Exhibit 10.26
EXECUTION
COPY
LOAN AND SECURITY AGREEMENT
between
THE CIT GROUP/BUSINESS CREDIT, INC.
and
G+G RETAIL, INC.
$30,000,000
as of May 2, 2001
--------------------------------
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx, L.L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................................................1
SECTION 2. CREDIT FACILITIES..............................................................................13
2.1 Loans..........................................................................................13
2.2 Letter of Credit Accommodations................................................................15
2.3 Availability Reserves..........................................................................17
SECTION 3. INTEREST AND FEES..............................................................................17
3.1 Interest.......................................................................................17
3.2 Loan Facility Fee..............................................................................19
3.3 Administrative Fee.............................................................................19
3.4 Unused Line Fee................................................................................19
3.5 Changes in Laws and Increased Costs of Loans...................................................19
SECTION 4. CONDITIONS PRECEDENT...........................................................................20
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations.......................................................................20
4.2 Conditions Precedent to All Loans and Letter
of Credit Accommodations.......................................................................22
SECTION 5. SECURITY INTEREST..............................................................................22
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................23
6.1 Borrowers' Loan Account(s).....................................................................24
6.2 Statements.....................................................................................24
6.3 Collection of Accounts.........................................................................24
6.4 Payments.......................................................................................26
6.5 Authorization to Make Loans....................................................................26
6.6 Use of Proceeds................................................................................27
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................27
7.1 Collateral Reporting...........................................................................27
7.2 Accounts Covenants.............................................................................28
7.3 Inventory Covenants............................................................................29
7.4 Power of Attorney..............................................................................30
7.5 Right to Cure..................................................................................31
7.6 Access to Premises.............................................................................31
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SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................31
8.1 Corporate Existence, Power and Authority; Subsidiaries.........................................32
8.2 Financial Statements; No Material Adverse Change...............................................32
8.3 Chief Executive Office; Collateral Locations...................................................32
8.4 Priority of Liens; Title to Properties.........................................................32
8.5 Tax Returns....................................................................................33
8.6 Litigation.....................................................................................33
8.7 Compliance with Other Agreements and Applicable Laws...........................................33
8.8 Environmental Compliance.......................................................................34
8.9 Credit Card Agreements.........................................................................35
8.10 Employee Benefits..............................................................................35
8.11 Bank Accounts..................................................................................36
8.12 Accuracy and Completeness of Information.......................................................36
8.13 Survival of Warranties; Cumulative.............................................................36
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................36
9.1 Maintenance of Existence.......................................................................36
9.2 New Collateral Locations.......................................................................37
9.3 Compliance with Laws, Regulations, Etc.........................................................37
9.4 Payment of Taxes and Claims....................................................................37
9.5 Insurance......................................................................................38
9.6 Financial Statements and Other Information.....................................................38
9.7 Sale of Assets, Consolidation, Merger,
Formation or Acquisition of Subsidiaries, Dissolution, Etc.....................................40
9.8 Encumbrances...................................................................................42
9.9 Indebtedness; Repayments and Prepayments of Certain Indebtedness...............................43
9.10 Loans, Investments, Guarantees, Etc............................................................45
9.11 Dividends and Redemptions......................................................................46
9.12 Transactions with Affiliates...................................................................47
9.13 Credit Card Agreements.........................................................................47
9.14 Net Worth......................................................................................48
9.15 Compliance with ERISA..........................................................................48
9.16 Additional Bank Accounts.......................................................................48
9.17 Costs and Expenses.............................................................................49
9.18 Further Assurances.............................................................................49
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................49
10.1 Events of Default..............................................................................50
10.2 Remedies.......................................................................................51
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW...................................53
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..........................53
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11.2 Waiver of Notices..............................................................................54
11.3 Amendments and Waivers.........................................................................54
11.4 Waiver of Counterclaims........................................................................54
11.5 Indemnification................................................................................54
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS...............................................................55
12.1 Term...........................................................................................55
12.2 Notices........................................................................................56
12.3 Partial Invalidity.............................................................................57
12.4 Successors.....................................................................................57
12.5 Confidentiality................................................................................57
12.6 Entire Agreement...............................................................................58
ANNEXES
Annex A - Closing Document Checklist
EXHIBITS
Exhibit A - Information Certificate
Exhibit B - form of Revolving Credit Note
SCHEDULES
Schedule 6.3 - bank accounts
Schedule 8.3 - address of chief executive office and locations of records
Schedule 8.4 - existing liens
Schedule 8.8 - environmental matters
Schedule 8.9 - Credit Card Agreements
Schedule 9.9 - existing indebtedness and obligations
Schedule 9.10 - existing loans, advances and guarantees
Schedule 9.12 - employment agreements
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of May 2, 2001, is entered
into by and among THE CIT GROUP/BUSINESS CREDIT, INC. ("Lender"), G+G RETAIL,
INC., a Delaware corporation ("G+G" or a "Borrower") and each Person that may
become a borrower hereunder, pursuant to the terms of Section 9.7 hereof (each
such Person, including G+G, individually a "Borrower" and collectively,
"Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
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: All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings given therein
unless otherwise defined in this Agreement. 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. All references to Borrowers pursuant to
the definitions set forth in the recitals hereto, unless the context otherwise
requires, shall mean each and all of them and their respective successors and
assigns, individually and collectively, jointly and severally. All references to
Lender pursuant to the definitions set forth in the recitals hereto, or to any
other person herein, shall include their respective successors and assigns. 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. The word "including" when used in this Agreement shall mean
"including, without limitation". 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 cured, if such Event of Default is capable of being cured as determined
by Lender. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in accordance
with GAAP. For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
"Accounts" shall mean all present and future rights of each Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance, and including, without limitation, Credit Card Receivables.
"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 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.
"Applicable Increment" shall mean, on any date of determination, with
respect to any Prime Rate Loan or any Eurodollar Rate Loan, the applicable
percentage set forth below under the applicable caption, based upon the Leverage
Ratio corresponding thereto for the period of four (4) consecutive Fiscal
Quarters ending immediately prior to such date of determination. The Applicable
Increment shall apply during the period commencing on the first day of the month
following the month during which Lender shall have received the financial
statements required to be delivered pursuant to Section 9.6(a)(ii) for any
referenced period of four (4) consecutive Fiscal Quarters, and ending on the
last day of the month during which Lender shall have received such financial
statements for the next succeeding period of four (4) consecutive Fiscal
Quarters, provided, however, that until such time as the Lender receives the
financial statements required to be delivered pursuant to Section 9.6(a)(ii) for
the period of four (4) consecutive Fiscal Quarters ending on the Saturday
closest to July 31, 2001, the Applicable Increment shall be those set forth
below opposite Case 2.
Leverage Ratio Applicable Increment for Prime Applicable Increment for
Rate Loans Eurodollar Rate Loans
Case 1 .00% 1.50%
Case 2 .00% 1.75%
Case 3 .00% 2.00%
Case 4 .25% 2.25%
"Applicable Percentage" shall mean (a) eighty-four per cent (84%) for
each of the months of December, January, February, March, April, May and June
and (b) eighty-six percent (86%) for each of the months of July, August,
September, October and November.
"Appraisal Firm" shall mean, on the Closing Date, the firm of Great
American Appraisal and Valuation Services LLC and, at all times after the
Closing Date, such firm or any other reputable firm ("another appraiser")
engaged by or at the direction of Lender, at Borrowers' expense, to conduct from
time to time examinations and appraisals of the value (including without
limitation the "going out of business" value) of Borrowers' Inventory, provided,
however, that in the event that Lender determines, after the Closing Date, to
engage another appraiser, such determination shall be made in Lender's
commercially reasonable judgment, based on all of the facts and circumstances
then existing.
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"Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations that would
otherwise be available to Borrowers under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks that, as
determined by Lender in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value, including
without limitation on account of inventory shrinkage, price adjustments,
damages, discounts, returns, claims and allowances, (ii) the assets, business or
prospects of any Borrower or any Obligor or (iii) the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
any Borrower or any Obligor to Lender is or may have been incomplete, inaccurate
or misleading in any material respect or (c) in respect of any state of facts
which Lender determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default, or (d)
to reflect outstanding Letter of Credit Accommodations as provided in Section
2.2 hereof or (e) the aggregate amount of deposits, if any, received by
Borrowers from their retail customers in respect of unfilled orders for
merchandise, or (f) the aggregate unused amount of gift certificates, if any,
purchased by or for the benefit of Borrower's retail customers, to the extent
such unused amount exceeds $250,000 in the aggregate or (g) (i) amounts due or
to become due in respect of use and/or withholding taxes and (ii) at any time
when Excess Availability is less than $5,000,000, amounts due or to become due
in respect of sales taxes, or (h) amounts owing by Borrowers to Credit Card
Issuers or Credit Card Processors in connection with the Credit Card Agreements.
In addition to, and not in limitation of the foregoing, if on the date of
receipt by Lender of a Rent Report, the sum of the aggregate amounts set forth
under clause (i) and clause (ii) of such Rent Report applicable to all leased
locations as to which Lender determines, in the exercise of its commercially
reasonable judgment, that the landlord has any rights in and to the Collateral
pursuant to applicable law, equals or exceeds $250,000, then Lender shall have
the right to establish an Availability Reserve in an aggregate amount equal to
such sum.
"Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
"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 and a day on which the Reference Bank and
Lender are 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.
"Capital Stock" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or
partnership interests and any options or warrants with respect to any of the
foregoing.
"Case 1" shall mean a Leverage Ratio of less than 3.25 to 1.00.
"Case 2" shall mean a Leverage Ratio of equal to or greater than 3.25
to 1.00, and less than 4.25 to 1.00.
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"Case 3" shall mean a Leverage Ratio of equal to or greater than 4.25
to 1.00, and less than 5.25 to 1.00.
"Case 4" shall mean a Leverage Ratio of equal to or greater than 5.25
to 1.00.
"Cash Equivalents" means (a) United States dollars (including, without
limitation, such dollars as are held as overnight bank deposits and demand
deposits with banks, which deposits are insured by the Federal Deposit Insurance
Corporation), (b) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition, (c)
certificates of deposit and Eurodollar time deposits with maturities of one year
or less from the date of acquisition and bankers' acceptances with maturities
not exceeding one year, in each case with any domestic commercial bank having
capital and surplus in excess of $500,000,000 and rated "A3" or better by
Xxxxx'x Investors Service, Inc. and "A-" or better by Standard & Poor's Rating
Group, (d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (b) and (c) above, (e)
commercial paper having one of the two highest ratings obtainable from Xxxxx'x
Investors Service, Inc or Standard & Poor's Ratings Group and in each case
maturing within nine months after the date of acquisition, and (f) money market
funds, the portfolios of which are limited to investments described in clauses
(a) through (e) above.
"Change Of Control" shall mean (i) at any time prior to the
consummation of an initial public offering of the capital stock of Parent
pursuant to a registration statement filed under the Securities Act of 1933, as
amended (other than a registration statement on Form S-8) and in which the
Parent receives gross proceeds equal to or greater than $30,000,000, the Initial
Holders, on a collective basis, cease to be the "beneficial owners" (as such
term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities representing at least a majority of the total voting
power of the outstanding capital stock of Parent that is entitled to vote in the
election of the Board of Directors of Parent or (ii) at any time prior to the
consummation of an initial public offering of the capital stock of G+G pursuant
to a registration statement filed under the Securities Act of 1933, as amended
(other than a registration statement on Form S-8) and in which G+G receives
gross proceeds equal to or greater than $30,000,000, Parent ceases to be the
beneficial owner of securities representing at least a majority of the total
voting power of the outstanding capital stock of G+G that is entitled to vote in
the election of the Board of Directors of G+G.
"Closing Date" shall mean the later of May 2, 2001 and the date on
which all of the conditions precedent contained in Section 4.1 hereof shall have
occurred or shall have been waived in writing by Lender.
"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.
"Collateral" shall have the meaning set forth in Section 5 hereof.
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"Cost" shall mean, as to the Inventory as of any date, the cost of such
Inventory as of such date, determined on a first-in-first-out basis under the
retail method of accounting in accordance with GAAP.
"Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements in writing, executed by Credit Card Issuers or
Credit Card Processors who are parties to Credit Card Agreements in favor of
Lender acknowledging Lender's first priority security interest in the monies due
and to become due to any Borrower or Obligor (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.
"Credit Card Agreements" shall mean all agreements now or hereafter
entered into by any Borrower or Obligor 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.
"Credit Card Issuer" shall mean any person (other than Borrower(s) 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 American Express Travel Related Services
Company, Inc. and Novus Services, Inc.
"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 of Borrowers' or Obligors' sales transactions involving
credit card or debit card purchases by customers using credit cards or debit
cards issued by any Credit Card Issuer.
"Credit Card Receivables" shall mean collectively, (a) all present and
future rights of Borrowers 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 Borrowers 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.
