Property subject to such License Agreement or the amounts required to be paid
thereunder.
(b) With respect to a License Agreement applicable to
Intellectual Property that is owned by a third party and licensed to a Borrower
or Guarantor and that is affixed to or otherwise used in connection with the
manufacture, sale or distribution of any Inventory, at any time an Event of
Default shall exist or have occurred and be continuing or if after giving effect
to any Reserves, or the reduction in the applicable Borrowing Base as a result
of Eligible Inventory using such licensed Intellectual Property ceasing to be
Eligible Inventory, Agent shall have, and is hereby granted, the irrevocable
right and authority, at its option, to renew or extend the term of such 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 or
Guarantor, subject to and in accordance with the terms of such License
Agreement. Agent may, but shall not be required to, perform any or all of such
obligations of such Borrower or Guarantor under any of the License Agreements,
including, but not limited to, the payment of any or all sums due from such
Borrower or Guarantor thereunder. Any sums so paid by Agent shall constitute
part of the Obligations.
9.21 After Acquired Real Property. If any Borrower or Guarantor
hereafter acquires any Real Property, fixtures or any other property that is of
the kind or nature described in the Mortgages and such Real Property, fixtures
or other property is adjacent to, contiguous with or necessary or related to or
used in connection with any Real Property then subject to a Mortgage, or if such
Real Property is not adjacent to, contiguous with or related to or used in
connection with such Real Property, then if such Real Property, fixtures or
other property at any location (or series of adjacent,
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contiguous or related locations, and regardless of the number of parcels) has a
fair market value in an amount equal to or greater than $1,000,000 (or if an
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 or Guarantor, promptly upon Agent's request, such
Borrower or Guarantor shall execute and deliver to Agent a mortgage, deed of
trust or deed to secure debt, as Agent may determine, in form and substance
substantially similar to the Mortgages and as to any provisions relating to
specific state laws 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 and security interest in such Real Property, fixtures or other property
(except as such Borrower or Guarantor would otherwise be permitted to incur
hereunder or under the Mortgages or as otherwise consented to in writing by
Agent) and such other agreements, documents and instruments as Agent may require
in connection therewith provided, that, as to any such Real Property that is not
adjacent, contiguous or related to Real Property then subject to a Mortgage, if
the purchase price for such Real Property is paid with the initial proceeds of a
loan from a financial institution giving rise to Indebtedness permitted under
Section 9.9(b) hereof, then such Borrower or Guarantor shall not be required to
execute and deliver such mortgage, deed of trust or deed to secure debt in favor
of Agent with respect to such Real Property.
9.22 Costs and Expenses. Borrowers and Guarantors shall pay to Agent
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 out-of-pocket 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) out-of-pocket costs and expenses and fees for
insurance premiums, environmental audits, title insurance premiums, surveys,
assessments, engineering reports and inspections, 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)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
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); (f)
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 such Borrower's or Guarantor's operations, plus a per diem charge
at Agent's then standard rate for Agent's examiners in the field and office
(which rate as of the date hereof is $750 per person per day); and (g) the
reasonable fees and disbursements of counsel (including legal assistants) to
Agent in connection with any of the foregoing.
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9.23 Further Assurances. At the request of Agent at any time and from
time to time, Borrowers and Guarantors 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 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 any Borrower or Guarantor 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) (i) any Borrower fails to pay any of the Obligations when
due or (ii) any Borrower or Obligor fails to perform any of the covenants
contained in Sections 7.1(a)(i), 7.1(a)(ii) or 7.1(a)(iii) of this Agreement and
such failure shall continue for five (5) days or Sections 9.2, 9.3, 9.4, 9.6(a),
9.6(c), 9.13, 9.14, 9.16 and 9.17 of this Agreement or any covenants contained
in any of the Financing Agreements other than any note, guarantee, security
agreement, mortgage or deed of trust and such failure shall continue for ten
(10) days; provided, that, such five (5) day period or ten (10) day period, as
applicable, shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such five (5) or
ten (10) day period, as applicable, or which in the case of a failure to perform
any covenant contained in Sections 7.1(a)(i), 7.1(a)(ii) or 7.1(a)(iii) has been
the subject of two (2) prior failures within a calendar year or, in the case of
a failure to perform any of the other covenants set forth in this clause (a)(ii)
has been the subject of a prior failure within a six (6) month period or (B) an
intentional breach by any Borrower or Obligor of any such covenant or (iii) any
Borrower or Obligor fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements
other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
any Borrower or Guarantor to Agent in this Agreement, the other Financing
Agreements shall when made or deemed made be false or misleading in any material
respect;
(c) 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;
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(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $5,000,000 in any one case or in excess of
$7,000,000 in the aggregate outstanding at any time (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
sixty (60) 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 Borrower or Obligor that has or
is reasonably likely to have a Material Adverse Effect or any of the Collateral
having a value in excess of $4,000,000;
(e) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or any Borrower or Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or 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;
(g) 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 Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within sixty (60)
days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) 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 Borrower or Obligor or for all or any part of its
property;
(i) any default by any Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lenders, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lenders, in any case in an amount in excess of $2,000,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any Material
Contract (including, without limitation, any of the Credit Card Agreements),
which default continues for more than the applicable cure period, if any, with
respect thereto which default has or could reasonably be expected to have a
Material Adverse Effect, or any Credit Card Issuer or
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Credit Card Processor withholds payment of amounts otherwise payable to a
Borrower to fund a reserve account or otherwise hold as collateral, or shall
require a Borrower to pay funds into a reserve account or for such Credit Card
Issuer or Credit Card Processor to otherwise hold as collateral, or any Borrower
shall provide a letter of credit, guarantee, indemnity or similar instrument to
or in favor of such Credit Card Issuer or Credit Card Processor such that in the
aggregate all of such funds in the reserve account, other amounts held as
