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EXHIBIT 10.8.3
POST-PETITION LOAN AND SECURITY AGREEMENT
Dated as of February 22, 2000
between
XXXXXXX NATIONAL LIFE INSURANCE COMPANY
as Lender
and
XXXXXXX, INC., a Debtor-in-Possession
as Borrower
RE:
TWENTY-FIVE MILLION DOLLAR ($25,000,000) CREDIT FACILITY
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POST-PETITION LOAN AND SECURITY AGREEMENT
THIS POST-PETITION LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this
22nd day of February, 2000, by and among XXXXXXX NATIONAL LIFE INSURANCE
COMPANY, a Michigan insurance company ("Lender"), and XXXXXXX, INC.
("Borrower"), an Ohio corporation, as debtor and debtor-in-possession.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, on January 19, 2000, Borrower filed a voluntary petition for relief
under the Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of Ohio, Western Division (the "Voluntary Petition"), and
Borrower continues to operate its business and manage its properties as a
debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
and WHEREAS, from time to time Borrower may request Lender to make loans and
advances to and extend certain credit accommodations to Borrower, and the
parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations shall be made.
NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by Lender, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties agree
as follows:
1. DEFINITIONS.
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1.1 GENERAL DEFINITIONS
"Account" shall mean all present and future rights of 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.
"Account Debtor," "Chattel Paper," "Documents," "General Intangibles," "Goods,"
"Instruments," and "Investment Property" shall have the respective meanings
assigned to such terms in the UCC.
"Additional Credit" shall have the meaning specified in paragraph 12.10(d).
"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.
"Advance" means any loan made to Borrower by Lender pursuant to PARAGRAPH 2.1
and any payments made by Lender to any Person pursuant to PARAGRAPH 2.2 hereof
or otherwise in accordance with this Agreement.
"Affiliate" means any Person who owns at least 5% of the outstanding capital
stock of the Borrower or any Person directly or indirectly controlling,
controlled by or under common control with the Borrower.
"Availability" means, at any time, the lesser of the Revolving Loan Commitment
or the Borrowing Base minus, in either case, the aggregate amount of all
outstanding Obligations.
"Availability Reserves" means, 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 Advances which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for the
obligations hereunder or its value, (ii) the assets, business or prospects of
Borrower or (iii) the Security Interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority thereof); (b)
to reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower to Lender is or may have been
incomplete, inaccurate or misleading in any material respect; (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, consti-
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tute an Event of Default; or (d) to reflect the Carve-Out and the G.E. Capital
Lien. Without limiting the generality of the foregoing, Availability Reserves
may include (but are not limited to) reserves based on rent, in-store customer
credits, gift certificates, frequent shopper programs, layaways and customer
deposits and other Charges.
"Base Rate" means the highest prime or equivalent rate of interest (expressed
as an annual rate rounded upwards, if necessary, to the next 1/16 of 1%)
publicly announced by The Chase Manhattan Bank, N.A. or Bank of America
National Trust and Savings Association from time to time as its "prime rate" or
"reference rate", each change in such a rate to take effect on the date of
effective change of such prime rate or reference rate. The Base Rate is not
intended to be the lowest rate of interest charged by the Lender to its
borrowers.
"Bankruptcy Case" shall mean that certain Chapter 11 Bankruptcy Case No.
00-30194 in the United States Bankruptcy Court, Southern District of Ohio,
Western Division, pursuant to which Borrower is the debtor-in-possession.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Bankruptcy Court" shall mean the United States Bankruptcy Court before which
the Borrower's Bankruptcy Case is pending.
"Blocked Account" shall have the meaning specified in PARAGRAPH 6 hereof.
"Borrowing Base" shall have the meaning specified in PARAGRAPH 2.1 hereof.
"Budget" shall mean the Borrower's budget of projected income and expenses as
set forth on EXHIBIT F hereto, as the same shall be updated from time to time in
accordance with this Agreement.
"Business Day" means any day other than a Saturday, Sunday, or such other day
as banks in Chicago, Illinois are authorized or required to be closed for
business and a day on which the Lender is open for the transaction of business.
"Capital Expenditures" means, with respect to any period, the aggregate of all
expenditures (whether paid in cash, in kind or accrued as liabilities and
including Capital Lease obligations during such period that are required by GAAP
to be included or reflected in the property, plant or equipment or similar fixed
asset accounts (or in intangible accounts subject to amortization) on a balance
sheet.
"Capital Lease" means any lease of Property required by GAAP to be reflected as
a liability on the Borrower's balance sheet.
"Carve-Out" shall have the meaning set forth in paragraph 3.
"CERCLA" means the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, 42 U.S.C. sec. 9601 et
seq.
"Change of Control" means any transaction or event as a result of which any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner,
directly or indirectly, of more than 30% of the issued and outstanding shares of
the capital stock of the Borrower.
"Charges" shall have the meaning specified in PARAGRAPH 9.1(g).
"Clearance Inventory" means Inventory with minor cosmetic defects but otherwise
in good condition or working order located in Borrower's stores that contain a
department in those areas designated to sell only clearance merchandise that is
not Eligible Liquidation Inventory or Eligible Inventory.
"Closing Date" shall mean the date upon which the initial Loan is made.
"Collateral" means: (i) all property referred to in PARAGRAPH 3, wherever
located and whether now existing or hereafter acquired, in which Borrower now
has or may hereafter acquire any interest; (ii) any other property of Borrower
of any kind or nature coming into the Lender's possession, custody or control;
and (iii) all other property and interests in property, real or personal, now
owned or leased or hereafter acquired or leased, now or hereafter pledged or
assigned as collateral security for payment of any of the Obligations.
"Commission" means the Securities and Exchange Commission or any other federal
agency then administering the Securities Act of 1933, as amended, and other
federal securities laws.
"Consolidated Tangible Net Worth" means the amount, computed in accordance with
GAAP, equal to the excess of the Borrower's Consolidated Total Assets plus
Subordinated Debt over their Consolidated Total Liabilities, less the amounts
then being presented on the applicable Financial Statement as: (i) the excess of
cost over net assets of purchased businesses; and (ii) licenses, franchises,
permits, patents, copyrights, trademarks, tradenames and other like intangibles
and organizational expenses.
"Consolidated Total Assets" means the amount, computed in accordance with GAAP,
of the total assets of the Borrower and its consolidated Subsidiaries,
excluding: (i) all Intercompany Accounts; (ii) all transactions with Affiliates
not permitted by PARAGRAPH 10.2(e); and (iii) minority interests in
Subsidiaries.
"Consolidated Total Liabilities" means the amount, computed in
accordance with GAAP, of the total liabilities (including all Indebtedness) of
the Borrower and its consolidated Subsidiaries, and all reserves and deferred
credits.
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"DDA" means any checking or other demand daily depository account maintained by
Borrower.
"Default" shall mean any event, condition or default which with the giving of
notice, the lapse of time or both would be an Event of Default. "Default Rate"
shall have the meaning specified in PARAGRAPH 2.4 hereof.