"EBITDA" shall mean, for any period, Net Income for such period plus,
to the extent deducted in determining Net Income for such period, the aggregate
amount of interest expense and income tax expense for such period, and all
depreciation, amortization and other non-cash charges for such period, minus, to
the extent included in determining Net Income for such period, the aggregate
amount of interest income for such period, that has been deferred or has not
5
been paid in cash, all determined in accordance with GAAP on a consistent basis,
but excluding the effect of non-cash extraordinary or non-reoccurring gains and
losses for such period.
"Eligible Accounts" shall mean the gross amount of Borrowers' Credit
Card Receivables that are subject to a valid, first priority and fully perfected
security interest in favor of Lender, which conform to the warranties contained
herein and which, at all times, continue to be acceptable to Lender in the
exercise of its reasonable business judgment. In general, Eligible Accounts
shall not include (a) any Credit Card Receivable, if the Credit Card
Acknowledgement executed by the Credit Card Issuer or Credit Card Processor in
respect of such Credit Card Receivable shall not then be in full force and
effect; (b) any Credit Card Receivable that remains unpaid for more than six (6)
days after the date on which the sales slip, credit card charge slip, or similar
documentation evidencing the transaction giving rise to such Credit Card
Receivable shall have been submitted for payment by the applicable Borrower to
the applicable Credit Card Issuer or Credit Card Processor, as the case may be;
(c) any Credit Card Receivable, the Credit Card Issuer or Credit Card Processor
in respect of which is (i) insolvent, (ii) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceeding
under any federal or state law (iii) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts or (iv)
financially unacceptable to Lender or has a credit rating unacceptable to
Lender; and (d) any other reasons deemed necessary by Lender in its reasonable
judgement, including without limitation those that are customary in the
commercial finance industry in general or in the lending practices of Lender,
specifically. General criteria for Eligible Accounts may be established and
revised from time to time by Lender in good faith based on an event, condition
or other circumstance arising after the date hereof, or existing on the date
hereof to the extent Lender has no notice thereof, which adversely affected or
could reasonably be expected to adversely affect Credit Card Receivables in the
good faith determination of Lender. Lender will not establish new criteria for
Eligible Accounts if Lender has established an Availability Reserve for the same
purpose and Lender will use its best efforts to promptly notify Borrowers of any
new criteria established by Lender. Any Credit Card Receivables which do not
constitute Eligible Accounts shall nevertheless be part of the Collateral.
"Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrowers that are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) packaging and shipping materials; (b) supplies
used or consumed in Borrowers' business; (c) Inventory at premises other than
those owned or leased and controlled by Borrowers; (d) Inventory subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement; (e) Inventory purchased on layaway plan; (f) xxxx
and hold goods; (g) unserviceable, obsolete or slow moving Inventory; (g)
Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (i) damaged and/or defective Inventory (j) returned
Inventory that is not held for resale; (k) Inventory to be returned to vendors;
(l) Inventory subject to deposits made by customers for sales of Inventory that
has not been delivered; (m) samples; (n) Inventory purchased or sold on
consignment; and (o) Inventory purchased from an affiliate of Borrowers at a
purchase price exceeding the fair market value of such Inventory, to the extent
of such excess purchase price. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith based on an
event, condition or other
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circumstance arising after the date hereof, or existing on the date hereof to
the extent Lender has no notice thereof, which adversely affected or could
reasonably be expected to adversely affect the Inventory in the good faith
determination of Lender. Lender will not establish new criteria for Eligible
Inventory if Lender has established an Availability Reserve for the same purpose
and Lender will use its best efforts to promptly notify Borrowers of any new
criteria established by Lender. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
"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 Borrowers 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 Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii applicable state counterparts to such laws, and (ii any common
law or equitable doctrine that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Materials.
"Equipment" shall mean all of Borrowers' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), 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.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
"ERISA Affiliate" shall mean any person required to be aggregated with
Borrowers or any of their subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
"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 (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at
7
which Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by Borrowers and
approved by Lender) 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 Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers.
"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.
"Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the least of (i) the amount of the Loans
available to Borrowers as of such time based on the applicable lending formulas
multiplied by the Cost of Eligible Inventory and the amount of Eligible
Accounts, respectively, as determined by Lender, and subject to the sublimits
and Availability Reserves from time to time established by Lender hereunder,
(ii) the amount of the Indenture Limit as of such time and (iii) the Maximum
Credit, minus (b) the sum of (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) (A) the aggregate amount of all trade payables of
Borrowers which are more than forty- five (45) days past due as of such time
minus (B) the lesser of (x) the amount of all trade payables which are more than
forty-five (45) days past due which Borrowers are in good faith contesting, to
the extent each such payable is so contested and (y) $500,000.
"Event Of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
"Financing Agreements" shall mean, collectively, this Agreement and all
notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
"Fiscal Quarter" shall mean, with respect to Borrowers, each three (3)
month period ending on the Saturday closest to April 30, July 31, October 31 and
January 31 of each Fiscal Year.
"Fiscal Year" shall mean, with respect to Borrowers, the period of four
(4) consecutive Fiscal Quarters commencing on the Sunday closest to February 1
of each year and ending on the Saturday closest to January 31 of the following
year, determined in a manner consistent with G+G's past practices.
"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 Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 hereof, GAAP shall be determined on the basis of
such principles
8
in effect on the Closing Date and consistent with those used in the preparation
of the audited financial statements delivered to Lender prior to the Closing
Date.
"Guarantor" shall mean any person other than Borrowers which executes a
guarantee in favor of Lender unconditionally guaranteeing Borrowers' Obligations
to Lender and has executed in favor of Lender a security agreement and related
documents including UCC-1 Financing Statements, and all of which documents then
continue in effect.
"Indenture" shall mean the Indenture dated as of May 17, 1999 between
G+G and U.S. Bank Trust National Association, as trustee, pursuant to which the
Senior Notes were issued, as the same may be amended, modified, supplemented or
restated from time to time.
"Indenture Limit" shall mean the lesser of the amounts calculated
pursuant to clause (x) and clause (y) of paragraph (1) of Section 4.09 of the
Indenture.
"Information Certificate" shall mean the Information Certificate of
Borrowers constituting Exhibit A hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
"Initial Holders" means Pegasus G&G Retail, L.P., Pegasus G&G Retail
II, L.P., Pegasus Partners, L.P., Pegasus Related Partners, L.P., Xxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxx Xxxxx and their respective affiliates.
"Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one month's duration, the exact duration to be determined in
accordance with the customary practice in the applicable Eurodollar Rate market;
provided, that, Borrowers may not elect an Interest Period which will end after
the last day of the then current term of this Agreement.
"Interest Rate" shall mean (a) as to Prime Rate Loans, a rate equal to
the Prime Rate plus the Applicable Increment and (b) as to Eurodollar Rate
Loans, a rate equal to the Adjusted Eurodollar Rate, based on the Eurodollar
Rate applicable for the Interest Period selected by Borrowers as in effect three
(3) Business Days after the date of receipt by Lender of the request of
Borrowers for such Eurodollar Rate Loans in accordance with the terms hereof
("Eurodollar Request Notice"), whether such rate is higher or lower than any
rate previously quoted to Borrowers), plus the Applicable Increment, provided,
that the Interest Rate specified in clause (a) with respect to Prime Rate Loans
and in clause (b) with respect to Eurodollar Rate Loans shall be increased, in
each case, by two (2%) percent per annum, at Lender's option, without notice,
(i) for the period on and after (A) the date of termination or non-renewal
hereof and until such time as all Obligations are indefeasibly paid in full
(notwithstanding entry of any judgment against Borrowers), or (B) the date of
the occurrence of any Event of Default, and for so long as such Event of Default
is continuing, as determined by Lender, and (ii) on the Loans at any time
outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default.
9
"Inventory" shall mean all of Borrowers' now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
"Ledger Debt" shall mean the obligations and indebtedness of any
Borrower on accounts receivable arising from the sale of goods or services
purchased by such Borrower from any Person, the accounts receivable of which are
factored or financed by Lender or any of its affiliates.
"Letter Of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of any Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrowers of their obligations to such issuer.
"Letter of Credit Reserves" shall mean, as of any date of
determination, with respect to Letter of Credit Accommodations, an amount equal
to the sum of (a) the aggregate undrawn amount of all letters of credit,
merchandise purchase and other guaranties (of the type described in the
definition of the term Letter of Credit Accommodations) then outstanding, plus
(b) the aggregate drawn and unreimbursed amount of all such letters of credit,
merchandise purchase and other guaranties, plus (c) the unpaid amount of all
fees due or to become due to Lender or to the issuer of any such letter of
credit in connection with such letters of credit, merchandise purchase and other
guarantees.
"Leverage Ratio" shall mean, for any relevant period, the ratio
determined by dividing (i) the sum of the aggregate principal amount of all
interest bearing debt incurred by G+G (including without limitation the Senior
Notes and the Loans, but excluding all capital lease obigations), the aggregate
undrawn amount of all Letter of Credit Accommodations and the aggregate amount
of all drawn and unreimbursed Letter of Credit Accommodations, in each case
outstanding on the last day of such period, by (ii) EBITDA of G+G for such
period.
"Loans" shall mean the loans now or hereafter made by Lender to or for
the benefit of Borrowers on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.
"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, performance, properties,
business or affairs of the Borrowers or any Obligor.
"Material Adverse Effect" shall mean a material adverse change in, or a
material adverse effect upon (a) the condition (financial or otherwise),
operations, business or affairs of Borrowers or any Obligor, (b) the ability of
Borrowers or any Obligor to repay any Obligations under any of the Financing
Agreements, or (c) Lender's rights or interests in its Collateral or of Lender's
ability to enforce the Obligations or realize upon its Collateral.
"Maximum Credit" shall mean $30,000,000.
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"Net Income" shall mean, for any period, with respect to any Person,
the net after tax income (or loss) of such Person for such period, determined in
accordance with GAAP.
"Net Recovery Cost Percentage" shall mean, as of any date, with respect
to any period of determination, the percentage of the Cost of Borrowers'
Inventory, as determined by the Appraisal Firm, and set forth in the then
current appraisal prepared by the Appraisal Firm, which, when multiplied against
such Cost, yields the net going out of business value of such Inventory during
such period, as determined by the Appraisal Firm.
"Net Worth" shall mean as to any Person, at any time, in accordance
with GAAP (except as otherwise specifically set forth below), on a consolidated
basis for such Person and its subsidiaries (if any), the amount equal to the
difference between: (a) the aggregate net book value of all assets of such
Person and its subsidiaries (including intangible assets), calculating the book
value of inventory for this purpose principally on a first-in-first-out basis,
using the retail inventory method, at the lower of cost or market, after
deducting from such book values all appropriate reserves in accordance with GAAP
(including all reserves for doubtful receivables, obsolescence, depreciation and
amortization), provided, however, that in the case of G+G such aggregate net
book value of all assets shall not be reduced by the amount of any intangible
assets written off in whole or in part, and (b) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals, but excluding any indebtedness, the
priority of repayment of which, as opposed to the priority of the lien, if any,
which secures such indebtedness, is subordinated to the Obligations of Lender
hereunder) and provided further, however, that in the case of G+G, the aggregate
net book value of assets shall not reflect any non-cash gains or non-cash losses
from unusual, infrequent or extraordinary items or from changes in accounting
principles recognized after the date hereof.
"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 Borrowers to Lender and/or its affiliates
(but excluding Ledger Debt), including principal, interest, charges, fees, costs
and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or otherwise,
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 Borrowers under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.
"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, other than Borrowers.
"Parent" shall mean G&G Retail Holdings, Inc., a Delaware corporation,
together with its successors and assigns.
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"Payment Account" shall have the meaning set forth in Section 6.3
hereof.
"Permits" shall have the meaning set forth in Section 8.7 hereof.
"Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, 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.
"Prime Rate" shall mean the rate from time to time publicly announced
by The Chase Manhattan Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
"Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms hereof.
"Real Property" shall mean all now owned and hereafter acquired real
property of Borrowers, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
"Records" shall mean all of Borrowers' 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 Borrowers with respect to the
foregoing maintained with or by any other person).
"Reference Bank" shall mean The Chase Manhattan Bank or such other bank
as Lender may designate from time to time.
"Renewal Date" shall have the meaning set forth in Section 12.1 hereof.
"Rent Report" shall mean a report, in form and substance reasonably
satisfactory to Lender, prepared each month by or under the direction of, and
certified by, the chief financial officer of G+G, which report shall set forth
in reasonable detail with respect to each retail store location leased by a
Borrower (i) whether such Borrower has not paid to the landlord of any such
location, by the date of such report, the monthly recurring rent, escrow and
other monthly recurring charges payable under the applicable lease for such
month, and if so, the aggregate amount thereof with respect to each such
location and (ii) whether any Borrower has not paid amounts specified in any
notice of default received during such month from any landlord of such leased
location, and if such Borrower has not paid such amounts, the nature of such
default and the monetary amount, if any, claimed by such landlord to be in
default.