collateral and the amount of such letters of credit, guarantees, indemnities or
similar instruments shall exceed $2,000,000 or any Credit Card Issuer or Credit
Card Processor shall debit or deduct any amounts in excess of $50,000 in the
aggregate in any fiscal year of Borrowers and Guarantors from any deposit
account of any Borrower;
(j) any Credit Card Issuer or Credit Card Processor shall send
written notice to any Borrower that it is ceasing to make or suspending payments
to any Borrower of amounts due or to become due to any Borrower or shall cease
or suspend such payments, or shall send written notice to any Borrower that it
is terminating its arrangements with any 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 sixty
(60) days after the date of any such notice;
(k) any default in respect of any Indebtedness of any Borrower
or Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in
any case in an amount in excess of $2,000,000, which default continues for more
than the applicable cure period, if any, with respect thereto or any default by
any Borrower or 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 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
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest 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 Borrower in an aggregate
amount in excess of $5,000,000;
(n) any Change of Control;
(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 Borrower or Obligor of which any Borrower, 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 such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies
105
sought or available include forfeiture of (i) any of the Collateral having a
value in excess of $2,000,000 or (ii) any other property of any Borrower or
Guarantor which is necessary or material to the conduct of its business; or
(p) there shall be a Material Adverse Effect (it being
understood that this Section 10.1(p) shall not constitute a limitation upon the
dollar threshold amounts set forth in Section 10.1(d) hereof).
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 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 Obligor of this
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 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(g) and 10.1(h), 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 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 Obligor, which right or equity of redemption is hereby expressly
waived and released by Borrowers and Obligors and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Agent upon credit
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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 Agent 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 Borrowers and
Obligors waive 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 and Obligor 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 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.
(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
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 Required Lenders, Agent shall, at such time or times (i) notify
any or all account debtors (including Credit Card Issuers and Credit Card
Processors), 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 (including Credit Card
Issuers and Credit Card Processors), 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 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.
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(d) 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 and Guarantor
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 any Borrower or Guarantor, 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 and Guarantor 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 Guarantor 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.
(e) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Obligor 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 any
Borrower or Obligor, to use, assign, license or sublicense 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 any Borrower or
Obligor, 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.
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(f) 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 such order
as Agent may elect, whether or not then due. Borrowers and Guarantors 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.
(g) Without limiting the foregoing, (i) upon the occurrence of a
Default (other than a Default as a result of the failure of any Borrower or
Obligor to perform any of the covenants contained in Sections 7.1(a)(i),
7.1(a)(ii), 7.1(a)(iii), 9.6(a), 9.6(b) or 9.6(c) hereof) or an Event of
Default, 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 for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Loans and Letter of
Credit Accommodations 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 contained 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 (other than the Mortgages to the
extent provided therein) and any dispute arising out of the relationship between
the parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.
(b) Borrowers, Guarantors, Agent and Lenders irrevocably consent
and submit to the non-exclusive jurisdiction of the Supreme Court of the State
of New York for New York County and the United States District Court for the
Southern District of New York, 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, 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
Guarantor or its or their property in the courts of any other jurisdiction which
Agent deems necessary
109
or appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or Guarantor or its or their property).
(c) Each Borrower and Guarantor 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 any Borrower or Guarantor (or Borrower Agent on behalf
of such Borrower or Guarantor) in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, such Borrower or
Guarantor shall appear in answer to such process, failing which such Borrower or
Guarantor shall be deemed in default and judgment may be entered by Agent
against such Borrower or Guarantor for the amount of the claim and other relief
requested.
(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
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, EQUITY OR OTHERWISE.
BORROWERS, GUARANTORS, 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 ANY BORROWER, ANY GUARANTOR, 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 Guarantor (whether in tort, contract, equity or otherwise) for
losses suffered by such Borrower or Guarantor 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. Each Borrower and
Guarantor: (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 and Guarantor 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 or Guarantor which
Agent or any Lender may elect to give shall entitle such Borrower or Guarantor
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 any Borrower; 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 principal, interest or any fees or reduce the principal amount of
any Loan or Letter of Credit Accommodations, 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 of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3
hereof, without the consent of Agent and all of Lenders,
(vii) amend, modify or waive any of the terms or conditions
set forth in Section 2.3 and Section 4.3 with respect to the Supplemental Loans,
without the consent of Agent and all of Lenders, or
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(viii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of 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 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 connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a "Non-Consenting Lender"), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Congress shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Congress of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Congress or such Eligible Transferee as Congress may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with
prior written notice of its intent to exercise its right under this Section,
which notice shall specify on date on which such purchase and sale shall occur.
Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Congress, or such Eligible Transferee
specified by Congress, shall pay to the Non-Consenting Lender the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately
preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in respect of interest and fees payable to the Non-
Consenting Lender to the effective date of the purchase (but in no event shall
the Non- Consenting Lender be deemed entitled to any early termination fee),
minus (iii) the amount of the closing fee received by the Non-Consenting Lender
pursuant to the terms hereof or of any of the other Financing Agreements
multiplied by the fraction, the numerator of which is the number of months
remaining in the then current term of the Credit Facility and the denominator of
which is the number of months in the then current term thereof. Such purchase
and sale shall be effective on the date of the payment of such amount to the
Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall
terminate on such date.
(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 and the exercise by Agent of any of its
rights hereunder with respect to Reserves or Eligible Credit Card Receivables or
Eligible Inventory shall not be deemed an amendment to the advance rates
provided for in this Section 11.3.
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11.4 Waiver of Counterclaims. Each Borrower and Guarantor 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 and Guarantor shall, jointly and
severally, indemnify 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
reasonable 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 (but only after notice to Borrower Agent), court costs, and the
reasonable fees and expenses of counsel except that Borrowers and Guarantors
shall not have any obligation under this Section 11.5 to indemnify an Indemnitee
with respect to a matter covered hereby resulting from the gross negligence or
wilful 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 Borrowers or Guarantors as to any other Indemnitee) or which
is a liability for Taxes (to the extent that the indemnification for such Taxes
is subject to Section 6.4 hereof). To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers and Guarantors 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 or Guarantor shall assert, and
each Borrower and Guarantor 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 Congress 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
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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 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. The identification
of Wachovia Bank, National Association as arranger hereunder shall not create
any rights in favor of it in such capacity nor subject it to any duties or
obligations in such capacity.
12.2 Reliance by Agent. 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 a Default or 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
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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.
(b) Except with the prior written consent of Agent, no Lender
may assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.
12.4 Congress 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
Congress 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 Congress in its individual capacity as Lender
hereunder. Congress (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 Borrowers (and
any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and
Congress and its Affiliates may accept fees and other consideration from any
Borrower or Guarantor 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.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers 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 Borrowers and Obligors 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 Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred
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to or provided for herein or therein or to inspect the properties or books of
any Borrower or Obligor. Agent will use reasonable efforts to provide Lenders
with any information received by Agent from any Borrower or Obligor which is
required to be provided to Lenders hereunder or deemed to be requested by
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 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.
12.8 Additional Loans. Agent shall not make any Revolving Loans
intentionally and with actual knowledge that such Revolving Loans would cause
the aggregate amount of the total outstanding Revolving Loans to exceed the
Borrowing Base or make any Revolving Loans or provide any Letter of Credit
Accommodations 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 exceed the
Total Borrowing Base, without the prior consent of all Lenders, except, that,
Agent may make such additional Revolving Loans intentionally and with actual
knowledge that such Revolving Loans will cause the total outstanding Revolving
Loans to exceed the Borrowing Base and Agent may make such additional Revolving
Loans and provide such additional Letter of Credit Accommodations on behalf of
Lenders, intentionally and with actual knowledge that such Revolving Loans or
Letter of Credit Accommodations will cause the total outstanding Revolving Loans
and Letter of Credit Accommodations to exceed the Total Borrowing Base, as Agent
may deem necessary or advisable in its discretion, provided, that: (a) the total
principal amount of the additional Revolving Loans which Agent may make after
obtaining actual knowledge that the aggregate principal amount of the Revolving
Loans equal or exceed the Borrowing Base and the additional Revolving Loans and
additional Letter of Credit Accommodations which Agent may make or provide after
obtaining such actual knowledge that the aggregate principal amount of the
Revolving Loans and Letter of Credit Accommodations equal or exceed the Total
Borrowing Base, plus the amount of Special Agent Advances made pursuant to
Section 12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate
amount equal to the lesser of $10,000,000 or ten (10%) percent of the Maximum
Credit outstanding at any time and shall not cause the total principal amount of
the Loans and Letter of Credit Accommodations to exceed the Maximum Credit and
(b) no such additional Revolving Loan or Letter of Credit Accommodation shall be
outstanding more than sixty (60) days after the date such additional Revolving
Loan or Letter of Credit Accommodation is made or issued (as the case may be),
except as
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the Required Lenders may otherwise agree. Each Lender shall be obligated to pay
Agent the amount of its Pro Rata Share of any such additional Revolving Loans or
Letter of Credit Accommodations.