"Dilution" shall mean, with respect to any period, the percentage obtained by
dividing: (a) the sum of non-cash credits against Accounts of Borrower for such
period, plus pending or probable, but not yet applied, non-cash credits against
Accounts of Borrower such period, as determined by Lender, by (b) gross invoiced
sales of Borrower for such period.
"EBITDA" shall mean, with respect to any period, net income after taxes for such
period (excluding: (i) any after-tax gains or losses on the sale of assets other
than in the ordinary course of business; and (ii) other after-tax extraordinary
gains or losses) PLUS interest expense, income tax expense, depreciation and
amortization for such period, LESS gains and losses attributable to any fixed
asset sales made during such period, PLUS OR MINUS any other non-cash charges or
gains which have been subtracted or added in calculating net income after taxes
for such period.
"Eligible Account" means a bona fide outstanding Account (other than G.E.
Capital Accounts) which arose in the ordinary course of business, LESS all
unearned finance charges, late fees, and other fees which are unearned, as to
which the Lender has a first priority perfected security interest under the UCC
and: (x) if for the sale of services, as to which all applicable services have
been duly performed and acknowledged and accepted by the Account Debtor; (y) if
for a lease of merchandise, as to which all applicable merchandise has been duly
leased for the term covered thereby; and (z) if for the sale of goods, as to
which all goods have been shipped or delivered to an Account Debtor against a
receipt therefor pursuant to a purchase order or otherwise on an absolute sale
basis and as to which no rejections or returns have been made or offered.
Eligible Accounts shall not include any Accounts:
(i) which have remained unpaid for either (i) more than thirty
(30) days from the original due date shown on the invoice or
(ii) more than ninety (90) days after the original invoice
date;
(ii) owed by an Account Debtor which collectively has more than
fifty percent (50%) of the aggregate amount of its Accounts
unpaid more than thirty (30) days past its original due date
or more than ninety (90) days from its original invoice date;
(iii) as to which any representation, warranty or covenant
contained in this Agreement and the Other Agreements with
respect to such Account has been breached;
(iv) with respect to which a check, promissory note, draft, trade
acceptance or other instrument for the payment of money has
been received, presented for payment and returned uncollected
for any reason;
(v) which relates to any cooperative advertising arrangement, a
contra account, a chargeback or to a sale which is subject to
any repurchase obligation or return right, such as a
consignment sale, xxxx-and-hold sale, guaranteed sale, sale
on approval or sale or return arrangement;
(vi) which is evidenced by a promissory note or other instrument
or by chattel paper or is not payable in United States
dollars;
(vii) as to which Borrower has extended the time for payment
without the consent of the Lender or which is for goods sold
or leased or services rendered under a contract or agreement
pursuant to which the Account Debtor's obligation to pay such
invoice is conditioned upon Borrower completion of any
further performance under the contract or agreement;
(viii) owed by an Account Debtor as to which an Insolvency
Proceeding has commenced or, in the case of an individual, as
to whom death or a judicial declaration of incompetency has
occurred;
(ix) owed by an Account Debtor which: (w) is an Affiliate or
employee of the Borrower; (x) does not maintain its chief
executive office in the United States; (y) is not organized
under the laws of the United States or any state thereof; or
(z) is the government of any foreign country or sovereign
state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency,
public corporation, or other instrumentality thereof; except
to the extent that such Account is secured or payable by a
letter of credit or accep-
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tance, or insured under foreign credit insurance, on terms
and conditions satisfactory to the Lender in its discretion;
(x) as to which either the perfection, enforceability, or
validity of the Lender's Security Interest in such Account,
or the Lender's right or ability to obtain direct payment to
the Lender of the Proceeds of such Account, is governed by
any federal, state, or local statutory requirements other
than those of the UCC;
(xi) is not a valid, legally enforceable and unconditional
obligation of the Account Debtor or is subject to setoff,
counterclaim, credit, allowance or adjustment by the Account
Debtor, or to any claim by such Account Debtor denying
liability thereunder in whole or in part;
(xii) which are owed by the government of the United States of
America, or any department, agency, public corporation, or
other instrumentality thereof, unless the Borrower has
assigned its right to payment of such Account to the Lender
in full compliance with the Federal Assignment of Claims Act
of 1940, as amended;
(xiii) which are owed by any state, municipality, or other political
subdivision of the United States of America, or any
department, agency, public corporation, or other
instrumentality thereof and as to which the Lender determines
that its Security Interest therein is not or cannot be
perfected, unless Lender, in its sole discretion, determines
(on a case-by-case basis) that any such Account shall qualify
as an Eligible Account;
(xiv) which are owed by an Account Debtor located in a state which
requires the Borrower, in order to commence or maintain an
action in the courts of that state, to either have qualified
to do business and be in good standing in such state or file
a notice of business activities report or similar report with
such state's taxing authority, unless the Borrower has either
complied with such requirement or is exempt from any such
requirement;
(xv) which (i) arises out of a contract or order which fails in
any material respect to comply with any requirement of
applicable law or (ii) which is not fully enforceable by
Borrower in the courts of the jurisdiction of the Account
Debtor's residence or (iii) is subject to any lien other than
a Permitted Lien; or
(xvi) which are contra accounts, poor credits, chargebacks, or are
otherwise unacceptable to the Lender as collateral for
lending purposes.
"Eligible Inventory" means, at the time of determination, Inventory owned by
Borrower located at premises within the United States listed on SCHEDULE 9.1(H)
in which the Lender has a first priority Security Interest under the UCC and
which Inventory meets all of the following criteria:
(i) is new and in good condition, in a finished state
and ready for immediate sale, free from defects and
not, in the Lender's reasonable judgment, obsolete,
unserviceable, slow-moving or unmerchantable;
(ii) is not (a) spare parts, (b) packaging and shipping
materials or (c) supplies used or consumed in
Borrower's business;
(iii) meets all applicable standards imposed by any
governmental or other regulatory authority over such
Inventory;
(iv) in the ordinary course of the Borrower's business,
is currently saleable and is being held for sale;
(v) is either Letter of Credit Inventory or is not in
transit or subject to any other assignment,
bailment, consignment, claim, lien, charge,
encumbrance, third party dispute, offset or
counterclaim;
(vi) does not fail in any material respect to comply with
any requirement of applicable law;
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(vii) as to which all applicable representations,
warranties or covenants of Borrower to the Lender
are true and correct or have been performed and
complied with;
(viii) is not Clearance Inventory or Eligible Liquidation
Inventory; and
(ix) is otherwise acceptable to the Lender as collateral
for lending purposes.
For purposes of this Agreement, unless otherwise specified herein, Eligible
Inventory shall be valued in accordance with GAAP at the lower of cost,
calculated on a first-in, first-out basis, or market. Lender, at Borrower's sole
cost and expense, may obtain appropriate quarterly inventory appraisals.
"Eligible Liquidation Inventory" means Inventory which is:
(x) located at Borrower's facilities or stores in
Cincinnati, Ohio, or the State of Florida;
(xi) approved for sale by liquidation by the Bankruptcy
Court;
(xii) subject to guaranteed liquidator's bids acceptable
to Lender, in its sole discretion;
(xiii) not Eligible Inventory or Clearance Inventory; and
(xiv) not otherwise unacceptable to Lender as collateral
for lending purposes.