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"Replacement Senior Notes" shall mean the promissory notes that may be
issued by G+G, after the Closing Date, whether pursuant to a public offering, an
exchange offer, a private placement, a bank credit facility or otherwise, the
proceeds of which are used to (x) refinance, renew, or replace all or any
portion of the principal indebtedness outstanding under the Senior Notes, or (y)
redeem or purchase any Senior Note Warrants (and any promissory notes that may
be issued by G+G, the proceeds of which are used to refinance, renew or replace
such promissory notes), so long as (i) the Replacement Senior Notes are not
secured, directly or indirectly, by the assets of any Person, including the
issuer thereof and (ii) neither the terms of the Replacement Senior Notes, nor
the terms of any document or agreement pursuant to which the Replacement Senior
Notes may be issued or governed, purport to make the indebtedness evidenced by
the Replacement Senior Notes senior in right of payment to the Obligations
arising under this Agreement. All references in this definition to Senior Notes
shall mean the Senior Notes as in effect on the Closing Date.
"Retail Value" shall mean, as to the Inventory as of any date, the then
current retail sales price of such Inventory as of such date, net of markdowns
from the original retail sales price or ticketed sales price with respect
thereto.
"Revolving Credit Note" shall mean the Revolving Credit Note in the
original principal amount of the Maximum Credit, dated as of the date of this
Agreement, executed by G+G and payable to the order of Lender, in the form of
Exhibit B hereto.
"Senior Note Warrants" shall mean those certain warrants to purchase
capital stock of the Parent, issued in connection with the Senior Notes.
"Senior Notes" shall mean the 11% Series B Notes due 2006 in the
original aggregate principal amount of $107 million issued by G+G pursuant to
the Indenture, as the same may be amended, modified, supplemented or restated
from time to time.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrowers from time to time in amounts
requested by Borrowers up to the least of the following amounts:
(i) an amount equal to the Maximum Credit minus
Letter of Credit Reserves;
(ii) an amount equal to the sum of, as of any date of
determination, (A) eighty-five percent (85%) of Eligible Accounts, plus (B) the
lesser of (I) an amount equal to eighty-five percent (85%) of the Cost of
Eligible Inventory or (II) an amount equal to the Applicable Percentage,
multiplied by the Net Recovery Cost Percentage, multiplied by the Cost of
Eligible Inventory, in each case as of such date, minus (C) any Availability
Reserves; and
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(iii) an amount equal to the Indenture Limit,
calculated as of such date of determination.
(b) In the event that Lender determines that (i) the number of
days of the turnover of the Inventory for any period has increased or (ii) the
nature, quality or mix of the Inventory has deteriorated (each a "deterioration
event"), Lender shall promptly give notice to Borrowers of such determination (a
"deterioration notice"), and Borrowers may, at their discretion and at their
expense, engage an Appraisal Firm for the purpose of confirming whether, in the
judgment of such Appraisal Firm, a deterioration event has occurred. Such
engagement by Borrowers shall not count against either the limitation on the
number of appraisals, or the Person at whose expense such appraisals shall be
borne, as set forth in Section 7.3(d). Lender and Borrowers agree to be bound by
the determination made by the Appraisal Firm, including without limitation any
determination to decrease the Net Recovery Cost Percentage so as to address the
effect of a deterioration event, provided, however, that if at the time of
delivery of a deterioration notice (1) Excess Availability is less than
$5,000,000, Lender may immediately reduce the Net Recovery Cost Percentage to
the extent deemed sufficient by Lender, in its commercially reasonable judgment,
to address the effect of the deterioration event, and such reduction shall
continue in effect until such time, if any, that the report of the Appraisal
Firm shall have been received and (2) Excess Availability is greater than
$5,000,000 and the report of the Appraisal Firm shall not have been received by
the tenth Business Day after Borrowers' receipt of a deterioration notice, then
on the eleventh Business Day after Borrowers' receipt of such deterioration
notice, Lender may immediately reduce the Net Recovery Cost Percentage to the
extent deemed sufficient by Lender, in its commercially reasonable judgment, to
address the effect of the deterioration event, and such reduction shall continue
in effect until such time, if any, that the report of the Appraisal Firm shall
have been received. In determining whether to so reduce the Net Recovery Cost
Percentage, Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Inventory or in establishing
Availability Reserves. To the extent Lender shall have established an
Availability Reserve which is sufficient to address any event, condition or
matter in a manner satisfactory to Lender in good faith, Lender shall not
exercise its rights under this Section 2.1(b) to reduce the Net Recovery Cost
Percentage to address such event, condition or matter. The amount of any
reduction in the Net Recovery Cost Percentage by Lender pursuant to this Section
2.1(b) shall have a reasonable relationship to the matter which is the basis for
such a reduction.
(c) Lender may, in its discretion, exercised in a commercially
reasonable manner, from time to time, upon not less than five (5) days prior
notice to Borrowers, reduce the advance rate set forth in Section 2.1(a)(ii)(A)
with respect to Eligible Accounts to the extent that Lender determines that
current dilution of Credit Card Receivables, as of any date of determination,
exceeds the historic dilution of Credit Card Receivables. In determining whether
to reduce the lending formula, Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts or in establishing Availability Reserves. To the extent Lender shall
have established an Availability Reserve which is sufficient to address any
event, condition or matter in a manner satisfactory to Lender in good faith,
Lender shall not exercise its rights under this Section 2.1(c) to reduce the
advance rate applicable to Eligible Accounts to address such event, condition or
matter. The amount of any
14
reduction in the advance rate applicable to Eligible Accounts by Lender pursuant
to this Section 2.1(c) shall have a reasonable relationship to the matter which
is the basis for such a reduction.
(d) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of the
Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrowers shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrowers, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrowers containing terms
and conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrowers
pursuant to this Section 2.
(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 Lender a letter of credit fee at a rate equal to (i) one
and one-half percent (1 1/2%) per annum on the daily outstanding balance of the
Letter of Credit Accommodations in respect of documentary letters of credit for
the immediately preceding month (or part thereof) and (ii) one and three
quarters percent (1 3/4%) per annum on the daily outstanding balance of the
Letter of Credit Accommodations in respect of stand-by letters of credit for the
immediately preceding month (or part thereof), in each case, payable in arrears
as of the first day of each succeeding month, except that Borrowers shall pay to
Lender such letter of credit fees, at Lender's option, without notice, at a rate
equal to three and one-half percent (3 1/2%) per annum and three and three
quarters percent (3 3/4%) per annum, respectively, for (i) the period from and
after the date of termination or non-renewal hereof until Lender has received
full and final payment of all Obligations (notwithstanding entry of a judgment
against Borrowers), but only in the event that Lender has not received, on the
date of such termination, with respect to all then outstanding letters of credit
(x) cash collateral in an amount equal to 105% of the then outstanding amount of
Letter of Credit Reserves or (y) an indemnification from, or a "back-to-back"
stand-by Letter of Credit issued by, a financial institution satisfactory to
Lender, the terms of which indemnification or letter of credit shall be
satisfactory to Lender in its commercially reasonable judgment, and (ii) the
period from and after the date of the occurrence of an Event of Default and for
so long as such Event of Default is continuing. Such letter of credit fees shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrowers to pay such fees shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Loans available to
15
Borrowers (subject to the Maximum Credit and any Availability Reserves) are
equal to or greater than (i) if the proposed Letter of Credit Accommodation is
for the purpose of purchasing Eligible Inventory, the sum of (A) the percentage
equal to one hundred percent (100%) minus the then applicable percentage set
forth in Section 2.1(ii)(B) multiplied by the Cost of Eligible Inventory, plus
(B) freight, taxes, duty and other amounts that Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrowers' locations for Eligible Inventory; and (ii) if the proposed Letter of
Credit Accommodation is for any other purpose an amount equal to one hundred
percent (100%) of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodations, an Availability Reserve shall
be established in the applicable amount set forth in Section 2.2(c)(i) or
Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations, and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at any
time exceed $10,000,000. At any time an Event of Default has occurred and is
continuing, upon Lender's request, Borrowers will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Loans otherwise
available to Borrowers shall not be reduced as provided in Section to 2.2(c) the
extent of such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from
and against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, 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 any losses, claims, damages,
liabilities, costs and expenses as a result of the gross negligence or willful
misconduct of Lender as determined pursuant to a final non-appealable order of a
court of competent jurisdiction. Borrowers assume 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
Borrowers' agent. Borrowers assume 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. Borrowers hereby release and hold Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrowers, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for any losses, claims,
damages, liabilities, costs and expenses as a result of the gross negligence or
willful misconduct of Lender as determined pursuant to a final non-appealable
order of a court of competent jurisdiction. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrowers any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a
16
guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrowers shall be bound by any interpretation made in good faith
by Lender, 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 Borrowers. Lender shall have the sole and exclusive right
and authority to, and Borrowers shall not at any time an Event of Default exists
or has occurred and is continuing, unless Lender delivers notice to the
Borrowers to the contrary, (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, or (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 payment 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. Lender may take such actions either in its own name or in
Borrowers' name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrowers 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 Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.
2.3 Availability Reserves. All Loans otherwise available to Borrowers
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender 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 or non-
renewal hereof shall be payable on demand.
(b) Borrowers may from time to time 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 request from Borrowers
shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below). Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Lender of such a request from Borrowers, such Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, as of such date each of the following
conditions is satisfied as determined by
17
Lender in good faith: (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrowers shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrowers from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than six (6) 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 $2,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrowers shall not exceed an amount equal to
ninety (90%) percent of the lowest principal amount of the Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as determined by Lender (but with no obligation of Lender to make such
Loans) and (vii) Lender shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Lender through the Reference Bank and
can be readily determined as of the date of the request for such Eurodollar Rate
Loan by Borrowers. Any request by Borrowers 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, Lender
and Reference Bank 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 Lender and Reference Bank 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
Lender has received and approved 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 Lender's option, upon notice
by Lender to Borrowers, convert to Prime Rate Loans in the event that (i) an
Event of Default shall exist, (ii) this Agreement shall terminate or not be
renewed, or (iii) the aggregate principal amount of the Prime Rate Loans which
have previously been converted to Eurodollar Rate Loans or existing Eurodollar
Rate Loans continued, as the case may be, at the beginning of an Interest Period
shall at any time during such Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding, or (B) the Loans then available
to Borrowers under Section 2 hereof. Borrowers shall pay to Lender, upon demand
by Lender (or Lender may, at its option, charge any loan account of Borrowers)
any amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), 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.
(d) Interest shall be payable by Borrowers to Lender 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 Loans (other than Eurodollar Rate Loans) shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate, effective as and when each such increase or decrease in the Prime
Rate occurs. In no event shall charges constituting interest payable by
Borrowers to Lender 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.
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3.2 Loan Facility Fee. Borrowers shall pay to Lender as a one time loan
facility fee the sum of $150,000 which shall be non-refundable, and fully earned
as of and payable on the date hereof. The commitment fee in the amount of
$75,000 paid by G+G to Lender pursuant to the letter agreement between them
dated January 22, 2001 shall be applied as a credit against such loan facility
fee.
3.3 Administrative Fee. Borrowers shall pay to Lender on the Closing
Date, and on each yearly anniversary thereafter, an administrative fee of
$30,000 per annum in lieu of payment of the per diem fees of and out-of-pocket
expenses incurred by the members of Lender's field examination staff, pursuant
to Lender's periodic examination of Borrowers' books and records and Collateral.
Such examinations shall occur not more than four times during any consecutive
twelve month period, commencing on the Closing Date, unless an Event of Default
has occurred and is continuing, in which case, should Lender's field examination
staff perform an examination of Borrowers' books and records and Collateral
during the period in which such Event of Default is continuing, all such per
diem fees and expenses paid or incurred during such period shall be payable by
Borrowers upon Lender's demand. The administrative fees shall be non-refundable
and fully earned when paid.
3.4 Unused Line Fee. Borrowers shall pay to Lender monthly an unused
line fee at a rate equal to one-quarter of one percent (1/4%) per annum
calculated upon the amount by which the Maximum Credit 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.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans or by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii the cost to Lender, Reference Bank
or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrowers shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrowers and shall be conclusive, absent manifest error.