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 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 field audit or examination
report and a report with respect to the Borrowing Base prepared by Agent (each
field audit or examination report and report with respect to the Borrowing Base
being referred to herein as a "Report" and collectively, "Reports");
(b) expressly agrees and acknowledges that Agent (i) does not
make any representation or warranty as to the accuracy of any Report, or (ii)
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
Borrowers and Guarantors and will rely significantly upon Borrowers' and
Guarantors' books and records, as well as on representations of Borrowers' and
Guarantors' 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 condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, (i) deems necessary or desirable
either to preserve or protect the Collateral or any portion thereof or (ii) to
enhance the likelihood or maximize the amount of repayment by Borrowers and
Guarantors of the Loans and other Obligations, provided, that, the aggregate
principal amount of the Special Agent Advances pursuant to this clause (ii),
plus the then outstanding principal amount of the additional Loans and Letter of
Credit Accommodations which Agent may make or provide as set forth in Section
12.8 hereof, shall not exceed the aggregate amount of the lesser of $10,000,000
or ten (10%) percent of the Maximum Credit outstanding at any time or
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(iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant
to the terms of this Agreement or any of the other Financing Agreements
consisting of (A) costs, fees and expenses and (B) payments to any issuer of
Letter of Credit Accommodations. 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. Without
limitation of its obligations pursuant to Section 6.10, 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,
such Lender shall be deemed a Defaulting Lender and 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 Borrower Agent or any Borrower or Guarantor
certifies 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 Guarantor 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 $5,000,000, or (v) if
required or permitted under the terms of any of the other Financing Agreements,
including any intercreditor agreement, or (vi) 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 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
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the Obligations or any security interest, mortgage or lien upon (or obligations
of any Borrower or Guarantor in respect of) the Collateral retained by such
Borrower or Guarantor.
(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 Guarantor 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 or 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 Parent. 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
Parent, 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 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.
12.14 Co-Agent. Agent may at any time and from time to time determine
that a Lender may, in addition, be a "Co-Agent", "Co-Documentation Agent" or
similar designation hereunder and enter into
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an agreement with such Lender to have it so identified for purposes of this
Agreement. Agent shall provide written notice to Borrower Agent of any such
agreement. Any Lender that is so designated as a Co-Agent, Co-Documentation
Agent or such similar designation by Agent shall have no right, power,
obligation, liability, responsibility or duty under this Agreement or any of the
other Financing Agreements other than those applicable to all Lenders as such.
Without limiting the foregoing, the Lenders so identified shall not have or be
deemed to have any fiduciary relationship with any Lender and no Lender shall be
deemed to have relied, nor shall any Lender rely, on a Lender so identified as a
Co-Agent, Co-Documentation Agent or such similar designation in deciding to
enter into this Agreement or in taking or not taking action hereunder.
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 three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Agent may, at its option
(or shall at the direction of any Lender in writing received by Agent at least
ninety (90) days prior to the Renewal Date or the anniversary of the Renewal
Date, as the case may be, terminate this Agreement and the other Financing
Agreements, or Borrower Agent may terminate this Agreement and the other
Financing Agreements, each case, effective on the Renewal Date or on the
anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. In addition,
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. Upon the Renewal Date or
any other effective date of termination of the Financing Agreements, Borrowers
shall pay to Agent all outstanding and unpaid monetary 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 reasonable attorneys' fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and 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 Borrower
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Agent 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, New York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all monetary Obligations have been fully and finally
discharged and paid and as to contingent Obligations, Agent shall have received
such cash collateral (or letter of credit, as Agent may determine), as is
required pursuant to the terms hereof, and Agent's continuing security interest
in the Collateral and the rights and remedies of Agent and Lenders hereunder,
under the other Financing Agreements and applicable law, shall remain in effect
until all such monetary Obligations have been so paid and as to contingent
Obligations, Agent shall have received such cash collateral (or letter of
credit, as Agent may determine) as is required pursuant to the terms hereof.
Accordingly, each Borrower and Guarantor 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 Borrowers or Guarantors, or to file them with any filing office, unless and
until this Agreement shall have been terminated in accordance with its terms and
all monetary Obligations paid in full in immediately available funds and as to
contingent Obligations, Agent shall have received such cash collateral (or
letter of credit, as Agent may determine), as required pursuant to the terms
hereof.
(c) If for any reason this Agreement is terminated prior to the
Renewal Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Agent's and each Lender's lost profits as a result
thereof, Borrowers agree to pay to Agent for itself and the ratable benefit of
Lenders, upon the effective date of such termination, an early termination fee
in the amount equal to
Amount Period
-------------------------- -------------------------------------------
(i) 2% of Maximum Credit From the date hereof to and including the
first anniversary of the date hereof
(ii) 1% of Maximum Credit From and after the first anniversary of the
date hereof to and including the second
anniversary of the date hereof
(iii) 1/4% of Maximum Credit From and after the second anniversary of the
date hereof to but not including the third
anniversary of the date hereof.
Such early termination fee shall be presumed to be the amount of damages
sustained by Agent and Lenders as a result of such early termination and
Borrowers and Guarantors agree that it is reasonable under the circumstances
currently existing.
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(d) Notwithstanding anything to the contrary contained in
Section 13.1(c) above, in the event of the termination of this Agreement at the
request of Borrower Agent prior to the end of the term of this Agreement and the
full and final repayment of all Obligations and the receipt by Agent of cash
collateral all as provided in Section 13.1(a) above, Borrowers shall not be
required to pay to Agent, for the benefit of Lenders an early termination fee if
such payments are made to Agent, for the benefit of Lenders, with the initial
proceeds of an unsecured credit facility provided by Wachovia Bank, National
Association, to Borrowers.