"Eligible Liquidation Real Estate" means real property owned by Borrower located
within the United States and set forth on SCHEDULE 9.1(S) which is:
(xv) approved for sale by liquidation by the Bankruptcy
Court;
(xvi) subject to guaranteed liquidator's bids acceptable
to Lender, in its sole discretion;
(xvii) not considered Owned Real Property for purposes of
PARAGRAPH 2.1; and
(xviii) not otherwise unacceptable to Lender as collateral
for lending purposes.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety, hazardous substances, and environmental
matters applicable to the Borrower's business and facilities (whether or not
owned by it) as any of the same may be from time to time hereafter amended.
"Equipment" means all of Borrower's 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.
"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 which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (Chicago 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 Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
"Event of Default" shall have the meaning specified in PARAGRAPH 11 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
"Excess Availability" means, as of any date of determination by Lender, the
excess, if any, of (i) the Borrowing Base over (ii) the outstanding Advances
and Letter of Credit Obligations, in each case as of the close of business on
such date.
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For purposes of calculating Excess Availability and the amount of the Borrowing
Base relating thereto, all of Borrower's trade payables and outstanding debt,
other than the Obligations hereunder, which remain unpaid more than thirty (30)
days after the due dates thereof, other than pre-petition debts, shall, on the
date of the determination of Excess Availability, be deemed to have been paid
by Borrower.
"Exit Financing" means financing obtained by Borrower which provides for a
portion of such financing to be used to consummate a Reorganization Plan.
"Facility" means the credit facility extended to the Borrower hereunder in the
principal amount of $25,000,000.
"Fair Market Value" means, with respect to Owned Real Property, the fair market
value thereof based upon the most recent appraisal provided by Borrower to
Lender, in form and substance satisfactory to Lender, in its sole discretion
less any outstanding Liens.
"Filing Date" means the date the Borrower filed the Voluntary Petition.
"Financials" means those consolidated financial statements of Borrower and its
Subsidiaries described on SCHEDULE 9.1(O)(1) hereto, all of which financial
statements have been certified as accurate and complete by the chief financial
officers of the Borrower and with respect to Fiscal Year end Financials,
certified by Deloitte & Touche LLP or another independent certified public
accounting firm acceptable to the Lender.
"Fiscal Quarter" means in a Fiscal Year each of the four (4) calendar quarters
ending March 31, June 30, September 30 and December 31.
"Fiscal Year" means the twelve month period ending on December 31.
"GAAP" means generally accepted accounting principles and practices as in effect
from time to time, consistently applied during each interval and from period to
period.
"G.E. Capital Account" means any Account created as a result of amounts
due Borrower in accordance with the G.E. Capital Agreement provided, however,
Borrower is not in default under such Agreement and G.E. Capital is not entitled
to exercise any set-off rights with respect to such Accounts.
"G.E. Capital Agreement" means that certain Amended and Restated Private Label
Revolving Credit Plan Agreement, as amended, by and between G.E. Capital
Consumer Card Co. (as successor to Bank One, N.A.) and Borrower, or any
successor agreements or arrangements with third-party credit card providers
that are substantially similar in terms and conditions to the arrangements
existing under the aforementioned agreement and that are acceptable in form and
substance to Lender, in its sole discretion.
"G.E. Capital Lien" means the Lien on Borrower's Inventory granted to G.E.
Capital Consumer Card Co. or its successor to secure payment of Borrower's
obligations under the G.E. Capital Agreement, such Lien to be limited to
merchandise returned by customers who used a credit card to purchase such
merchandise in an amount not to exceed $2,000,000 at any one time.
"GOB Value" means with respect to either Eligible Inventory or Clearance
Inventory the non-auction liquidation value thereof in an orderly "going out of
business" sale to the public conducted by a liquidator who is approved by Lender
and is regularly engaged in the business of appraising and liquidating inventory
similar in type to the Inventory.
"Gross Margin" means with respect to the subject accounting period, the decimal
equivalent of the following (determined in accordance with the retail method of
accounting:
sales (minus) cost of goods sold
--------------------------------
Sales
"Guaranteed Liquidation Inventory Value" means a liquidator's guaranteed-bid
receivable representing the value of liquidation proceeds, less all fees and
expenses, from Eligible Liquidation Inventory.
"Guaranteed Liquidation Real Estate Value" means a liquidator's guaranteed-bid
receivable representing the value of liquidation proceeds (net of all Liens
thereon), less all fees and expenses, from Eligible Liquidation Real Estate.
"Hazardous Substances" means all materials, substances, compounds and solutions
the use, transportation, storage, generation or disposal of which are regulated
by any Environmental Law. Without limiting the generality of the foregoing,
Hazardous Substances shall include (a) "hazardous substances", as defined in
XXXXXX 00 X.X.X. xxx. 0000 (00), (x) "petroleum" as defined in RCRA 42 U.S.C.
sec. 6991(2)(B), and (c) "pollutant" and "contaminant", each as defined in
CERCLA 42 U.S.C. sec. 9601 (33).
"Indebtedness" means all liabilities, obligations and indebtedness of any and
every kind and nature, including, without limitation, the Obligations and all
obligations to trade creditors whether heretofore, now or hereafter owing,
arising, due, or payable from Borrower to any Person and howsoever evidenced,
created, incurred, acquired, or owing, whether primary, secondary, direct,
contingent, fixed, or otherwise. Without in any way limiting the generality of
the foregoing, Indebtedness specifically includes (i) all obligations or
liabilities of any Person that are secured by any lien, claim, encumbrance, or
security interest upon property owned by Borrower, even though Borrower has not
assumed or become
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XXXXXXX, INC. 1999 ANNUAL REPORT ON FORM 10-K
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liable for the payment thereof; (ii) obligations or liabilities created or
arising under any lease of real or personal property or conditional sale or
other title retention agreement with respect to property used or acquired by
Borrower, even though the rights and remedies of the lessor, seller or lender
thereunder are limited to repossession of such property; (iii) all unfunded
pension fund obligations and liabilities; and (iv) all deferred or accrued
taxes.
"Indemnified Party" shall have the meaning specified in PARAGRAPH 13 hereof.
"Information Certificate" means the Information Certificate of Borrower
constituting SCHEDULE 1.1(B) hereto and containing material information with
respect to Borrower, its business and assets.
"Insolvency Proceeding" means, with respect to the Person in question, the
commencement or filing by or against it of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as
a bankrupt, winding-up, or other similar relief under the bankruptcy,
insolvency, or similar laws of the United States, any state or territory
thereof, or any foreign jurisdiction, now or hereafter in effect; the making of
any general assignment for the benefit of creditors; the appointment of a
receiver, trustee or custodian for it or for any of its assets; the institution
by or against it of any of the foregoing or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against,
or winding up of its affairs; the sale, assignment, or transfer of all or any
material part of its assets; the nonpayment generally of its debts as they
become due; or the cessation of its business as a going concern.
"Intercompany Accounts" means all Accounts, however arising, which are due to
Borrower from, or which are due from Borrower to, any Affiliate.
"Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
"Inventory" means with respect to Borrower, all inventory, whether now owned or
hereafter acquired including, but not limited to, all goods intended for sale or
lease by Borrower, or for display or demonstration used in connection with the
manufacturing, printing, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in the business of Borrower; and all
documents evidencing and General Intangibles relating to any of the foregoing,
whether now owned or hereafter acquired by Borrower.
"Inventory Advance Rate" shall mean the advance rate applied to the applicable
Inventory pursuant to paragraph 2.1(a) hereof.
"Lease" means any lease or other agreement pursuant to which Borrower is
entitled to the use or occupancy of any space.
"Leasehold Interest" means any interest of the Borrower as lessee under any
Lease.
"Letter of Credit" means any documentary or stand-by letter of credit issued
for Borrower's account pursuant to PARAGRAPH 2.2 hereof, which Letter of
Credit: (x) may be either a trade letter of credit or a stand-by letter of
credit; and (y) unless the Lender otherwise agrees, shall have an expiration
date no later than the earlier of: (i) the day numerically corresponding to the
date of issuance in the twelfth month thereafter (or, if there is no such day,
on the last day of such month); and (ii) six Business Days prior to the
expiration of the Term.
"Letter of Credit Inventory" means any Eligible Inventory which Borrower has
purchased, the payment of which is secured by the issuance of a Letter of
Credit.
"Letter of Credit Obligations" means the maximum undrawn amount of all Letters
of Credit and to the extent not charged to Borrower's account as an Advance, all
drawn amounts of all Letters of Credit not paid directly by the Borrower, and
all fees, costs and expenses of any kind payable by the Borrower or the Lender
directly or indirectly in connection therewith.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever, including any conditional sale or other title
retention agreement. "Lien" includes reservations, exceptions, easements, leases
and other restrictions and encumbrances affecting real property. For purposes
hereof a Person shall be deemed to own property acquired or held pursuant to a
conditional sale or similar security arrangement.
"Loan Documents" shall mean this Agreement and the Other Agreements.
"Loans" collectively means the revolving loan Advances.
"Material Adverse Effect" shall mean with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences,
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whether or not related, a material adverse change in, or a material adverse
effect upon, any of the business, property, assets, operations, condition
(financial or otherwise) or prospects of the Borrower, taken as a whole.
"Mortgages" means the fee or leasehold mortgages, deeds of trust or similar
instruments concurrently or hereafter entered into by the Borrower for the
benefit of the Lender. At any time when there is only one Mortgage, references
to "Mortgages" shall be deemed to refer only to such Mortgage.
"Net Income" means, with respect to any fiscal period of Borrower, the net
income after the provision for income and franchise taxes for such fiscal period
of Borrower, as determined in accordance with GAAP.
"Notes" collectively means the Notes which evidence the revolving loan Advances
substantially in the form of EXHIBIT A.
"Obligations" means and includes the aggregate of the unpaid principal balance
of all revolving loan Advances and all accrued interest on all thereof, the
Letter of Credit Obligations, and all other loans, indebtedness, debts,
liabilities, obligations, interest, fees, premiums, guarantees, covenants and
duties owing by Borrower to the Lender, of every kind and description (whether
or not evidenced by any note or other instrument and whether or not for the
payment of money), direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including those arising before, during
and after the commencement of any case with respect to Borrower under the
Bankruptcy Code or any similar statute or those arising under the Other
Agreements. "Obligations" includes: (i) any debt, liability or obligation owing
from Borrower to others which the Lender may obtain by assignment or otherwise;
(ii) all interest, fees, charges or other costs and payments that Borrower is
required to pay to the Lender under or as a result of the Loan Documents or by
law; (iii) all fees, costs and expenses described in PARAGRAPH 14.2 or otherwise
required to be paid by Borrower to the Lender pursuant to any Loan Document.
"Orders" means the Interim Order and the Final Order of the Bankruptcy Court
referred to in paragraph 12.6 and 12.10.
"Other Agreements" means, collectively, the Orders, the Information
Certificate, all agreements, instruments and documents including, without
limitation, notes, guarantees, mortgages, trust deeds, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements and all other writings heretofore, now or from
time to time hereafter executed by or on behalf of Borrower or any other Person
and delivered to Lender or to any parent, affiliate or subsidiary of Lender in
connection with the Obligations or the transactions contemplated hereby.
"Over Advance" shall have the meaning specified in PARAGRAPH 2.1(c).
"Owned Real Property" means real property owned by Borrower other than Eligible
Liquidation Real Estate as set forth on SCHEDULE 9.1(s).
"Permitted Liens" means: (i) Liens for taxes not yet payable or being contested
in good faith and by appropriate proceedings diligently pursued, provided that
the reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor; (ii) deposits or pledges to secure the
payment of workmen's compensation, unemployment insurance, old age pensions or
other social security benefits or obligations; (iii) deposits or pledges to
secure the performance of bids, tenders, contracts, leases, public or statutory
obligations, surety or appeal bonds, or other deposits or pledges for purposes
of a like general nature made or given in the ordinary course of business and
not in connection with the borrowing of money; (iv) Liens in favor of the
Lender; (v) such utility, access and other easements, rights of way,
restrictions, exceptions, minor defects or irregularities in or clouds on title
or encumbrances not arising out of the borrowing of money or the securing of
advances or credit, and which will not interfere with or impair in any respect
the utility, operation or value of any properties of Borrower; and (vii) Liens
described in detail on SCHEDULE 9.1(b) hereof.
"Permitted Sale Assets" means any property or assets owned by Borrower
other than Owned Real Property, Eligible Liquidation Real Estate or Eligible
Liquidation Inventory which is:
(i) approved for sale by liquidation by the Bankruptcy Court;
(ii) set forth on Schedule 1.1(c); and
(iii) subject to Lender's consent, in its sole discretion.
"Person" means any individual, trust, firm, partnership, corporation or any
other form of public, private or governmental entity or authority.
"Pre-Petition Payment" shall mean a payment (by way of adequate protection or
otherwise) of principal or interest or otherwise on account of any pre-petition
Indebtedness or trade payables or other pre-petition claims against Borrower.
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"Prime Rate Loans" shall mean any Loans or portion thereof on which interest is
payable based on the Base Rate in accordance with the terms thereof.
"Proceeds" means all products and proceeds (as defined in the UCC) of any
Collateral, and all proceeds of any such proceeds, including all cash, credit
balances and all payments under any indemnity, warranty, or guaranty payable
with respect to any Collateral, all awards for taking by eminent domain, all
proceeds of fire or other insurance and all proceeds obtained as a result of
any legal action or proceeding with respect to any Collateral.
"Property" means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"Real Property Leases" shall mean the Borrower's Leasehold Interest in the real
property set forth on SCHEDULE 9.1(s).
"Reference Bank" shall mean The Chase Manhattan Bank, N.A., or such other bank
as Lender may from time to time designate.
"Release" shall have the meanings assigned to such term in CERCLA 42 U.S.C. sec.
9601(22).
"Reorganization Plan" means a plan of reorganization in the Bankruptcy
Case. "Reportable Event" shall have the meaning specified in PARAGRAPH 9.1(f).