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(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrowers) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
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 Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by Congress
Financial Corporation of its financing arrangements with Borrowers and the
termination and release by it of any interest in and to any assets and
properties of Borrowers and each Obligor, duly authorized, executed and
delivered by it, including, but not limited to, UCC termination statements for
all UCC financing statements previously filed by it or its predecessors, as
secured party and Borrowers or any Obligor, as debtor;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender: (i) of G+G's corporate good standing in the State of
Delaware, and its qualification as a foreign corporation to do business in the
states of California, Florida, Illinois, Maryland, Massachusetts, New York, Ohio
and Texas; (ii) of searches, performed as of a recent date, against G+G and its
assets and properties in each jurisdiction deemed appropriate by Lender,
including UCC, tax and judgment lien searches and (iii) that Lender has valid
perfected and first priority security interests in and liens upon the Collateral
and any other property which is intended to be security for the Obligations or
the liability of any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the
assets, business or prospects of Borrowers since the earlier of (i) the date of
Lender's receipt of Borrower's most recently completed financial statements for
the year-to-date period ended in December, 2000 and
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(ii) date of Lender's latest field examination, and no change or event shall
have occurred which would impair the ability of Borrowers or any Obligor to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral;
(e) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Loans available to Borrowers including, without
limitation, current perpetual inventory records and/or roll-forwards of
Inventory through the Closing Date, together with such supporting documentation
as may be necessary or appropriate, and other documents and information that
will enable Lender to accurately identify and verify the Collateral, the results
of which shall be satisfactory to Lender, not more than three (3) Business Days
prior to the Closing Date;
(f) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons (other than from landlords of the Borrowers'
leased locations) which Lender may deem necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement and the
other Financing Agreements, including, without limitation, acknowledgements by
lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(g) Borrowers shall have established the Blocked Accounts and
Lender shall have received, in form and substance satisfactory to Lender, all
agreements with the depository banks and Borrowers with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrowers;
(h) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrowers have (i) directed the banks at which
Borrowers maintains deposit accounts for the initial receipt of cash, checks and
other items from Borrowers' retail store locations to transfer all immediately
available funds deposited in such bank only to the Blocked Accounts as required
pursuant to Section 6.3 hereof or as otherwise consented to by Lender and (ii)
notified such banks of the security interests of Lender in such funds and the
other Collateral;
(i) Lender shall have received Credit Card Acknowledgements in
each case, duly authorized, executed and delivered by the Credit Card Issuers
and Credit Card Processors;
(j) The Excess Availability as determined by Lender, as of the
date hereof, shall not be less than $10,000,000 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;
(k) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and
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substance satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee;
(l) Lender shall have received, in form and substance
satisfactory to Lender, the opinion letter of counsel to Borrowers with respect
to the Financing Agreements and the security interests and liens of Lender with
respect to the Collateral and such other matters and Lender may request;
(m) Borrowers shall be in material compliance with all of the
material terms and conditions of all agreements to which any of them is a party
or by which any of them on their properties may be bound, and which is material
to such Borrower's business, including without limitation the Senior Notes and
the Indenture, and Borrowers shall have delivered to Lender a compliance
certificate executed by G+G's chief executive officer or chief financial
officer, pursuant to which such officer shall certify such compliance; and
(n) This Agreement, the Revolving Credit Note, all other
agreements, documents and instruments listed on Annex A to this Agreement, and
all instruments and documents hereunder and thereunder shall have been duly
executed and delivered to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making 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; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an 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.
SECTION 5. SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby collaterally assigns to Lender the
following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts.
5.2. All present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks,
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copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment), chattel paper, documents, instruments, credit
card sales drafts, credit card sales slips or charge slips or receipts and other
forms of store receipts, letters of credit, bankers' acceptances and guaranties;
5.3 All present and future monies, credit balances, deposits, deposit
accounts and other property of such Borrower now or hereafter held or received
by or in transit to Lender or its affiliates or at any other depository or other
institution from or for the account of such Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise, and all present and
future liens, security interests, rights, remedies, title and interest in, to
and in respect of Accounts and other Collateral, including, without limitation,
(i) rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to the
Collateral, (ii) rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, (iii) goods described in invoices, documents, credit card sales drafts,
credit card sales slips or charge slips or receipts and other forms of store
receipts, contracts or instruments with respect to, or otherwise representing or
evidencing, Accounts or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (iv) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4. Inventory
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
5.8 Notwithstanding anything to the contrary set forth above,
Collateral shall not include any rights or interests in Equipment which is, and
so long as such Equipment remains subject to, a contract or lease which,
pursuant to its stated terms, prohibits the granting of a security interest or
lien therein to Lender and such prohibition has not been or is not waived or the
consent of the other party to such contract or lease 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 (a) to apply
if any such prohibition is unenforceable under Section 9- 318 of the Uniform
Commercial Code or other applicable law, or (b) so as to limit, impair or
otherwise affect the Lender's unconditional continuing security interests in and
liens upon any rights or interests of Borrowers in or to monies due or to become
due under any such contract or lease (including any Accounts), or (c) if the
lessor or holder of such security interest in and to such Equipment does not
have a valid and perfected security interest in or lien upon such Equipment.
SECTION 6. COLLECTION AND ADMINISTRATION
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6.1 Borrowers' Loan Account(s). Lender 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 Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrowers each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
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 Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from Borrowers of any specific exceptions of Borrowers thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrowers a written statement
as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrowers.
6.3 Collection of Accounts
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are reasonably
acceptable to Lender into which Borrowers shall promptly deposit and direct
their account debtors to directly remit all payments on Accounts and all
payments constituting proceeds of Inventory or other Collateral in the identical
form in which such payments are made, whether by cash, check, credit card sales
drafts, credit card sales or charge slips or other manner. Each bank at which a
Blocked Account is established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in such Blocked Account are the property of Lender, that such bank has no lien
upon, or right to setoff against, such Blocked Account, the items received for
deposit therein, or the funds from time to time on deposit therein, and that
such bank will wire, or otherwise transfer, in immediately available funds, on a
daily basis, at such time as Lender shall direct, all funds received or
deposited into such Blocked Account to such bank account of Lender as Lender may
from time to time designate for such purpose ("Payment Account"). Lender shall
instruct each depository bank at which a Blocked Account is maintained to
transfer the funds on deposit in such Blocked Account to such operating bank
account of Borrowers as Borrowers may specify in writing to Lender (each an
"Operating Account") until such time as Lender shall notify such bank otherwise.
Lender may give instructions ("Sweep Instructions") to each bank at which a
Blocked Account is maintained to transfer all funds received or deposited into
such Blocked Accounts to the Payment Account if, at any time: (i) an Event of
Default, or event which with notice or passage of time or both would constitute
an Event of Default, shall exist, or (ii) Borrowers have Excess Availability of
less than $5,000,000 for three (3) consecutive days, provided, however, that in
the event that, after the date on which Lender gives Sweep Instructions to such
banks, Borrowers have Excess Availability greater than $5,000,000 for a period
of thirty (30) consecutive days, then, on the first day following the expiration
of such period, so long as no Event of Default has occurred and is then
continuing, Lender shall revoke
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the Sweep Instructions previously given by it, and each such bank may resume the
transfer of funds on deposit in the applicable Blocked Account to the applicable
Operating Account. Borrowers agree that all payments made to such Blocked
Accounts or other funds received and collected by Lender, whether on the
Accounts or as proceeds of Inventory or other Collateral or otherwise shall be
the property of Lender.
(b) For purposes of calculating the amount of the Loans
available to Borrowers, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and by 12:00 noon New York City time
or, at Lender's discretion, otherwise within sufficient time to credit
Borrowers' loan account on such day, and if not, then on the next Business Day.
Until the date Lender notifies the depository banks at which the Blocked
Accounts are maintained to direct payment to the Payment Account in accordance
with Section 6.3(a), Lender shall be entitled to charge Borrowers an
administrative fee equivalent to the interest Lender would have received for the
Collection Period (as defined below) had the funds deposited in the Blocked
Account on such day been transferred from the Blocked Account to the Payment
Account on such day. If Lender notifies the depository banks at which the
Blocked Accounts are maintained to direct payment to the Payment Account in
accordance with the terms of Section 6.3(a), then, for purposes of calculating
interest on the Obligations, such payments or other funds received in the
Payment Account will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account (the "Collection Period"),
provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and by 12:00 noon New York City time, or, at Lender's discretion, otherwise
within sufficient time to credit Borrowers' loan account on such day, and if
not, then on the next Business Day. Prior to the Lender notifying the depository
banks at which the Blocked Accounts are maintained to direct payment to the
Payment Account in accordance with Section 6.3(a), for purposes of calculating
interest on the Obligations, payments or other funds received in the Payment
Account will be applied (conditional upon final collection) to the Obligations
on the Business Day of receipt of immediately available funds by Lender in the
Payment Account, provided such payments or other funds and notice thereof are
received in accordance with Lender's usual and customary practices as in effect
from time to time and by 12:00 noon New York City time, or, at Lender's
discretion, otherwise within sufficient time to credit Borrowers' loan account
on such day, and if not, then on the next Business Day.
(c) Borrowers and all of their affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts,
credit card sales drafts, credit card sales or charge slips or receipts, or any
other payment relating to and/or proceeds of Accounts 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
Lender. In no event shall the same be commingled with Borrowers' own funds.
Borrowers agree to reimburse Lender 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
25
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrowers to reimburse Lender, for such amounts pursuant to this Section 6.3
shall survive the termination or non- renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate in
writing from time to time. Lender may apply payments received or collected from
Borrowers or for the account of Borrowers (including, without limitation, the
monetary proceeds of collections or of realization upon any Collateral) to such
of the Obligations whether or not then due, in such order and manner as Lender
determines; except that, so long as no Event of Default exists and is
continuing, Lender agrees to apply all payments received or collected from
Borrowers first against all outstanding Obligations, other than Eurodollar Rate
Loans, and second against all outstanding Eurodollar Rate Loans. At Lender's
option, all principal, interest, fees, costs, expenses and other charges
provided for in this Agreement or the other Financing Agreements may be charged
directly to the loan account(s) of Borrowers. Borrowers shall make all payments
to Lender on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, 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 Lender. Borrowers
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement. If, at any time, there are no Loans outstanding,
and Lender holds a credit balance, Lender shall remit such credit balance to an
account of Borrowers as directed in writing by G+G.
6.5 Authorization to Make Loans. Lender is 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 Borrowers or
other authorized person or, at the discretion of Lender, 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,
Borrowers when deposited to the credit of Borrowers or otherwise disbursed or
established in accordance with the instructions of Borrowers or in accordance
with the terms and conditions of this Agreement.
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6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Lender to Borrowers hereunder only for: (a) the payment of
satisfaction in full of all loans outstanding on the Closing Date and payable by
Borrowers to Congress Financial Corporation pursuant to the Loan and Security
Agreement dated October 30, 1998, as amended, between Congress Financial
Corporation and Borrowers, all interest accrued thereon, and all fees payable in
connection thereunder, (b) payments to each of the persons listed in the
disbursement direction letter furnished by Borrowers to Lender on or about the
date hereof and (c) 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 by
Lender to Borrowers pursuant to the provisions hereof shall be used by Borrowers
only for general operating, working capital and other proper corporate purposes
of Borrowers not otherwise prohibited by the terms hereof. None of the proceeds
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrowers shall provide Lender, upon Lender's
request, with (a) perpetual inventory reports with reports of sales of Inventory
by store, (b) copies of the monthly statements received by Borrowers from any
Credit Card Issuers or Credit Card Processors, together with such additional
information with respect thereto as shall be sufficient to enable Lender to
monitor the transactions pursuant to the Credit Card Agreements and (c) such
other reports as to the Collateral as Lender shall request from time to time. In
addition, Borrowers shall provide Lender (I) on a monthly basis, on or before
the tenth day of each month, with a Rent Report with respect to the previous
month, and (II) with a borrowing base certificate and related collateral report,
in each case in such scope and detail as Lender shall determine to be
satisfactory, in its sole discretion, exercised in a commercially reasonable
manner (x) on a weekly basis, on Friday of each week with respect to the
previous week, during each of the months of July through and including November,
and with respect to any other week during any other month if Excess Availability
on any day during such other week is less than $7,500,000 and (y) except as
otherwise provided in clause (x) of this sentence, on a monthly basis no later
than the third Business Day of the following month during each of the months of
December through and including June. Such borrowing base certificate and related
collateral report may include, without limitation, at Lender's discretion, on
reasonable prior notice to Borrowers, (i) reports of sales of Inventory,
indicating net sales, (ii) reports of aggregate Inventory purchases (including
all costs related thereto, such as freight, duty and taxes) and identifying
items of Inventory in transit to Borrowers related to the applicable documentary
letter of credit and/or xxxx of lading number, (iii) reports of amounts of
consigned Inventory held by Borrowers by category and consignor, (iv) reports of
the Cost and Retail Value of the Inventory (net of markdowns and shrink
reserves), (v) reports on Accounts, including aggregate outstanding amounts by
category, payments, accruals and returns and other credits, (vi) copies of
customer statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (vii) copies of bills of lading, (viii)
copies of purchase orders, invoices
27
and delivery documents for Inventory and Equipment acquired by Borrowers, (ix)
reports by retail store location of sales and operating profits for each such
retail store location; (x) accounts payable trial balance, (xi) reports on sales
and use tax collections, deposits and payments, including monthly sales and use
tax accruals; and (xii) accounts receivable detail as Lender may request. If any
of Borrowers' records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrowers hereby
irrevocably authorize such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Lender.