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, Guarantor, 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 "store" or "retail store" as applied to
Borrowers shall include both factory outlet stores and other retail stores
operated by Borrowers.
(h) All references to the term "knowledge" used herein when
applicable to any Borrower or Guarantor shall mean the actual knowledge of the
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer,
General Counsel, Chief Accounting Officer of a Borrower or Guarantor or persons
having the same or similar responsibilities or functions as such positions as in
effect on the date hereof, or as customarily understood to be the case for
companies similarly situated.
(i) All references to the term "good faith" used herein or the
term "reasonable" or
122
"reasonably" when applicable to Agent or any Lender shall be based upon the
manner in which a comparable asset-based lender similarly situated, with similar
rights and providing a credit facility of the type and with the Collateral and
information then available to it set forth herein, would act in such
circumstances.
(j) 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 Parent most recently received
by Agent prior to the date hereof.
(k) 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".
(l) 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.
(m) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(n) 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.
(o) 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 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):
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If to any Borrower
or Guarantor: J. Crew Group, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telephone No.: 000-000-0000
with a copy to: J. Crew Group, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Telephone No.: 000-000-0000
If to Agent: Congress Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Portfolio Manager
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 which is
clearly and conspicuously marked as confidential at the time such information is
furnished by such Borrower to Agent or such Lender, 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, in connection
with any litigation to which Agent or such Lender is a party, (iii) to any
Lender or Participant (or prospective Lender or Participant) or to any Affiliate
of any Lender so long as such Lender or Participant (or prospective Lender or
Participant) or Affiliate shall have been instructed to treat such information
as confidential in accordance with this Section 13.5, or (iv) to counsel for
Agent or any Lender or Participant (or prospective Lender or Participant).
(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 Lender, as the case
124
may be, agrees (i) 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, Agent or such
Lender will promptly notify Borrower Agent of such request so that Borrower
Agent 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 expenses,
cooperate with Borrower Agent in the reasonable efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to such
portion of the disclosed information which Borrower Agent so designates, 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, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by any Borrower, Guarantor or any third party or otherwise
becomes generally available to the public other than as a result of a disclosure
in violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Agent or any Lender (or any Affiliate of any Lender)
on a non-confidential basis from a person other than a Borrower or Guarantor,
(iii) to require Agent or any Lender to return any materials furnished by a
Borrower or Guarantor to Agent or a Lender or prevent Agent or a Lender 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, Borrowers, Guarantors
and their respective successors and assigns, except that Borrower may not 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, Guarantors, 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, with the prior written consent of Agent,
assign all or, if less than all, a portion equal to at least $10,000,000 in the
aggregate for the assigning Lender, 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
125
Agreement as a Lender by execution of an Assignment and Acceptance; provided,
that, (i) such transfer or assignment will not be effective until recorded by
Agent on the Register and (ii) Agent shall have received for its sole account
payment of a processing fee from the assigning Lender or the assignee in the
amount of $5,000.
(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 any Borrowers,
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 Borrower Agent 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,
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 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, Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or 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
126
to be performed by it as a Lender. Agent and Lenders may furnish any information
concerning any Borrower or 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, Guarantors, the other Lenders 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, and (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 any Borrower or 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) Borrowers and Guarantors 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. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor 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.
127
13.9 Counterparts, Etc. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
128
IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused
these presents to be duly executed as of the day and year first above written.
AGENT BORROWERS
CONGRESS FINANCIAL CORPORATION, J. CREW OPERATING CORP.
as Agent
By:
---------------------------------
By:
-------------------------------- Title:
------------------------------
Title:
------------------------------
J. CREW INC.
By:
--------------------------------
Title:
------------------------------
XXXXX XXXXXX, INC. d/b/a
J. CREW RETAIL
By:
---------------------------------
Title:
------------------------------
LENDERS
H.F.D. NO. 55, INC. d/b/a J. CREW
CONGRESS FINANCIAL CORPORATION FACTORY
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Commitment: $180,000,000
GUARANTORS
J. CREW GROUP, INC.
By:
---------------------------------
Title:
------------------------------
129
J. CREW INTERNATIONAL, INC.
By:
---------------------------------
Title:
------------------------------
130
EXHIBIT A
to
LOAN AND SECURITY AGREEMENT
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of _____________, 200_ is made between
________________________ (the "Assignor") and ____________________ (the
"Assignee").