"Revolving Loan Commitment" shall mean the amount of $25,000,000.
"Revolving Note" shall mean the promissory note in the original principal amount
of $25,000,000, executed by Borrower to the order of Lender, dated as of the
Closing Date.
"Security Interest" collectively means the liens and security interests created
for the benefit of the Lender pursuant to the Loan Documents.
"Special Collateral" shall have the meaning specified in PARAGRAPH 3.
"Solvent" means when used with respect to any Person, that:
(b) the fair value and present fair saleable value of such
Person's assets is in excess of the total amount of such
Person's stated liabilities including identified contingent
liabilities;
(c) the present fair saleable value of such Person's assets is in
excess of the amount that will be required to pay such
Person's probable liability on such Person's debts as they
become absolute and mature;
(d) such Person does not have unreasonably small capital to carry
on the business in which such Person is engaged and all
businesses in which such Person is about to engage; and
(e) such Person has not incurred debts beyond such Person's
ability to pay such debts as they mature.
"Subordinated Debt" means Indebtedness of Borrower which is subordinated to the
Obligations in a manner satisfactory in form and substance to Lender.
"Subsidiary" means any corporation (or other legal entity) of which more than
50% of the outstanding stock (or other equity interests) having by its terms the
ordinary voting power to elect a majority of the board of directors, managers or
trustees of such corporation (or other legal entity) is at the time, directly or
indirectly through one or more intermediaries, owned or controlled by the
Borrower and/or one or more of its Subsidiaries, irrespective of whether or not,
at the time, stock (or other equity interests) of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency.
"Superpriority Claim" means a claim against Borrower in the Bankruptcy Case
which is an administrative expense claim having priority over any or all
administrative expenses of the kind specified in Sections 503(b) or 507(b) of
the Bankruptcy Code.
"Term" shall have the meaning specified in PARAGRAPH 8 hereof.
"UCC" means the Uniform Commercial Code (or any successor statute) of the State
of New York or of any other state the laws of which are required by Section
9-103 of the UCC of New York to be applied in connection with the issue of
perfection of security interests.
2. LOANS AND TERMS OF PAYMENT
2.1 REVOLVING LOAN ADVANCES. (a) Upon the Borrower's requests made during
the Term, the Lender will make revolving loan Advances to Borrower in
an aggregate principal amount at any time outstanding not in excess of
the lesser of (x) the Borrowing Base or (y) the Revolving Loan
Commitment minus all Letter of Credit Obligations. As used herein the
term "Borrowing Base" shall mean an amount as of any time of
determination equal to the sum of:
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(i) the lesser of either (x) 85% of the amount of Eligible
Accounts and of the G.E. Capital Account as at such date or
(y) $2,000,000; PLUS
(ii) the lesser of either (x) 68% of the value of Eligible
Inventory or (y) 85% of the GOB Value of Eligible Inventory;
PLUS
(iii) the lesser of either (x) 30% of the value of Clearance
Inventory or (y) 85% of the GOB Value of Clearance Inventory
or (z) $1,000,000; plus
(iv) the lesser of either (x) 85% of the value of Accounts
relating to Eligible Liquidation Inventory based on the
Guaranteed Liquidation Inventory Value or (y) $10,000,000
PLUS
(v) the lesser of (x) 67.3% of the Fair Market Value of Owned
Real Property or (y) $3,000,000; PLUS
(vi) the lesser of either (x) 75% of the value of Accounts
relating to Eligible Liquidation Real Estate based on the
Guaranteed Liquidation Real Estate Value or (y) $20,000,000;
and PLUS
(vii) an amount equal to the product of the applicable advance rate
set forth in paragraphs 2.1(ii) or (iii) above TIMES all
undrawn amounts on outstanding Letters of Credit issued for
the purchase of Eligible Inventory or Clearance Inventory;
and MINUS
(viii) all Letter of Credit Obligations; and MINUS
(ix) any Availability Reserve.
The Lender may, in its sole discretion, at any time or times upon three
Business Days' prior notice to the Borrower, increase or decrease the ratio of
the Advances against Eligible Accounts, Eligible Inventory, Eligible Liquidation
Inventory or Eligible Liquidation Real Estate, or all of the foregoing, and, in
the event that any such ratio shall be decreased for any reason, such decrease
shall become effective immediately for purposes of calculating the maximum
amount of new revolving loan Advances hereunder. Notwithstanding anything
contained herein to the contrary, upon repayment of Advances with the proceeds
of any sale of Owned Real Property, no additional Advances will be made with
respect to Owned Real Property.
(b) Lender may, in its discretion, from time to time: (i) reduce
the lending formula with respect to Eligible Accounts to the
extent that Lender determines in good faith that the Dilution
has increased with respect to the Accounts for any period to
five percent (5%) or greater or may be reasonably anticipated
to increase to five percent (5%) or greater; or (ii) upon not
less than one (1) day's prior notice to Borrower, establish
any Availability Reserves.
(c) Borrower shall request each Advance not later than 11:00 a.m.
(Chicago time): (i) on the Business Day the Borrower requests
Lender to make a Prime Rate Loan and (ii) at least three (3)
Business Days before the Business Day on which the Borrower
requests the Lender to make a Eurodollar Rate Loan. Each such
request shall be made by telephone or facsimile transmission
in the form of EXHIBIT B hereto ("Borrowing Request") and
shall specify the requested date and amount of such Advance.
Each such notice shall be irrevocable. Each oral request for
an Advance shall be conclusively presumed to be made by a
person authorized by Borrower to do so and shall be confirmed
in writing by delivery to Lender of a Borrowing Request the
next Business Day. Any Advance which is a Eurodollar Rate
Loan shall be in an amount not less than $5,000,000 and in
integral multiples of $1,000,000 each thereafter. Advances
shall be evidenced by a Note in the form of EXHIBIT A. All
Advances shall be repaid in full upon the earlier to occur at
(A) the end of the Term, if this Agreement is terminated at
such time pursuant to paragraph 8 hereof, and (B) the
acceleration of the Obligations pursuant to PARAGRAPH 11 of
this Agreement. If, at any time and for any reason, (x) the
amount of unpaid Advances and Letter of Credit Obligations
exceeds the Borrowing Base, or (y) if all of the Obligations
(including, without limitation, any Advances made pursuant to
this PARAGRAPH 2.1, or pursuant to any note or notes), at any
time and for any reason, exceed the sum of Twenty-Five
Million Dollars ($25,000,000) (such amount, an "Over
Advance"), then Borrower, upon Lender's election and demand,
shall be obligated to immediately pay to
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Lender, in cash, the amount of such excess. Borrower hereby
authorizes Lender to charge any of the Borrower's accounts to
make any payments of principal or interest required by this
Agreement and any such payments shall be deemed to be an
Advance hereunder.