7.2 Accounts Covenants
(a) Borrowers shall notify Lender promptly of the assertion of
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 which could reasonably be
expected to have a Material Adverse Effect. 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 Borrowers' business in accordance with the then-current practices of
Borrowers. So long as no Event of Default has occurred and is continuing,
Borrowers shall be entitled to 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 Default has occurred and is continuing,
Lender shall, unless it delivers notice to the contrary to Borrowers, 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) Borrowers shall notify Lender promptly of any of the
following which could reasonably be expected to have a Material Adverse Effect:
(i) any notice of a material default by Borrowers under any of the Credit Card
Agreements or of any default which might result in the Credit Card Issuer or
Credit Card Processor ceasing to make payments or suspending payments to
Borrowers, (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 Borrowers from such person, or that
such person is terminating or will terminate any of the Credit Card Agreements,
and (iii) the failure of Borrowers to comply with any material terms of the
Credit Card Agreements or any terms thereof which might result in the Credit
Card Issuer or Credit Card Processor ceasing or suspending payments to
Borrowers.
(c) With respect to each Account: (i) the amounts shown on any
report delivered to Lender or schedule thereof delivered to Lender shall be true
and complete in all material respects, (ii) except as otherwise provided in
Section 6.3 hereof, no payments shall be made thereon except payments delivered
to Lender pursuant to the terms of this Agreement, (iii) no credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any Credit Card Issuer or Credit Card Processor, except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrowers' business in
accordance with practices and policies previously disclosed to Lender, and (iv)
none of the transactions giving rise thereto will violate
28
any applicable State or Federal Laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) If an Event of Default exists and is continuing, Lender
may, from time to time (i) notify any or all account debtors, Credit Card
Issuers and Credit Card Processors that the Accounts have been collaterally
assigned to Lender and that Lender has a security interest in the Accounts and
Lender may direct any or all account debtors, Credit Card Issuers and Credit
Card Processors to make payments of Accounts directly to Lender, (ii) extend the
time of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all Accounts
or other obligations included in the Collateral and thereby discharge or release
the account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof not for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default has occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor, Credit Card Issuer or Credit Card
Processor shall state that the Accounts due from such account debtor, Credit
Card Issuer or Credit Card Processor and such other obligations have been
assigned to Lender and are payable directly and only to Lender and Borrowers
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
(e) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(f) Upon the request of Lender, Borrowers shall deliver or
cause to be delivered to Lender, with appropriate endorsement and assignment,
with full recourse to Borrowers, all chattel paper and instruments which
Borrowers now own or may at any time acquire., provided, however, that Lender
may only make such request with respect to Employee Notes, as defined in the
following sentence, if an Event of Default has occurred and is continuing or
Excess Availability is less than $5,000,000. In the event that Borrowers deliver
to Lender any instrument or note executed and delivered by any officer,
director, employee or shareholder of Borrower in connection with the
transactions more particularly described in Section 9.10(d)(ii) below (the
"Employee Notes"), Lender agrees, upon the request of Borrowers, to return any
such instrument to Borrowers for the purpose of permitting Borrowers to
consummate their transactions with such employee, officer, director or
shareholder and to provide Borrowers with such additional documents reasonably
necessary to release Lender's lien upon such instruments.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrowers
shall at all times maintain inventory records reasonably satisfactory to Lender
(it being understood that the form and scope of inventory records maintained by
Borrowers on the Closing Date is satisfactory to Lender), keeping correct and
accurate records itemizing and describing the kind, type, quality and quantity
of Inventory, Borrowers' Cost therefor and daily withdrawals therefrom and
additions thereto; (b) Borrowers shall conduct a physical count of the Inventory
at least once
29
each year, but at any time or times as Lender may request during the continuance
of an Event of Default, and promptly following such physical inventory shall
supply Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count; (c) Borrowers
shall not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Lender, except for sales of Inventory in
the ordinary course of Borrowers' business, returns of Inventory to the
suppliers thereof, for credit, so long as such returns are made 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; (d) upon
Lender's request, Borrowers shall, at their expense, no more than twice in any
consecutive twelve (12) month period commencing on the Closing Date but at any
time or times as Lender may request at Lender's expense, or at any time or times
as Lender may request at Borrowers' expense during the existence and continuance
of an Event of Default, or in the event that Excess Availability is less than
$7,500,000, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by the Appraisal Firm, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) upon Lender's request, Borrowers shall, at
their expense, conduct through RGIS Inventory Specialists, Inc. or another
inventory counting service reasonably acceptable to Lender, a physical count of
the Inventory in form, scope and methodology reasonably acceptable to Lender no
more than twice in any consecutive twelve (12) month period commencing on the
Closing Date, but at any time or times as Lender may request during the
continuance of an Event of Default, the results of which shall be reported
directly by such inventory counting service to Lender and Borrowers shall
promptly deliver confirmation in a form satisfactory to Lender that appropriate
adjustments have been made to the inventory records of Borrowers to reconcile
the inventory count to Borrowers' inventory records; (f) Borrowers shall
produce, use, store and maintain the Inventory, with reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with applicable laws (including, but not limited to, the requirements of the
Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations
and orders related thereto); (g) Borrowers assume all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (h) Borrowers shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrowers to repurchase such Inventory except for the right of
return given to retail customers of Borrowers in the ordinary course of the
business of Borrowers in accordance with the then current return policy of
Borrowers; (i) Borrowers shall use their best efforts to keep the Inventory in
good and marketable condition; and (j) Borrowers shall not acquire or accept any
Inventory on consignment or approval, except to the extent such Inventory is
reported to Lender in accordance with the terms hereof.
7.4 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all of Lender's employees, agents or affiliates designated
by Lender) as such Borrower's true and lawful attorney-in-fact, and authorizes
Lender, in Borrowers' or Lender's name, to: (a) at any time an Event of Default
exists or has occurred and is continuing (i) demand payment on Accounts or other
proceeds of Inventory or other Collateral, (ii) enforce payment of Accounts by
legal proceedings or otherwise, (iii) exercise all of Borrowers' rights and
remedies to collect any Account or other Collateral, (iv) sell or assign any
Account upon such terms, for such amount and at such time or times as the Lender
deems advisable, (v) settle, adjust, compromise, extend or renew an Account,
(vi) discharge and release any Account, (vii) prepare,
30
file and sign such Borrower's name on any proof of claim in bankruptcy or other
similar document against an account debtor, (viii) notify the post office
authorities to change the address for delivery of Borrowers' mail to an address
designated by Lender, and open and dispose of all mail addressed to Borrowers,
and (ix) do all acts and things which are necessary, in Lender's determination,
to fulfill Borrowers' 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 or proceeds thereof, (ii) have access to any lockbox or postal box into
which Borrowers' mail is deposited, (iii) endorse such Borrower's name upon any
items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations, (iv) endorse such Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
Collateral, (v) sign such Borrower's name on any verification of Accounts and
notices thereof to account debtors and (vi) execute in such Borrower's name and
file any UCC financing statements or amendments thereto. Borrowers hereby
releases Lender and its 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 Lender's own
gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.5 Right to Cure. Lender may, at its option, (a) cure any default by
Borrowers under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrowers, provided that any such default or judgment
would constitute an Event of Default hereunder, (b) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing with
respect to the Collateral and (c) pay any amount, incur any expense or perform
any act which, in Lender's reasonable judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the Obligations
and charge Borrowers' account therefor, such amounts to be repayable by
Borrowers on demand. Lender 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 Borrowers. Any payment made or other action taken by
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.
7.6 Access to Premises. From time to time as requested by Lender, and,
if an Event of Default has occurred and is then continuing, at the cost and
expense of Borrowers, (a) Lender or its designee shall have complete access to
all of Borrowers' premises during normal business hours and after reasonable
notice to Borrowers, or at any time and without notice to Borrowers if an Event
of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrowers' books
and records, including, without limitation, the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrowers' personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
31
Borrowers hereby, jointly and severally, represent and warrant to
Lender the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which (except to the extent that such
representations and warranties relate solely to an earlier date) are a
continuing condition of the making of Loans and providing Letter of Credit
Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each
Borrower 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 are all within such
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of such Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which such Borrower is a party or by which such
Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms. Borrowers do not have any
subsidiaries except as set forth on the Information Certificate or otherwise
disclosed in writing to Lender.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein except that the pro forma
financial statements and projections delivered to Lender have been, or will be,
prepared consistent with the principles used in preparing the audited financial
statements required to be delivered under this Agreement. Except as disclosed in
any interim financial statements furnished by Borrowers to Lender prior to the
date of this Agreement, there has been no Material Adverse Change since the date
of the most recent audited financial statements furnished by Borrowers to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts and
Inventory are located only at the address set forth on Schedule 8.3 hereto and
its only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of each Borrower to establish new locations in accordance with Section 9.2
hereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
32
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, and has collected, deposited and
remitted in accordance with all applicable laws all sales and/or use taxes
applicable to the conduct of its business, except taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
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
material Federal, State, county, local, foreign and other taxes whether or not
yet due and payable and whether or not disputed. Each Borrower has collected and
has remitted or will remit timely to the appropriate tax authority all sales
and/or use taxes applicable to its business required to be collected under the
laws of the United States and each possession or territory thereof, and each
State or political subdivision thereof, including any State in which such
Borrower owns any Inventory or owns or leases any other property.
8.6 Litigation. Except as set forth on the Information Certificate or
otherwise disclosed in writing by Borrowers to Lender, there is no present
investigation by any governmental agency pending, or to the best of Borrowers'
knowledge threatened, against or affecting Borrowers, their assets or business
and there is no action, suit, proceeding or claim by any Person pending, or to
the best of Borrowers' knowledge threatened, against Borrowers or their assets
or goodwill, or against or affecting any transactions contemplated by this
Agreement, in each case which if adversely determined against Borrowers would
result in any material adverse change in the assets, business or prospects of
Borrowers taken as a whole or would impair the ability of Borrowers to perform
their obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce any Obligations or realize upon any
Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Each Borrower is not 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 would
have a Material Adverse Effect. Each Borrower is in compliance in all material
respects 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
33
Trade Commission Act of 1914, as amended, and all regulations, rules and orders
promulgated thereunder), where the failure to comply would have a Material
Adverse Effect.
(b) Each Borrower has obtained all permits, licenses, approvals,
consents, certificates, orders or authorizations (the "Permits") of any
governmental agency required for the lawful conduct of its business, in each
case except to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect. The Permits constitute all permits,
licenses, approvals, consents, certificates, orders or authorizations necessary
for Borrowers to own and operate their business as presently conducted or
proposed to be conducted where the failure to have such Permits would have a
material adverse effect on the business, performance, operations or properties
of Borrowers or the legality, validity or enforceability of this Agreement or
the other Financing Agreements or the ability of Borrowers to perform their
obligations under the Agreement or any of the other Financing Agreements or the
rights and remedies of Lender under this Agreement or any of the other Financing
Agreements. All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or threatened that
seek the revocation, cancellation, suspension or modification of any of the
Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, no Borrower has 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 in any material respect or any license, permit, certificate,
approval or similar authorization issued to Borrowers thereunder and the
operations of Borrowers comply in all material respects with all applicable
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there is no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person pending or to the best
of Borrowers' knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any applicable Environmental Law by Borrowers
nor has there been any release, spill or discharge, overtly threatened or
actual, of any Hazardous Material on any properties of Borrowers, or to the best
of Borrowers' knowledge, releases, spills or discharges from any properties at
which any Borrower has transported, stored or disposed of any Hazardous
Materials, or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental matter which would have a Material Adverse Effect.
(c) Except as set forth in Schedule 8.8 hereto, no Borrower has any
material liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(d) Each Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of such Borrower under any Environmental Law and
all of such licenses, permits, certificates, approvals
34
or similar authorizations are valid and in full force and effect in each case
where the failure to obtain or maintain such licenses, permits, certificates,
approvals or similar authorizations would have a material adverse effect on the
assets or business of such Borrower or would impair the ability of such Borrower
to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Agent or any Lender to enforce any
Obligations or realize upon any Collateral.