W I T N E S S E T H:
WHEREAS, Congress Financial Corporation, in its capacity as
administrative and collateral agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the parties thereto as lenders
(in such capacity, "Agent"), Wachovia Bank, National Association, in its
capacity as arranger (in such capacity, "Arranger") and the parties to the Loan
Agreement as lenders (individually, each a "Lender" and collectively, "Lenders")
have entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to J. Crew Operating Corp., J. Crew, Inc., Xxxxx Xxxxxx, Inc.
d/b/a J. Crew Retail, and HFD No. 55, Inc. d/b/a J. Crew Factory (collectively,
"Borrowers") as set forth in the Loan and Security Agreement, dated _________,
2002, by and among Borrowers, certain of their affiliates, Agent, Arranger and
Lenders (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement"),
and the other agreements, documents and instruments referred to therein or at
any time executed and/or delivered in connection therewith or related thereto
(all of the foregoing, together with the Loan Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced, being collectively referred to herein as the "Financing
Agreements");
WHEREAS, as provided under the Loan Agreement, Assignor committed to
making Loans (the "Committed Loans") to Borrowers in an aggregate amount not to
exceed $___________ (the "Commitment");
WHEREAS, Assignor wishes to assign to Assignee [part of the] [all]
rights and obligations of Assignor under the Loan Agreement in respect of its
Commitment in an amount equal to $______________ (the "Assigned Commitment
Amount") on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
A-1
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and
Assignee hereby purchases, assumes and undertakes from Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) an interest in (i) the Commitment and each of the
Committed Loans of Assignor and (ii) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the
Loan Agreement and the other Financing Agreements, so that after giving effect
thereto, the Commitment of Assignee shall be as set forth below and the Pro Rata
Share of Assignee shall be _______ (__%) percent.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed
to all of the rights and be obligated to perform all of the obligations of a
Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Commitment Amount. Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Commitment Amount
and Assignor shall relinquish its rights and be released from its obligations
under the Loan Agreement to the extent such obligations have been assumed by
Assignee; provided, that, Assignor shall not relinquish its rights under
Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignee's Commitment will be
$_____________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignor's Commitment will be
$______________ (as such amount may be further reduced by any other assignments
by Assignor on or after the date hereof).
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, Assignee shall pay to Assignor on the
Effective Date in immediately available funds an amount equal to $____________,
representing Assignee's Pro Rata Share of the principal amount of all Committed
Loans.
(b) Assignee shall pay to Agent the processing fee in the amount
specified in Section 13.7(a) of the Loan Agreement.
A-2
3. Reallocation of Payments. Any interest, fees and other payments
accrued to the Effective Date with respect to the Commitment, Committed Loans
and outstanding Letter of Credit Accommodations shall be for the account of
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Commitment Amount shall be for the
account of Assignee. Each of Assignor and Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision. Assignee acknowledges that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent financial statements of _____________
and its Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit and legal decisions in taking or not taking action under the Loan
Agreement.
5. Effective Date; Notices.
(a) As between Assignor and Assignee, the effective date for
this Assignment and Acceptance shall be _______________, 200_ (the "Effective
Date"); provided, that, the following conditions precedent have been satisfied
on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by Assignor and Assignee;
(ii) the consent of Agent as required for an effective
assignment of the Assigned Commitment Amount by Assignor to Assignee shall have
been duly obtained and shall be in full force and effect as of the Effective
Date;
(iii) written notice of such assignment, together with
payment instructions, addresses and related information with respect to
Assignee, shall have been given to Borrower Agent and Agent;
(iv) Assignee shall pay to Assignor all amounts due to
Assignor under this Assignment and Acceptance; and
(v) the processing fee referred to in Section 2(b) hereof
shall have been paid to Agent.
A-3
(b) Promptly following the execution of this Assignment and
Acceptance, Assignor shall deliver to Borrower Agent and Agent for
acknowledgment by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]
(a) Assignee hereby appoints and authorizes Assignor in its
capacity as Agent to take such action as agent on its behalf to exercise such
powers under the Loan Agreement as are delegated to Agent by Lenders pursuant to
the terms of the Loan Agreement.
(b) Assignee shall assume no duties or obligations held by
Assignor in its capacity as Agent under the Loan Agreement.]
7. Withholding Tax. Assignee (a) represents and warrants to Assignor,
Agent and Borrowers that under applicable law and treaties no tax will be
required to be withheld by Assignee, Agent or Borrowers with respect to any
payments to be made to Assignee hereunder or under any of the Financing
Agreements, (b) agrees to furnish (if it is not a "United States Person" as such
term is defined in Section 7701(a)(30) of the Code) to Agent and Borrowers prior
to the time that Agent or Borrowers are required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form W-8 ECI or U.S. Internal Revenue Service Form
W-8 BEN (wherein Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payments hereunder) and agrees to provide new Forms W-8 ECI or W-8 BEN
upon the expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by Assignee, and (c) agrees to comply with all applicable
U.S. laws and regulations with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any security interest, lien, encumbrance or
other adverse claim, (ii) it is duly organized and existing and it has the full
power and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and
A-4
other laws of general application relating to or affecting creditors' rights and
to general equitable principles.
(b) Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto. Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of Borrowers, Guarantors or any of their
respective Affiliates, or the performance or observance by Borrowers, Guarantors
or any other Person, of any of its respective obligations under the Loan
Agreement or any other instrument or document furnished in connection therewith.
(c) Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder, (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; and (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignee, enforceable against Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights to general equitable principles.
9. Further Assurances. Assignor and Assignee each hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to Borrowers or Agent, which may be
required in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous
(a) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No failure
or delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other for further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
A-5
(c) Assignor and Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF _____________. Assignor and
Assignee each irrevocably submits to the non-exclusive jurisdiction of any State
or Federal court sitting in ______________ County, ________ over any suit,
action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such _____________ State or Federal
court. Each party to this Assignment and Acceptance hereby irrevocably waives,
to the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding.