2.2 LETTERS OF CREDIT. (a) Upon the Borrower's request, and subject to the
terms and conditions of this Agreement, the Borrower will cause the
issuance of Letters of Credit for the account of Borrower within the
limits of the Borrowing Base up to a maximum aggregate undrawn face
amount of $3,000,000. Each Letter of Credit shall be acceptable in form
and substance to the Lender. Any payment made by Lender to any Person
on account of any Letter of Credit shall constitute an Advance
hereunder. At no time shall the aggregate sum of direct Advances by
Lender to the Borrower plus the contingent liability of Lender under
the outstanding Letters of Credit be in excess of the Revolving Loan
Commitment or the Borrowing Base.
(b) Borrower 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 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. Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of
any Letter of Credit and for such purposes the drawer or beneficiary
shall be deemed the agent of the Borrower. The Borrower assumes all
risks for, and agrees to pay, all foreign, federal, state and local
taxes, duties and levies relating to any goods subject to any Letter
of Credit or any documents, drafts or acceptances thereunder. Borrower
hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by
any issuer or correspondent or otherwise with respect to or relating
to any Letter of Credit. The provisions of this paragraph 2.2(b) shall
survive the payment of the Obligations and the termination or
non-renewal of the Loan Documents.
2.3 INTENTIONALLY OMITTED.
2.4 INTEREST.
(a) The Borrower will pay interest to the Lender on the unpaid principal
amount of all revolving loan Advances and all other Obligations, if
any, at a fluctuating rate per annum equal to one quarter of one per
cent (0.25%) above the Base Rate as to Prime Rate Loans and at
Borrower's option, at a rate equal to two and three quarters of one
percent (2.75%) per annum in excess of the Adjusted Eurodollar Rate
(based on the Eurodollar Rate applicable for the Interest Period. The
fluctuating rate of interest provided for above as to Prime Rate Loans
shall increase or decrease by an amount equal to any increase or
decrease in the Base Rate, effective as of the opening of business on
the day that any such change in the Base Rate occurs. Interest will be
calculated with respect to the outstanding principal balance of the
Loans at the close of each day computed on the basis of the actual
number of days elapsed over a 360-day year and all payment items which
the Lender receives shall be credited to the principal balance of the
Obligations, subject to collection, two (2) Business Days after the
Lender receives good funds therefor at its account designated by
Lender. Without affecting Borrower's obligation to immediately repay
to Lender the amount of any and all Over Advances in accordance with
the provisions of PARAGRAPH 2.1 of this Agreement, at any time when
any Over Advance exists, the Obligations shall bear interest, on the
daily balance thereof owing, at two percent (2%) percentage points
above the applicable per annum rates provided above (the "Over Advance
Rate"). At any time when an Event of Default has occurred and is
continuing the unpaid principal amount of all Obligations shall bear
interest at the respective applicable per annum rates provided for
above plus three percent (3%) (the "Default Rate"). All interest
payable by Borrower shall be due and payable on the last business day
of each calendar month during the term of this Agreement and Lender
may, at its option, charge such interest to Borrower's account with
Lender as an Advance.
Borrower 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 Borrower
shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans. Subject
to the terms
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and conditions contained herein, three (3) Business Days after receipt
by Lender of such a request from Borrower, such Prime Rate Loans shall
be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans
shall continue, as the case may be, provided, however, that, (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) Borrower shall
have complied with such customary procedures as are established by
Lender and specified by Lender to Borrower from time to time for
requests by Borrower for Eurodollar Rate Loans; (iv) no more than four
(4) Interest Periods may be in effect at any one time; (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof; and (vi) 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 Borrower. Any request by
Borrower to convert Prime Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be irrevocable.
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 Borrower, convert to Prime Rate Loans
in the event that (i) an Event of Default or event which with the
notice or passage of time or both would constitute 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 then outstanding principal amount of the
Revolving Loans then available to Borrower under paragraph 2 hereof.
Borrower shall pay to Lender, upon demand by Lender (or Lender may, at
its option, charge any loan account of Borrower) 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.
(b) It is the intent of the parties that the rate of interest and the other
charges to the Borrower under this Agreement shall be lawful;
therefore, if for any reason the interest or other charges payable
under this Agreement are found by a court of competent jurisdiction, in
a final determination, to exceed the limit which the Lender may
lawfully charge the Borrower, then the obligation to pay interest and
other charges shall automatically be reduced to such limit and, if any
amount in excess of such limit shall have been paid, then such amount
shall be refunded to the Borrower.
2.5 FEES. The Borrower will pay the fees described below to the Lender
during the term of this Agreement.
(a) An unused line fee of three eighths of one percent (0.375%) per annum
on the difference between the Facility and the average unpaid monthly
balance of the revolving loan Advances and undrawn Letter of Credit
Obligations outstanding under the Facility, payable monthly.
(b) A Letter of Credit fee equal to one and three quarters of one percent
(1.75%) per annum on the aggregate undrawn face amount of all
outstanding Letters of Credit issued for the account of Borrower,
which fee shall be payable monthly in arrears on the first day of each
month. The Borrower shall also pay on demand the normal and customary
administrative charges for issuance, amendment, negotiation, renewal
or extension of any Letter of Credit imposed by the bank issuing such
Letter of Credit. Upon the occurrence and during the continuance of an
Event of Default, all Letter of Credit fees shall be payable on demand
at a rate equal to three and three quarters of one percent (3.75%) per
annum on the aggregate undrawn face amount thereof.
(c) An examination fee of $750 per person, per day, plus reasonable
applicable expenses, for each examination performed by or at Lender's
direction of the Borrower's books and records and Collateral and such
other matters as Lender shall deem appropriate in its commercially
reasonable judgment, each such fee to be paid upon
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the completion of each such examination. Notwithstanding the
foregoing, Lender reserves the right to increase the examination fee,
based upon Lender's customary practices, upon prior written notice to
Borrower.
(d) An early termination fee if the Term ends for any reason other than
confirmation by the Bankruptcy Court of a Reorganization Plan prior to
the expiration of twenty-seven (27) months after the Closing Date or a
liquidation of substantially all of the Borrower's assets prior to the
expiration of twenty-seven (27) months after the Closing Date,
determined with reference to the date on which the Term ends in
relation to the anniversaries of the Closing Date indicated below;
provided, however, that if Borrower obtains Exit Financing from any
source other than Lender and Lender offered to provide such Exit
Financing on terms and conditions substantially similar to the terms
and conditions provided in the Exit Financing then Borrower shall pay
Lender a fee in the amount of 0.5% of the Facility:
2.0% of the Facility from the date hereof to the first
anniversary of the date hereof; and
0.5% of the Facility from the first anniversary of the date
hereof to May 22, 2002
If the Facility is terminated because of the sale of the business prior
to one year from the Closing Date, the Borrower shall pay the Lender an early
termination fee in the amount of one half of one percent (0.5%) of the Facility;
provided, however, if the Facility is terminated because of the sale of the
business after one year from the Closing Date, the Lender shall not be entitled
to receive an early termination fee.
(e) A closing fee of $150,000, earned in full on the date hereof, which fee
shall be payable by Borrower to Lender on the Closing Date.
CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
Notwithstanding anything to the contrary contained herein, all Eurodollar Rate
Loans shall, upon notice by Lender to Borrower, 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, by an amount deemed by
Lender to be material, 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 (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.