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
related agreements, documents and instruments existing as of the date hereof
between or among Borrowers, the Credit Card Issuers, the Credit Card Processors
and any of their affiliates. The Credit Card Agreements constitute all of such
agreements necessary for Borrowers to operate their businesses as presently
conducted with respect to credit cards and debit cards and no Accounts of
Borrowers 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
Borrowers have entered into one of the Credit Card Agreements set forth on
Schedule 8.9 hereto or with whom Borrowers have entered into a Credit Card
Agreement in accordance with Section 9.13 hereof. Each of the Credit Card
Agreements constitutes the legal, valid and binding obligations of Borrowers and
to the best of Borrowers' knowledge, the other parties thereto, enforceable in
accordance with their respective terms and are in full force and effect. No
default or event of default, or act, condition or event which after notice or
passage of time or both, would constitute a default or an event of default under
any of the Credit Card Agreements exists or has occurred. Borrowers and the
other parties thereto have complied with all of the terms and conditions of the
Credit Card Agreements to the extent necessary for Borrowers to be entitled to
receive all payments thereunder. Borrowers have delivered, or caused to be
delivered to Lender, true, correct and complete copies of all of the Credit Card
Agreements.
8.10 Employee Benefits.
(a) Borrowers have not engaged in any transaction in connection
with which Borrowers or any of their ERISA Affiliates could be subject to either
a civil penalty assessed pursuant to ERISA or a tax imposed the Code, including
any accumulated funding deficiency described in Section 8.10(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.10(d)
hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrowers to be incurred with respect to any employee
benefit plan of Borrowers or any of their ERISA Affiliates. There has been no
reportable event (within the meaning of ERISA) or any other event or condition
with respect to any employee benefit plan of Borrowers or any of their ERISA
Affiliates which presents a risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrowers or
any of their ERISA Affiliates is required under ERISA and the Code to have paid
under the terms of each employee benefit plan as contributions to such plan as
of the last day of the most recent fiscal year of such plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in ERISA and the
Code), whether or not waived, exists with respect to any employee
35
pension benefit plan, including any penalty or tax described in Section 8.10(a)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.10(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrowers that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.10(a) hereof and any accumulated funding deficiency
described in Section 8.10(d) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrowers nor any of their ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in ERISA) that is subject to Title IV of ERISA.
8.11 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 6.3 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.13
below.
8.12 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrowers in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrowers, which has not been fully and accurately disclosed to Lender in
writing.
8.13 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 Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times
preserve, renew and keep in full force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on its business as presently or proposed to be
conducted in each case except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect. Each Borrower shall
give Lender at least thirty (30) days prior written notice of any proposed
change in its corporate name, which notice shall set
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forth the new name and such Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation of such Borrower providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.
9.2 New Collateral Locations. Each Borrower may open any new location
within (a) the United States, including the Commonwealth of Puerto Rico and the
United States Virgin Islands, (b) Canada, (c) in any other country where Lender
has a first priority security interest in such assets and Lender determines that
it has rights and remedies to enforce its lien and realize upon its Collateral
located in such country, all as determined by Lender in its sole discretion, or
(d) any country where the terms of Section 9.2(c) are not complied with,
provided that, in such instance, the aggregate amount of all such net
investments in such countries, including all loans, investments, guaranties or
advances made by Borrowers or any Guarantors shall not exceed, in the aggregate,
$1,000,000, provided that in all such instances Borrowers (i) give Lender at
least fifteen (15) Business Days prior written notice of the intended opening of
any such new location and (ii) execute and deliver, or cause to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such locations, including without limitation UCC financing
statements and evidence, in form and substance satisfactory to Lender, that
Borrowers have (x) directed the bank at which Borrowers maintain a deposit
account for the initial receipt of cash, checks and other items from such new
location to transfer all immediately available funds deposited in such bank only
to the Blocked Accounts as required pursuant to Section 6.3 hereof or as
otherwise consented to by Lender and (y) notified such bank of the security
interests of Lender in such funds and the other Collateral.
9.3 Compliance with Laws, Regulations, Etc. Each Borrower shall at all
times comply in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders and duly observe all
material requirements, of any foreign, Federal, State or local governmental
authority, including, without limitation, the Occupational Safety and Health Act
of 1970, as amended, the Code, the Fair Labor Standards Act of 1938, as amended,
and the rules and regulations thereunder, all Federal, State and local statutes,
regulations, rules and orders relating to consumer credit (including, without
limitations, 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 statutes,
rules, regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including, without limitation, all
Environmental Laws except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
9.4 Payment of Taxes and Claims. Each Borrower shall 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
by such Borrower and with respect to which adequate reserves have been set aside
on its books. Borrowers shall be liable for any tax or penalties imposed on
37
Lender as a result of the financing arrangements provided for herein and each
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans, provided
that nothing contained herein shall be construed to require Borrowers to pay any
income or franchise taxes, including those attributable to the income of Lender
from any amounts charged or paid hereunder to Lender. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.5 Insurance. Each Borrower shall, 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 Lender
as to form, amount and insurer. Borrowers shall furnish certificates, policies
or endorsements to Lender as Lender shall require as proof of such insurance,
and, if Borrowers fail to do so, Lender 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 Lender of any cancellation
or reduction of coverage and that Lender may act as attorney for Borrowers 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 shall cause Lender to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and Borrowers shall obtain non-contributory lender's loss payable
endorsements to all insurance policies in form and substance reasonably
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrowers or any of their affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations; except that, so
long as no Event of Default exists and is continuing, to the extent Lender
applies such proceeds in respect of the Obligations, Lender shall apply such
proceeds first, against all outstanding Obligations, other than Eurodollar Rate
Loans, and second, against all outstanding Eurodollar Rate Loans. Not
withstanding anything hereinabove to the contrary, Borrowers shall not be
obligated to (i) insure any truck or automobile or (ii) cause the issuer of any
policy pursuant to which any trucks or automobiles are in fact insured to (x)
name Lender as loss payee or insured thereunder with respect to such trucks or
automobiles, (y) give Lender any prior notice of cancellation or reduction in
coverage with respect to such trucks or automobiles or (z) pay to Lender any
claims or proceeds thereunder with respect to such trucks or automobiles.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its
subsidiaries (if any) in accordance with GAAP and Borrowers shall furnish or
cause to be furnished to Lender: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited consolidated financial statements, and, if
Borrowers
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have any subsidiaries, and have prepared such statements, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrowers and their subsidiaries
as of the end of and through such fiscal month, and for the year-to-date period
then ended; (ii) within forty-five (45) days after the end of each Fiscal
Quarter, quarterly unaudited consolidated financial statements, and, if
Borrowers have any subsidiaries, and have prepared such statements, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrowers and their subsidiaries
as of the end of and through such Fiscal Quarter, and for the year-to-date
period then ended; and (iii) within ninety (90) days after the end of each
Fiscal Year, audited consolidated financial statements and, if Borrowers have
any subsidiaries and have prepared such statements, audited consolidating
financial statements of Borrowers and their subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrowers and their subsidiaries as of the end of and for such
Fiscal Year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrowers and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrowers and their
subsidiaries as of the end of and for the Fiscal Year then ended.
(b) Borrowers shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim in excess of $500,000 or $1,000,000 in the aggregate relating to the
Collateral or any other property which is security for the Obligations or which
would result in any Material Adverse Change and (ii) the occurrence of any Event
of Default or act, condition or event which, with the passage of time or giving
of notice or both, would constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports and
registration statements which any Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request. Each Borrower hereby irrevocably authorizes and directs all accountants
or auditors to deliver to Lender, at Borrowers' expense, copies of the financial
statements of Borrowers and any reports or management letters prepared by such
accountants or auditors on behalf of Borrowers. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Borrowers to Lender in writing.
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9.7 Sale of Assets, Consolidation, Merger, Formation or Acquisition of
Subsidiaries, Dissolution, Etc. Each Borrower shall not, 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, provided,
however, that, so long as no Event of Default exists and is continuing, any
Borrower (other than G+G) or Guarantor may merge with or into any other Borrower
(other than G+G) or Guarantor (i) upon at least thirty (30) days advance written
notice to Lender, (ii) provided that such Borrowers or Guarantors execute UCC-1
financing statements and any other agreements, documents, guaranties and
instruments reasonably requested by Lender whether to protect or continue
Lender's interests in and upon the Collateral or otherwise related to the
Collateral or the Financing Agreements and (iii) provided that such Borrowers or
Guarantors deliver financial and other information as Lender may reasonably
request, or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any 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 disposition of Collateral so long as (A) if an Event
of Default exists or has occurred and is continuing, any proceeds are paid to
Lender and (B) such dispositions for all Borrowers do not involve Collateral
having an aggregate fair market value in excess of $500,000 for all such
Collateral disposed of in any fiscal year of Borrowers,
(iii) sales or other dispositions by such 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, (A) on
the date of, and after giving effect to, any such sale, in any calendar year,
such Borrower shall not have closed or sold retail store locations accounting
for more than twenty percent (20%) of all sales of such Borrower in the
immediately preceding twelve (12) month period, (B) Lender shall have received
not less than ten (10) Business Days prior written notice of such sale, which
notice shall set forth in reasonable detail satisfactory to Lender, 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 Lender may request, (C) as of the date of
such sale or other disposition and after giving effect thereto, no Event of
Default, or act, condition or event which with notice or passage of time would
constitute an Event of Default, shall exist, (D) such sale shall be on
commercially reasonable prices and terms in a bona fide arm's length
transaction, and (E) any and all net proceeds payable or delivered to Borrowers
in respect of such sale or other disposition shall be paid or delivered, or
caused to be paid or delivered, to Lender in accordance with the terms of this
Agreement either, at Lender's option, for application to the Obligations in
accordance with the terms hereof (except to the extent such proceeds reflect
payment in respect of indebtedness secured by a valid security interest in the
assets sold, in which case, such proceeds shall be applied to such indebtedness
secured thereby).
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(iv) the abandonment of any assets no longer deemed necessary
to the conduct of such Borrower's business, as determined by such Borrower's
board of directors in its business judgment,
(v) except as expressly limited in this Agreement, transfer of
assets to any other Borrower or Guarantor,
(vi) any sale, assignment, lease, transfer, abandonment,
investment or other disposition expressly permitted under Sections 9.9, 9.10,
9.11 or 9.12 hereof,
(vii) in the case of any Person (x) the issued and outstanding
shares of capital stock of which will be owned by Parent or G+G and (y) formed
to carry on the business and operations currently operated by G+G under the
business line known as "Rave Girl", a sale of all or any portion of such shares
of capital stock, or the private placement or initial public offering by such
Person of its capital stock, provided that the consideration for any such sale,
private placement or public offering consists solely of cash, and that the net
cash proceeds of any such sale, private placement or public offering are
promptly delivered to Lender, for application by it against the Obligations, in
such order as Lender may determine in its sole discretion, or
(viii) the sale or transfer to Parent of Capital Stock of
Parent (including without limitation Senior Note Warrants) purchased or acquired
by G+G in accordance with Section 9.10 (e), or
(c) form or acquire any subsidiaries except that, so long as no
Event of Default then exists and is continuing, Borrowers may form or acquire
subsidiaries upon at least fifteen (15) Business Days advance written notice to
Lender, provided, however, that (i) such notice may be contemporaneous with the
formation or acquisition of any such subsidiaries which operate or own assets
located solely in the United States, Canada, the United States Virgin Islands or
Puerto Rico, or any other country of the kind described in Section 9.2(d), so
long as Borrowers are in compliance with the terms of Section 9.2(d), (ii) such
new subsidiary or subsidiaries and each Borrower in such transaction shall
execute and deliver to Lender all such UCC-1 financing statements and other
agreements, documents, guarantees and instruments as Lender may request, whether
to protect or continue Lender's interest in the Collateral or otherwise, (iii)
Lender, upon its request, shall perform an examination and analysis of the
inventory of such subsidiary and shall have the right to include within Eligible
Inventory such inventory of such subsidiary as Lender shall so determine, in the
exercise of its commercially reasonable judgment, until such time, if any, as
Borrowers shall have engaged at their expense an Appraisal Firm to evaluate such
inventory and make a determination as to the propriety of the inclusion within
Eligible Inventory of such inventory, which determination shall be conclusive
(such engagement by Borrowers shall not count against either the limitation on
the number of appraisals, or the Person at whose expense such appraisals shall
be borne, as set forth in Section 7.3(d)) (iv) each such subsidiary, at Lender's
request, shall (x) execute this Agreement as a "Borrower", and, if Lender so
determines, all then existing Borrowers shall execute all amendments to this
Agreement as Lender may deem advisable, including, without limitation, for the
purpose of establishing separate borrowing bases and loan accounts for each
Borrower, should Lender so determine in the exercise of its commercially
reasonable judgment or (y) execute as a "Guarantor" an unlimited guarantee in
favor of Lender guaranteeing the Obligations
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and a general security agreement in favor of Lender granting in favor of Lender
a first priority security interest in all assets of such subsidiary and (v)
Borrowers and any such subsidiaries shall deliver such financial or other
information as Lender may request, or
(d) wind up, liquidate or dissolve, provided, however, that any
Borrower (other than G+G) or any Guarantor may be wound up, liquidated or
dissolved so long as such Borrower or Guarantor (i) is no longer actively
engaged in any business or activities, (ii) does not own assets with an
aggregate fair market or book value in excess of $250,000 and (iii) determines
through its board of directors that such action is in the best interests of
Borrowers and Guarantors, or
(e) in a manner that does not contemplate payment in full of the
Obligations upon consummation thereof, agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower shall not 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, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued by such Borrower 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 business to the extent: (i) such liens secure
indebtedness which is not overdue or (ii) such liens secure indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued by such Borrower, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;
(d) liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business, (e) liens of or resulting from any judgment or
award not bonded or otherwise covered by insurance that does not exceed singly,
or in the aggregate, $2,500,000 and as to which the time for the appeal or
petition for rehearing of which has not yet expired, or in respect of which
Borrowers are in good faith prosecuting an appeal or proceeding for a review,
and in respect of which a stay of execution pending such appeal or proceeding
for review has been secured, (f) liens on property of a Person existing at the
time such Person is acquired, merged into or consolidated with any Borrower, so
long as such liens were in existence prior to the consummation of such
acquisition, merger or consolidation and do not (after consummation thereof)
extend to any assets other than the Equipment or Real Property of the person
merged into or consolidated with such Borrower, (g) 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 as presently
conducted thereon or materially impair the value of the Real Property which may
be subject thereto; (h) purchase money security interests in Equipment
(including capital leases) not to exceed $12,000,000 in the aggregate at any
time outstanding so long as such security interests and mortgages do not apply
to any property of Borrowers other than the Equipment or real estate so
acquired, and the indebtedness secured thereby does not exceed the cost of the
Equipment or
42
real estate so acquired, as the case may be; (i) liens or rights of setoff or
credit balances of Borrowers with banks and other financial institutions at
which Borrowers have accounts or other investments permitted hereunder and
Credit Card Issuers, 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 as a result of fees and chargebacks; (j) 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 obligations under the terms of the lease for such premises; and (k) the
liens and security interests existing on the date hereof set forth on Schedule
8.4 hereto.