(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING
AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
and Acceptance to be executed and delivered by their duly authorized officers as
of the date first above written.
[ASSIGNOR]
By:
------------------------------
Title:
---------------------------
[ASSIGNEE]
By:
------------------------------
Title:
---------------------------
A-6
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
________, 20__
________________
________________
________________
Attn.:__________
Re:________________
Ladies and Gentlemen:
Congress Financial Corporation, in its capacity as administrative and
collateral agent pursuant to the Loan Agreement (as hereinafter defined) acting
for and on behalf of the parties thereto as lenders (in such capacity, "Agent"),
Wachovia Bank, National Association, in its capacity as arranger pursuant to the
Loan Agreement (in such capacity, "Arranger") and the financial institutions
which are parties to the Loan Agreement as lenders (individually, each a
"Lender" and collectively, "Lenders") have entered or are about to enter into
financing arrangements pursuant to which Agent and Lenders may make loans and
advances and provide other financial accommodations to ___________, ___________,
____________, and ____________ (collectively, "Borrowers") as set forth in the
Loan and Security Agreement, dated _____________, 2002, by and among Borrowers,
certain of their affiliates, Agent and Lenders (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the "Loan Agreement"), and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements"). Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________________ (the "Assignor") to
___________________________ (the "Assignee") such that after giving effect to
the assignment Assignee shall have an interest equal to ________ (__%) percent
of the total Commitments pursuant to the Assignment and Acceptance Agreement
attached hereto (the "Assignment and Acceptance"). We understand that the
Assignor's Commitment shall be reduced by $_____________, as the same may be
further reduced by other assignments on or after the date hereof.
2. Assignee agrees that, upon receiving the consent of Agent to such
assignment, Assignee will be bound by the terms of the Loan Agreement as fully
and to the same extent as if the Assignee were the Lender originally holding
such interest under the Loan Agreement.
A-7
3. The following administrative details apply to Assignee:
(A) Notice address:
Assignee name:
---------------------------
Address:
---------------------------
Attention:
--------------------------
Telephone:
---------------------------
Telecopier:
---------------------------
(B) Payment instructions:
Account No.:
---------------------------
At:
---------------------------
---------------------------
---------------------------
Reference:
---------------------------
Attention:
--------------------------
4. You are entitled to rely upon the representations, warranties and
covenants of each of Assignor and Assignee contained in the Assignment and
Acceptance.
A-8
IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
---------------------------
Title:
------------------------
[NAME OF ASSIGNEE]
By:
---------------------------
Title:
------------------------
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CONGRESS FINANCIAL CORPORATION,
as Agent
By:
-----------------------------
Title:
--------------------------
A-9
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
Compliance Certificate
To: Congress Financial Corporation,
as Agent
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
I hereby certify to you in my capacity as [Chief Financial Officer]
[Controller] pursuant to Section 9.6 of the Loan Agreement (as defined below) as
follows:
1. I am the duly elected [Chief Financial Officer] [Controller] of J.
Crew Operating Corp., J. Crew Inc., a New Jersey corporation, Xxxxx Xxxxxx, Inc.
and HFD No. 55, Inc. (collectively, "Borrowers"). Capitalized terms used herein
without definition shall have the meanings given to such terms in the Loan and
Security Agreement, dated ______, 2002, by and among Congress Financial
Corporation as administrative and collateral agent for the financial
institutions party thereto as lenders (in such capacity, "Agent"), Wachovia
Bank, National Association, as arranger (in such capacity "Arranger") and the
parties thereto as lenders (collectively, "Lenders"), Borrowers and certain of
their affiliates (as such Loan and Security Agreement is amended, modified or
supplemented, from time to time, the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have made, or
have caused to be made under my supervision, a review in reasonable detail of
the transactions and the financial condition of Borrowers and Guarantors, during
the immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
any Borrower or Guarantor has taken, is taking, or proposes to take with respect
to such condition or event.
C-1
4. I further certify that, based on the review described in Section 2
above, no Borrower or Guarantor has not at any time during or at the end of such
fiscal month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:
(a) Changed its respective corporate name, or transacted
business under any trade name, style, or fictitious
name, other than those previously described to you and
set forth in the Financing Agreements.
(b) Changed the location of its chief executive office,
changed its jurisdiction of incorporation, changed its
type of organization or changed the location of or
disposed of any of its properties or assets (other than
pursuant to the sale of Inventory in the ordinary course
of its business or as otherwise permitted by Section 9.7
of the Loan Agreement), or established any new asset
locations.
(c) Materially changed the terms upon which it sells goods
(including sales on consignment) or provides services,
nor has any vendor or trade supplier to any Borrower or
Guarantor during or at the end of such period materially
adversely changed the terms upon which it supplies goods
to any Borrower or Guarantor.
(d) Permitted or suffered to exist any security interest in
or liens on any of its properties, whether real or
personal, other than as specifically permitted in the
Financing Agreements.