Borrower shall pay to Lender, upon demand by Lender (or Lender may, at
its option, charge any loan account of Borrower) 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 Borrower and shall be conclusive,
absent manifest error.
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 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at
its option, charge any loan account of Borrower) 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.
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3. GRANT OF SECURITY INTEREST TO LENDER. As security for the payment of
all Loans now or in the future made by Lender to the Borrower hereunder and for
the payment or other satisfaction of all other Obligations, Borrower hereby
assigns to Lender and grants to Lender a continuing security interest in the
following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located:
(a) all Accounts and all Goods whose sale, lease or other disposition by
Borrower has given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower;
(b) all Chattel Paper, Instruments, Investment Property, Documents and
General Intangibles (including, without limitation, all patents,
patent applications, trademarks, trademark applications, tradenames,
trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, claims against
carriers and shippers, guarantee claims, contracts rights, security
interests, security deposits and any rights to indemnification);
(c) all Inventory;
(d) all Goods including, without limitation, vehicles and fixtures;
(e) all Equipment;
(f) all deposits and cash and any other property of Borrower now or
hereafter in the possession, custody or control of Lender or any
agent or any parent, affiliate or subsidiary of Lender or any
participant with Lender in the Loans for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or
otherwise);
(g) All capital stock of all Subsidiaries;
(h) all Leasehold Interests and all real property owned by Borrower,
including without limitation, Eligible Liquidation Real Estate and
Owned Real Property set forth on SCHEDULE 9.1(S); provided, however,
with respect to Leasehold Interests Lender shall not exercise any
rights to obtain control of such Leasehold Interests, unless Lender
agrees to assume the Borrower's obligations under the applicable
Leases as of the date of Lender's possession of such Leasehold
Interests, subject to any rights and remedies provided to the
Borrower and Lender pursuant to Bankruptcy Code sec.365; and
(i) all additions and accessions to, substitutions for, and replacements,
products and Proceeds of the foregoing property, including, without
limitation, proceeds of all insurance policies insuring the foregoing
property, and all of Borrower's books and records relating to any of
the foregoing and to its business.
Immediately upon Borrower's receipt of that portion of the Collateral which is
or becomes evidenced by an agreement, instrument and/or document, including,
without limitation, promissory notes, trade acceptances, documents of title and
warehouse receipts (the "SPECIAL COLLATERAL"), Borrower shall deliver the
original thereof to Lender, together with appropriate endorsements or other
specific evidence (in form and substance acceptable to Lender) of assignment
thereof to Lender.
Upon entry of the Interim Order pursuant to Section 364(c)(l) of the Bankruptcy
Code, the Obligations of the Borrower hereunder shall at all times constitute
allowed administrative expense claims in the Bankruptcy Case having priority
over all administrative expenses of the kind specified in Sections 503(b) or
507(b) of the Bankruptcy Code; provided, however, such priority of claims shall
be subordinate to (i) quarterly fees required to be paid pursuant to 28 U.S.C.
sec. 1930(c)(6) and fees payable to the Clerk of the Bankruptcy Court; and (ii)
the payment of fees and expenses of professionals engaged pursuant to Sections
327 and 1103 of the Bankruptcy Code that are unpaid and subject to allowance by
the Bankruptcy Court upon proper application therefor, in an amount not to
exceed $500,000 (collectively, the "Carve-Out"). The foregoing proviso is
without prejudice to Lender's right to object to any such application. In
addition, the Obligations shall be secured pursuant to Sections 364(c)(2) and
364(d)(1) of the Bankruptcy Code in
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accordance with the terms of the Interim Order and the security interests and
Liens on the Collateral granted hereunder shall be senior to all other Liens on
the Collateral other than Permitted Liens. Notwithstanding anything herein to
the contrary, if an Event of Default shall have occurred, no payments shall be
made to professionals for fees and expenses incurred after such date.
4. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall, at Lender's request, at any time and from time to
time, execute and deliver to Lender such financing statements, documents and
other agreements and instruments (and pay the cost of filing or recording the
same in all public offices deemed reasonably necessary or desirable by Lender)
and do such other acts and things as Lender may deem necessary or desirable in
order to establish and maintain a valid, attached and perfected security
interest in the Collateral in favor of Lender (free and clear of all other
liens, claims and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Obligations and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
necessary to preserve and perfect Lender's security interest in the Collateral.
Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
5. POSSESSION OF COLLATERAL AND RELATED MATTERS (a) Until an Event of
Default has occurred, Borrower shall have the right, except as otherwise
provided in this Agreement, in the ordinary course of Borrower's business, to
(i) sell, lease or furnish under contracts of service any of Borrower's
Inventory normally held by it for any such purpose, and (ii) use and consume
any raw materials, work in process or other materials normally held by Borrower
for such purpose; provided, however, that a sale in the ordinary course of
business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower.
(b) If Borrower sells any Owned Real Property, Eligible Liquidation Real
Estate, Eligible Liquidation Inventory, Clearance Inventory or any
other Permitted Sale Assets or if any of the Collateral is damaged,
destroyed or taken by condemnation, Borrower shall pay to Lender,
unless otherwise specifically provided herein or otherwise agreed to
by Lender, as and when received by Borrower, a sum equal to the
proceeds received from (i) such sale (except that with respect to any
sale of Owned Real Property or Eligible Liquidation Real Estate, the
payment of proceeds to Lender shall be subject to payment of existing
mortgages thereon having priority over the Liens of Lender) or (ii)
such damage, destruction or condemnation; provided, however, that
without Lender's consent, unless and until an Event of Default has
occurred and is continuing:
(i) obsolete or worn out Equipment may be sold or otherwise disposed of
by Borrower and the proceeds thereof may be retained by Borrower, so
long as the fair market value of any such Equipment sold or otherwise
disposed of in any single transaction is less than $100,000, and the
fair market value, in the aggregate, of all such Equipment sold or
otherwise disposed of by Borrower during any twelve-month period is
less than $500,000; and
(ii) proceeds of Collateral arising from the damage, destruction or
condemnation thereof may be retained by Borrower and used by Borrower
to repair, restore or replace such Collateral, as the case may be, so
long as the fair market value of any such Collateral damaged,
destroyed or condemned in any single incident is less than $100,000,
and the fair market value, in the aggregate, of all such Collateral
owned by the Borrower during any twelve-month period is less than
$500,000.
6. COLLECTIONS AND ADMINISTRATION.
(a) Borrower shall establish an account ("Blocked Account") in Lender's
name for the benefit of Borrower with a financial institution
acceptable to Lender, into which Borrower will immediately deposit
all payments made for Inventory or services sold or rendered by
Borrower and received by it in the identical form in which such
payments were made, whether by cash or check. The contents of each
Blocked Account constitute Collateral and proceeds of Collateral. If
Borrower, any Affiliate or Subsidiary thereof, or any shareholder,
officer, direc-
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17
tor, employee or agent thereof or any Affiliate or Subsidiary, or any
other Person acting for or in concert with Borrower shall receive any
monies, checks, notes, drafts or other payments relating to or as
proceeds of Accounts or other Collateral, Borrower and each such
Person shall receive all such items in trust for, and as the sole and
exclusive property of, Lender and, immediately upon receipt thereof,
shall remit the same (or cause the same to be remitted) in kind to
the Blocked Account.