9.9 Indebtedness; Repayments and Prepayments of Certain Indebtedness.
Each Borrower shall not incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, any indebtedness, except:
(a) Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) obligations or indebtedness (including indebtedness evidenced
by the Senior Notes) existing as of the date hereof set forth on Schedule 9.9
hereto, and indebtedness evidenced by the Replacement Senior Notes, provided,
that (i) except as otherwise provided in clause (iv) hereof, Borrowers may only
make regularly scheduled payments of principal and interest in respect of any
such indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness, as in effect on the Closing Date
(or, in the case of the Replacement Senior Notes, as in effect on the date of
issuance thereof), (ii) Borrowers shall not, directly or indirectly 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 (or, in
the case of the Replacement Senior Notes, as in effect on the date of issuance
thereof), in any manner which purports to grant any lien, collateral or other
security therefor, (iii) Borrowers shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrowers or on
their behalf, promptly after the receipt thereof, or sent by Borrowers or on
their behalf, concurrently with the sending thereof, as the case may be; (iv) so
long as no Event of Default has occurred and is then continuing, Borrowers may
purchase or redeem from time to time any of the Senior Notes and any of the
Replacement Senior Notes, and may make prepayments from time to time of all or
any portion of the indebtedness evidenced by the Senior Notes and the
Replacement Senior Notes, provided that after giving effect to any such
purchase, redemption or prepayment, Borrowers have Excess Availability of not
less than $5,000,000; and (v) with respect to the indebtedness evidenced by the
Replacement Senior Notes, Lender shall have received not less than five (5)
Business Days prior written notice of the intention to incur such indebtedness,
which notice shall set forth in reasonable detail satisfactory to Lender the
amount of such indebtedness, the person(s) to whom such indebtedness will be
owed (or the agent or trustee on their behalf), the interest rate, the schedule
of repayments and
43
maturity date with respect thereto, the Borrower or Borrowers incurring such
indebtedness and such other information as Lender may reasonably request with
respect thereto, and Lender shall have received true, correct and complete
copies of all agreements, documents and instruments evidencing or otherwise
related to such indebtedness;
(e) indebtedness secured by liens permitted under Section 9.8, to
the extent permitted under such Section;
(f) indebtedness of the Borrowers consisting of performance, bid or
advance payment bonds, custom bonds, utility bonds and similar obligations
arising in the ordinary course of business, provided that the aggregate amount
of such bonds shall not exceed $4,000,000, at any time outstanding; and
(g) indebtedness permitted under Section 9.10.
(h) indebtedness arising from intercompany loans and advances among
the Borrowers and Guarantors, made in the ordinary course of business on fair
and reasonable terms; and
(i) unsecured indebtedness of Borrowers for borrowed money incurred
after the Closing Date owing to any person on commercially reasonable rates and
terms pursuant to an arm's length transaction; provided, that, (i) Lender shall
have received not less than five (5) Business Days prior written notice of the
intention to incur such indebtedness, which notice shall set forth in reasonable
detail satisfactory to Lender the amount of such indebtedness, the person to
whom such indebtedness will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto, the Borrower or Borrowers
incurring such indebtedness and such other information as Lender may reasonably
request with respect thereto, (ii) Lender shall have received true, correct and
complete copies of all agreements, documents and instruments evidencing or
otherwise related to such indebtedness, (iii) the sum of (A) the aggregate
principal amount of such indebtedness of all Borrowers at any time outstanding,
plus (B) the aggregate principal amount of the contingent obligations under all
instruments of guarantee permitted under Section 9.10(i) then outstanding, plus
(C) the aggregate unpaid principal amount of all Senior Notes and Replacement
Senior Notes then outstanding, shall not exceed $147,000,000, (iv) on and before
the date of incurring such indebtedness and after giving effect thereto, no
Event of Default, or event which with the passage of time or both would
constitute an Event of Default, shall exist and be continuing, (v) Borrowers 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 of the
execution thereof, (vi) Borrowers shall not, directly or indirectly (A) make any
prepayments or other non-mandatory payments in respect of such indebtedness, or
(B) amend, modify, alter or change any material terms of such indebtedness or
any agreement, document or instrument related thereto in any manner which
purports to grant any lien, collateral or other security therefor, or (C)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, (vii) Borrowers
shall furnish to Lender all notices, demands or other materials in connection
with such indebtedness either received by Borrowers or on their behalf, promptly
after the receipt thereof, or sent by Borrowers or on their behalf, concurrently
with the sending thereof, as the
44
case may be, and (viii) notwithstanding anything to the contrary contained in
this Section 9.9(i), so long as no Event of Default has occurred and is then
continuing, Borrowers shall have the right to make prepayments in respect of any
such indebtedness, provided that after giving effect thereto, Borrowers have
Excess Availability of not less than $5,000,000 in each instance.
9.10 Loans, Investments, Guarantees, Etc. Each Borrower shall not,
directly or indirectly, make any loans or advance money (other than sales on
credit in the ordinary course of its business) or property to any person, or
invest in (by capital contribution, dividend (except as expressly permitted
under Section 9.11) or otherwise) or purchase or repurchase the stock or
indebtedness or all or a substantial part of the assets or property of any
person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or dividends
of any Person or agree to do any of the foregoing, except:
(a) intercompany loans and advances among the Borrowers and
Guarantors and the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in Cash Equivalents; provided, that, unless waived
in writing by Lender, so long as any Obligations are outstanding such Borrower
shall take such actions as are deemed necessary by Lender to perfect the
security interest of Lender in such investments;
(c) the existing loans, advances and guarantees by such Borrower
outstanding as of the date hereof as set forth on Schedule 9.10 hereto or as
permitted under Section 9.9; provided, that, as to such loans, advances and
guarantees and except as permitted under Section 9.9, (i) such Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such loans, advances or guarantees or any agreement, document or instrument
related thereto in any manner which purports to grant any lien, collateral or
other security therefor, or (B) as to such guarantees, except as otherwise
permitted herein with respect to the underlying indebtedness, redeem, retire,
defease, purchase or otherwise acquire such guarantee or set aside or otherwise
deposit or invest any sums for such purpose and (ii) such Borrower shall furnish
to Lender all notices, demands or other materials in connection with such loans,
advances or guarantees either received by such Borrower or on its behalf,
promptly after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;
(d) loans or advances of money (other than salary) to officers,
directors, employees, independent contractors, or stockholders of Borrowers, not
to exceed $500,000 in the aggregate outstanding at any one time, consisting of
(i) loans and expense advances in the ordinary course of business consistent
with past practices and (ii) loans to Borrowers' employees, officers and
directors in connection with the purchase by such employees, officers and
directors of common stock of Parent so long as the cash proceeds of such
purchase received by Parent are contemporaneously remitted by Parent to G+G as a
capital contribution and that such obligations of employees, officers and/or
directors are evidenced by promissory notes, provided, however, that loans and
advances of money by G+G to Parent, the proceeds of which are used concurrently
upon its receipt thereof by Parent to fund (x) costs and expenses incurred or
payable by it in connection with an initial public offering of Parent's stock or
(y) the transactions permitted under Section 9.10 (e) (i), in each case, shall
not be considered in the calculation of the $500,000 limitation contained in
this Section 9.10 (d);
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(e) G+G shall be permitted to (i) make loans and advances to
Parent, the proceeds of which are used concurrently upon its receipt thereof by
Parent to fund the cost of redeeming or repurchasing Capital Stock of Parent
(including without limitation the Senior Note Warrants) and (ii) purchase or
otherwise acquire Capital Stock of Parent (including without limitation the
Senior Note Warrants), provided that, in each case, (A) no Event of Default has
occurred and is continuing on the date (the "transaction date") on which G+G
proposes to make such loan, advance, purchase or acquisition (each a
"transaction"), (B) Lender shall have received, at least ten (10) days prior to
the transaction date, written notice from Borrowers of such proposed
transaction, (C) Borrowers' Excess Availability on the transaction date, after
giving effect to the proposed transaction, is at least $5,000,000 and (D)
Borrowers' Net Worth on the transaction date, after giving effect to the
proposed transaction, is in compliance with Section 9.14, provided further that,
solely for the purpose of determining Borrowers' compliance with this clause
(D), the calculation of Net Worth shall exclude any amounts due to G+G from
Parent as a result of loans and advances made by G+G to Parent pursuant to
clause (i) of this Section 9.10(e);
(f) Borrowers shall be permitted to form or purchase subsidiaries
consistent with the terms of Section 9.7 and, subject to the limitation
contained in Section 9.2(d), Borrowers may contribute assets or properties to
subsidiaries engaged in a like business as G+G, so long as both before and after
giving effect to any such formation, purchase or contribution, no Event of
Default shall have occurred and be continuing;
(g) investments in account debtors received in connection with the
bankruptcy or reorganization, or in settlement of delinquent obligations, of
customers in the ordinary course of business and in accordance with applicable
collection and credit policies established by such Borrower;
(h) promissory notes and other similar non-cash consideration
received as proceeds of asset dispositions permitted by Section 9.7; and
(i) guarantees by any Borrower, given in the ordinary course of its
business, the indebtedness or obligations of any other Borrower or Guarantor.
9.11 Dividends and Redemptions. G+G shall not, directly or indirectly,
declare or pay any dividends on account of any shares of any class of its
Capital Stock now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of Capital Stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except that
(a) G+G may declare and pay cash dividends upon its Capital Stock,
provided that (1) no Event of Default has occurred and is continuing on the date
(the "dividend payment date") on which G+G proposes to pay such dividend, (2)
Lender shall have received, at least ten (10) days prior to the dividend payment
date, written notice from Borrowers of such proposed dividend, (3) Borrowers'
Excess Availability on the dividend payment date, after giving effect to
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such Dividend, is at least $5,000,000 and (4) Borrowers' Net Worth on the
dividend payment date, after giving effect to such dividend, is in compliance
with Section 9.14,
(b) G+G may issue stock dividends upon its Capital Stock so long as
the same is in accordance with all applicable laws,
(c) G+G may declare and pay cash dividends upon its Capital Stock
in lieu of the loans and advances permitted to be made by it pursuant to clause
(i) of Section 9.10(e), but only if G+G could have otherwise made such loans and
advances in compliance with the conditions contained in Section 9.10 (e), and
(d) G+G may declare and issue dividends upon its Capital Stock
consisting of Capital Stock of Parent (including without limitation the Senior
Note Warrants) purchased or acquired by G+G in accordance with Section 9.10(e).
9.12 Transactions with Affiliates. Except for (a) reasonable
compensation paid to officers, employees and directors for services rendered in
the ordinary course of business including, but not limited to the Employment
Agreements set forth as items 1 and 2 on Schedule 9.12, and (b) transactions
and/or payments otherwise permitted under, but in all cases, subject to, any
other section of this Agreement, at any time that Borrowers have Excess
Availability of less than $5,000,000 or any Event of Default has occurred and is
continuing, no Borrower shall directly or indirectly purchase, acquire or lease
any property from, or sell, transfer or lease any property to, any officer,
employee, shareholder, director, agent or any other person affiliated with
Borrowers or make any payment of management, consulting or other fees for
management or similar services.