(e) Received any notice of, or obtained knowledge of any of
the following not previously disclosed to Agent: (i) the
occurrence of any event involving the release, spill or
discharge of any Hazardous Material in violation of
applicable Environmental Law in a material respect or
(ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to:
(A) any non-compliance with or violation of any
applicable Environmental Law by any Borrower or
Guarantor in any material respect or (B) the release,
spill or discharge of any Hazardous Material in
violation of applicable Environmental Law in a material
respect or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or
disposal of any Hazardous Materials in violation of
applicable Environmental Laws in a material respect or
(D) any other environmental, health or safety matter,
which has a material adverse effect on any Borrower or
Guarantor or its business, operations or assets or any
properties at which such Borrower or Guarantor
transported, stored or disposed of any Hazardous
Materials.
(f) Become aware of, obtained knowledge of, or received
notification of, any breach or violation of any material
covenant contained in any instrument or agreement in
respect of Indebtedness for money borrowed by any
Borrower or Guarantor.
C-2
5. Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrowers and Guarantors
are in compliance with the covenants set forth in Sections 9.18 and 9.19 of the
Loan Agreement for such fiscal month.
The foregoing certifications are made and delivered this day of
___________, 200__.
Very truly yours,
--------------------------
By:
-----------------------
Title:
--------------------
C-3
SCHEDULE 2.7
TO
LOAN AND SECURITY AGREEMENT
Special Availability Reserve
Period Amount
----------------------- -----------------
January 1 through $ 10,000,000
January 31
February 1 through 10,000,000
February 28 or 29, as
the case may be
March 1 through 10,000,000
March 31
April 1 through April 30 - 0 - in 2003;
5,000,000 in all
other years
May 1 through May 31 5,000,000
June 1 through June 30 5,000,000
July 1 through July 31 5,000,000
August 1 through 5,000,000
August 31
September 1 through 5,000,000
September 30
October 1 through and - 0 - in 2003;
including October 31 5,000,000 in all
other years
November 1 through 10,000,000
November 30
December 1 through 10,000,000
December 31
Schedule 1 - 1
SCHEDULE 4.3
TO
LOAN AND SECURITY AGREEMENT
Required Supplemental Loan EBITDA
Month Ending On Or About EBITDA*
------------------------ -------------
February 28, 2003 $ 44,500,000
March 31, 2003 44,500,000
April 30, 2003 44,700,000
May 31, 2003 44,100,000
June 30, 2003 44,000,000
July 31, 2003 45,700,000
August 31, 2003 45,300,000
February 29, 2004 56,875,000
March 31, 2004 56,875,000
April 30, 2004 58,300,000
May 31, 2004 59,200,000
June 30, 2004 61,000,000
July 31, 2004 62,700,000
August 31, 2004 64,500,000
February 28, 2005 75,000,000
March 31, 2005 75,000,000
April 30, 2005 77,000,000
May 31, 2005 77,700,000
----------
* EBITDA with respect to each of the twelve (12) month periods ending on
the dates indicated above will be determined using the most recent internal
financial statements of Parent and its Subsidiaries for the applicable period.
Schedule 4.3 - 1
Month Ending On Or About EBITDA*
------------------------ ----------
June 30, 2005 79,500,000
July 31, 2005 80,700,000
August 31, 2005 82,250,000
Schedule 4.3 - 2
SCHEDULE 9.18
TO
LOAN AND SECURITY AGREEMENT
Minimum EBITDA
Month Ending On Or About EBITDA*
------------------------ -------------
January 31, 2003 $ 42,300,000
February 28, 2003 41,400,000
March 31, 2003 40,700,000
April 30, 2003 40,900,000
May 31, 2003 40,300,000
June 30, 2003 40,200,000
July 31, 2003 41,800,000
August 31, 2003 41,400,000
September 30, 2003 40,800,000
October 31, 2003 41,700,000
November 30, 2003 43,400,000
December 31, 2003 45,500,000
January 31, 2004 47,800,000
February 29, 2004 45,500,000
March 31, 2004 46,000,000
April 30, 2004 47,000,000
----------
* EBITDA with respect to twelve (12) month periods ending on January 31
of any fiscal year of Parent and its Subsidiaries will be determined using the
audited financial statements of Parent and its Subsidiaries for the applicable
period; with respect to twelve (12) month periods ending on the last day of
other months, EBITDA will be determined using the most recent internal financial
statements of Parent and its Subsidiaries for the applicable period.
Schedule 9.18 - 1
Month Ending On Or About EBITDA*
------------------------ ----------
May 31, 2004 49,000,000
June 30, 2004 50,000,000
July 31, 2004 52,000,000
August 31, 2004 54,000,000
September 30, 2004 56,000,000
October 31, 2004 57,000,000
November 30, 2004 59,000,000
December 31, 2004 62,000,000
January, 2005 64,000,000
February, 2005 60,000,000
March, 2005 60,500,000
April, 2005 61,000,000
May, 2005 61,500,000
June, 2005 62,000,000
July, 2005 62,500,000
August, 2005 63,000,000
September, 2005 63,500,000
October, 2005 64,000,000
November, 2005 64,500,000
December, 2005 66,500,000
January, 2006 67,000,000
Schedule 9.18 - 2