9.13 Credit Card Agreements. Borrowers shall (a) observe and perform
all material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by them at the times set forth therein;
(b) not do, permit, suffer or refrain from doing anything, as a result of which
there could be a material default under or material breach of any of the terms
of any of the Credit Card Agreements; (c) at all times maintain in full force
and effect the Credit Card Agreements and not terminate, cancel, surrender,
modify, amend (unless such amendment does not adversely affect Lender's rights
under the Financing Agreements), waive or release any of the Credit Card
Agreements, or consent to or permit to occur any of the foregoing; except, that,
Borrowers may terminate or cancel any of the Credit Card Agreements in the
ordinary course of the business of Borrowers; provided, that, Borrowers shall
give Lender not less than fifteen (15) days prior written notice of their
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) Lender shall have received not less than thirty (30) days prior written
notice of the intention of Borrowers to enter into such agreement (together with
such other information with respect thereto as Lender may request) and (ii)
Borrowers deliver, or cause to be delivered to Lender, a Credit Card
Acknowledgment in favor of Lender; (e) give Lender written notice of any Credit
Card Agreement entered into by Borrowers after the date hereof, together with a
true, correct and complete copy thereof and such other information with respect
thereto as Lender may request; and (f) furnish to Lender, promptly upon the
request of Lender, such information and evidence as Lender may reasonably
require from time to time concerning the observance, performance and compliance
by Borrowers or the other party or
47
parties thereto with the terms, covenants or provisions of the Credit Card
Agreements. Lender acknowledges that on or before the Closing Date, it has
received notice from the Borrowers of their intention to enter into a new Credit
Card Agreement after the Closing Date with a new Credit Card Issuer known as
Shoppers Charge Accounts Co., and Lender agrees that such notice shall satisfy
the requirement contained in clause (d)(i) of the previous sentence (it being
understood that the Borrowers shall still be obligated to comply with the
requirements contained in clause (d)(ii) of the previous sentence if such new
Credit Card Agreement is in fact consummated).
9.14 Net Worth. With respect to any fiscal month during which Excess
Availability, on any day during such fiscal month, is equal to or less than
$7,500,000, G+G, at all times during and at the end of such fiscal month, shall
have a Net Worth of not less than $40,000,000.
9.15 Compliance with ERISA.
(a) Each Borrower shall not with respect to any "employee benefit
plans" maintained by any Borrower or any of its ERISA Affiliates: (i) terminate
any of such employee pension plans so as to incur any liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer
to exist any prohibited transaction involving any of such employee benefit plans
or any trust created thereunder which would subject any Borrower or such ERISA
Affiliate to a material tax or penalty or other liability on prohibited
transactions imposed under the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under ERISA,
the Code or the terms of such plan, (iv) allow or suffer to exist any material
accumulated funding deficiency, whether or not waived, with respect to any such
employee benefit plan, (v) 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 employee
benefit plan that is a single employer plan, which termination could result in
any material liability to the Pension Benefit Guaranty Corporation or (vi) incur
any material withdrawal liability with respect to any multiemployer pension
plan.
(b) As used in this Section 9.15, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA.
9.16 Additional Bank Accounts. Borrowers shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts, accounts holding Cash Equivalents and other investments
permitted hereunder, and the accounts set forth in Schedule 6.3 hereto, except:
(a) any new or additional Blocked Accounts and other such new or additional
accounts which contain any Collateral or proceeds thereof, so long as in the
case of any such other accounts the applicable bank or financial institution has
executed an agreement as described in Section 6.3(a) hereof or, in the case of
depository or concentration accounts, so long as Borrowers have given written
notice to such depository or concentration account bank to transfer on a daily
basis to a Blocked Account all funds received in such depository or
concentration account, and (b) as to any depository or concentration accounts
used by Borrowers
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to make payments of payroll, taxes or other obligations to third parties, after
prior written notice to Lender.
9.17 Costs and Expenses. Borrowers shall pay to Lender 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, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) all insurance premiums,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, 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 Lender arising out of the transactions contemplated hereby
and thereby (including preparations for and consultations concerning any such
matters); (g) with respect to any period during which an Event of Default has
occurred and is continuing, all out-of-pocket expenses and costs incurred during
such period by Lender pursuant to Lender's field examinations of the Collateral
and Borrowers' operations, plus a per diem charge at the rate of $650 per person
for each day during such period that Lender's examiners (whether stationed in
the field or office) are engaged in an examination of Borrowers' books and
records and Collateral and (h) the fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers 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. Lender may
at any time and from time to time request a certificate from an officer of
Borrowers representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, each Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
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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 any Obligor fails to perform any of the covenants
contained in this Agreement or any of the other Financing Agreements other than
as described in Section 10.1(a)(i) and such failure shall continue for fifteen
(15) days; provided, that, such fifteen (15) day period 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 fifteen (15) day period or which has been the
subject of a prior failure within a six (6) month period or (B) a willful breach
of any Borrower or any Obligor of any such covenant or (C) the failure to
observe or perform any of the covenants or provisions contained in Section
9.2(ii), 9.6(a), 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.15, 9.16 or 9.18 of
this Agreement or any covenants or agreements covering substantially the same
matter as such sections in any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) (i) any judgment for the payment of money is rendered against
any Borrower or any Obligor in excess of $2,500,000 in the aggregate (net of
amounts covered by insurance) and either (A) shall remain undischarged or
unvacated or unstayed for a period in excess of thirty (30) consecutive days or
(B) enforcement proceedings shall have been commenced upon such judgment or
execution shall at any time not be effectively stayed, or (ii) any judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or any Obligor or any of their
assets, unless the same could not reasonably be expected to have a Material
Adverse Effect;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies, or except as otherwise permitted
hereunder, any Borrower or any 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 any Obligor becomes insolvent (as defined under
applicable state or federal law), 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;
(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 any Obligor or all or any part of
its properties and such petition or application is not dismissed within sixty
(60) days after
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the date of its filing or any Borrower or any 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 any Obligor or for all or any part of its
property;
(i) any default by any Borrower or any Obligor occurs under (i) the
Senior Notes or the Indenture, (ii) any other agreement, document or instrument
relating to any indebtedness for borrowed money owing to any person other than
Lender, or (iii) or in respect of 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 Lender, in any case
under clause (ii) or clause (iii) hereof in an amount in excess of $2,500,000,
which default continues for more than the applicable cure period, if any, with
respect thereto;
(j) any Change of Control shall have occurred;
(k) the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any Obligor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of any Borrower or such Obligor;
(l) there shall be a Material Adverse Change in the business or
assets of any Borrower or any Obligor after the date hereof; or
(m) an event of default (after giving effect to any applicable
grace and/or cure period and/or notice period) shall have occurred under any of
the other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender'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 of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
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(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (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 Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (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, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender 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 Borrowers, which right or equity of redemption
is hereby expressly waived and released by Borrowers and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, ten (10) days prior notice by
Lender to Borrowers 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 waive
any other notice. In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
Borrowers waive the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender 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 Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender 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 legal expenses.
(d) Without limiting the foregoing, Lender may, at its option,
without notice (i) upon the occurrence and during the continuance of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default 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 (ii) upon the
occurrence and during the continuance of an Event of Default, or an event which
would with notice or passage of time or both constitute an Event of Default
under Section 10.1(g) or Section 10.1(h), terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrowers.
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, New
York County and the United States District Court for the Southern District of
New York 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
Lender shall have the right to bring any action or proceeding against any
Borrower or its property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against any Borrower or its property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof 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 Lender's option, by service upon such Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
such Borrower shall appear in answer to such process, failing which such
Borrower shall be deemed in default and judgment may be entered by Lender
against such Borrower for the amount of the claim and other relief requested.
(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS AND
LENDER 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
BORROWERS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
53
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) Lender shall not have any liability to Borrowers (whether in
tort, contract, equity or otherwise) for losses suffered by Borrowers 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 Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial 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 Borrowers which Lender may elect to give shall entitle Borrowers
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrowers. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by 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 Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Lender,
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or 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, without limitation, court costs, and the fees and expenses of
counsel, except for any losses, claims, damages, liabilities, costs or expenses
which result from the gross negligence or willful misconduct of Lender as
determined pursuant
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to a final non-appealable order of a court of competent jurisdiction. 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 shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
on the Closing Date and shall continue in full force and effect for a term
ending on the date (the "Renewal Date") occurring three (3) years from the
Closing Date, and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof, including, without limitation, pursuant to Section
12.1(c) hereof; provided, that, Lender or Borrowers may terminate this Agreement
and the other Financing Agreements 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, or, alternatively, effective upon
any other date pursuant to Section 12.1(c); provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrowers shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal 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 Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrowers for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrowers to the bank account designated by Lender 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 Borrowers of their respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, 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 Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
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Amount Period
------ ------
(i) 1.00% of the Maximum Credit From the Closing Date to and including
May 1, 2002
(ii) .5% of the Maximum Credit From May 2, 2002 to and including May 1,
2003
(iii) .25% of the Maximum Credit From May 2, 2003 to and including May 1,
2004.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to the contrary contained in Section
12.1(c), in the event of the termination of this Agreement by Borrowers prior to
the end of the then current term and the full and final repayment of all of the
Obligations and the receipt by Lender of cash collateral all as provided in
Section 12.1 (a), Borrowers shall not be required to pay the early termination
fee provided for above if each of the following conditions is satisfied: (i) no
Event of Default or act, condition or event which with notice or passage of time
or both would constitute an Event of Default shall exist or have occurred and be
continuing, (ii) Lender shall have received not less than thirty (30) days prior
written notice of the intention of Borrowers to so terminate this Agreement, and
(iii) the final payment in full of all of the Obligations is received
simultaneously with (A) the refinancing of the Credit Facility with proceeds of
loans made to Borrowers by (1) Lender or an affiliate of Lender or (2) any other
financial institution, (B) the consummation of a public equity offering, after
the first anniversary of the date hereof, which equity offering shall be
registered under the Securities act of 1933, as amended, and the net proceeds
received by Borrowers shall not be less than the Maximum Credit; or (C) the
consummation by Borrowers after the first anniversary of the date hereof of an
unsecured bond, debenture or note offering pursuant to which Borrowers shall
receive net proceeds of not less than the Maximum Credit, provided, however,
that notwithstanding the foregoing, in the event that the conditions set forth
in clauses (i), (ii) and (iii) (A) (2) of this sentence shall have been
satisfied, then Borrowers shall be required to pay to Lender as an early
termination fee one-half of the amount that Borrowers would otherwise be
obligated to pay Lender pursuant to Section 12.1(c).
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by facsimile transmission, immediately
upon sending and upon confirmation of receipt; if by nationally recognized
overnight courier service with
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instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, seven (7) days
after mailing.
12.3 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.
12.4 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 Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign their rights and delegate their obligations
under this Agreement and the other Financing Agreements and further may assign,
or sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation, provided, however, that Lender shall
obtain Borrowers' prior written consent, which consent shall not be unreasonably
withheld, with respect to any such proposed assignment or participation by
Lender, and if the proposed assignee or participant is a lending institution
that is not organized and existing under the laws of the United States or a
political subdivision thereof, such lending institution must be capable of
receiving payments of interest hereunder without deduction or withholding of
United States federal income taxes under the provisions of an applicable tax
treaty concluded by the United States.
12.5 Confidentiality
(a) 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 Borrowers pursuant to this Agreement which is clearly and
conspicuously marked as confidential at the time such information is furnished
by Borrowers to 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, (iii) in connection with any litigation
to which Lender is a party, (iv) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) shall have first agreed in writing to treat such
information as confidential in accordance with this Section 12.5, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).
(b) In no event shall this Section 12.5 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers or any
third party without breach of this Section 12.5 or otherwise become generally
available to the public other than as a result of a disclosure in
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violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Lender on a non-confidential basis from a person
other than Borrowers, (iii) require Lender to return any materials furnished by
Borrowers to Lender or (iv) prevent 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 Lender under this Section 12.5 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
12.6 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.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to
be duly executed as of the day and year first above written.
LENDER:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
BORROWER:
G+G RETAIL, INC.
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Financial Officer
Address: 000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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ANNEXES - Omitted
Annex A - Closing Document Checklist
EXHIBITS - Omitted
Exhibit A - Information Certificate
Exhibit B - form of Revolving Credit Note
SCHEDULES - Omitted
Schedule 6.3 - bank accounts
Schedule 8.3 - address of chief executive office and locations of records
Schedule 8.4 - existing liens
Schedule 8.8 - environmental matters
Schedule 8.9 - Credit Card Agreements
Schedule 9.9 - existing indebtedness and obligations
Schedule 9.10 - existing loans, advances and guarantees
Schedule 9.12 - employment agreements
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