(b) Borrower shall deliver, or cause to be delivered by each of
Borrower's credit card clearinghouses and processors, payment of all
credit card charges submitted by Borrower to such clearinghouses or
other processors and any other amounts payable to Borrower by such
clearinghouses or other processors to the Blocked Account or as
otherwise designated from time to time by Lender. Borrower shall not
change such direction or designation except upon and with the prior
written consent of the Lender.
(c) Borrower shall cause the automated clearinghouse or wire transfer to
the Blocked Account, no less frequently than daily of
(i) the then contents of each DDA; provided, that each such transfer
shall be net of any minimum balance, not to exceed $5,000, as may be
required to be maintained in the subject DDA by the bank at which
such DDA is maintained; and
(ii) the proceeds of all credit card charges not otherwise provided for
pursuant hereto. Telephone advice (confirmed by written notice) shall
be provided to Lender on each Business Day on which any such transfer
is made.
(d) Each financial institution with which a Blocked Account is
established shall acknowledge and agree, in a manner satisfactory to
Lender, that the amounts on deposit in such Blocked Account are the
sole and exclusive property of Lender, that such financial
institution has no right to setoff against such Blocked Account or
against any other account maintained by such financial institution
into which the contents of such Blocked Account are transferred, and
that such financial institution shall wire, or otherwise transfer in
immediately available funds in a manner satisfactory to Lender, funds
deposited in the Blocked Account on a daily basis as such funds are
collected. Borrower agrees that all payments made to the Blocked
Account established by the Borrower or otherwise received by Lender,
whether in respect of the Accounts of Borrower or as proceeds of
other Collateral of the Borrower or otherwise, will be applied on
account of the Obligations of the Borrower in accordance with the
terms of this Agreement. Borrower agrees to pay all fees, costs and
expenses which Borrower incurs in connection with opening and
maintaining a Blocked Account. All of such fees, costs and expenses
which remain unpaid pursuant to any Blocked Account Agreement with
Borrower, to the extent same shall have been paid by Lender
hereunder, shall constitute Advances hereunder, shall be payable to
Lender by Borrower upon demand, and, until paid, shall bear interest
at the highest rate then applicable to Advances hereunder. All
checks, drafts, instruments and other items of payment or proceeds of
Collateral delivered to Lender in kind shall be endorsed by the
Borrower, to Lender, and, if that endorsement of any such item shall
not be made for any reason, Lender is hereby irrevocably authorized
to endorse the same on Borrower's behalf.
(e) For the purpose of this PARAGRAPH 6, Borrower irrevocably hereby
makes, constitutes and appoints Lender (and all Persons designated by
Lender for that purpose) as its true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of
payment and/or proceeds of Collateral of the Borrower and upon any
Chattel Paper, document, instrument, invoice or similar document or
agreement relating to any Account of Borrower or goods pertaining
thereto; (ii) to take control in any manner of any item of payment or
proceeds thereof; (iii) to have access to any lock box or postal box
into which any of the Borrower's mail is deposited; and (iv) open and
process all mail addressed to any Borrower and deposited therein;
provided, however, that Lender shall not exercise any such powers
described in SUBPARAGRAPHS (i) AND (ii) OF PARAGRAPH 6(e) (except for
routine lock box payments/proceeds) unless and until an Event of
Default has occurred.
(f) Lender may, at any time and from time to time after the occurrence of
an Event of Default, whether before or after notification to any
Account Debtor and whether before or after the maturity of any of the
Obligations, (i) enforce collection of any of the Borrower's Accounts
or contract rights by suit or otherwise; (ii) exercise
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all of the Borrower's rights and remedies with respect to proceedings
brought to collect any Accounts; (iii) surrender, release or exchange
all or any part of any Accounts of the Borrower, or compromise or
extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any
Account of Borrower upon such terms, for such amount and at such time
or times as Lender deems advisable; (v) prepare, file and sign the
requisite Borrower's name on any proof of claim in bankruptcy or
other similar document against any Account Debtor indebted on an
Account of such Borrower; and (vi) do all other acts and things which
are necessary, in Lender's sole discretion, to fulfill each
Borrower's Obligations under this Agreement and to allow Lender to
collect the Accounts. In addition to any other provision hereof,
Lender may at any time on or after the occurrence of an Event of
Default, at the Borrower's sole expense, notify any parties obligated
on any of the Accounts of the Borrower to make payment directly to
Lender of any amounts due or to become due thereunder.
(g) For the purpose of determining the Borrowing Base hereunder, Lender
shall, upon receipt by Lender at its office in Chicago, Illinois, of
cash or other immediately available funds from collections of items
of payment and proceeds of any Collateral, apply the whole or any
part of such collections or proceeds against the Obligations in such
order as Lender shall determine in its sole discretion or such order
as may be required by applicable law.
(h) Immediately upon a Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document
including, without limitation, any Chattel Paper, Borrower shall
deliver the original thereof to Lender together with an appropriate
endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any
reason, Lender is hereby irrevocably authorized, as such Borrower's
attorney and agent-in-fact, to endorse or assign the same on
Borrower's behalf.
(i) PAYMENT OF OBLIGATIONS. Upon the maturity (whether by acceleration or
otherwise) of any of the Obligations under this Agreement or any of
the other Loan Documents, the Lender shall be entitled to immediate
payment of such Obligations without further application to or order
of the Bankruptcy Court.
(j) NO DISCHARGE; SURVIVAL OF CLAIMS. The Borrower agrees that (i) its
Obligations hereunder shall not be discharged by the entry of an
order confirming a Reorganization Plan (and the Borrower pursuant to
Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such
discharge) and (ii) the Superpriority Claim granted to the Lender
pursuant to the Orders and described in paragraph 3 and the security
interests and Liens granted to the Lender pursuant to the Orders and
described in paragraph 3 shall not be affected in any manner by the
entry of an order confirming a Reorganization Plan.
(k) USE OF PROCEEDS. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only in accordance with
Borrower's existing budget as approved by Lender for: (a) payments to
existing lenders under that certain revolving loan facility granted
by Fleet Retail Finance Inc. d/b/a BankBoston Retail Finance, Inc. as
agent for a syndicate of lenders and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Loan Documents. All other Loans made
or Letters of Credit provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general
operating, working capital and other proper corporate purposes of
Borrower not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of
reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System, as amended.
7. SCHEDULES AND REPORTS.
(a) Within five (5) days after the close of each calendar week, and at
such other times as may be requested by Lender from time to time
hereafter, Borrower shall deliver to Lender a Borrowing Base
certificate for such week, which shall include calculations of the
Borrowing Base (excluding reserves but including calculations
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of Eligible Accounts, Eligible Inventory, Eligible Liquidation
Inventory, Clearance Inventory, and Eligible Liquidation Real Estate)
and shall otherwise be in form and substance satisfactory to Lender
together with (i) an aged trial balance of Borrower's accounts that
are payable as of the end of such week and (ii) a schedule
identifying by age each Account a reconciliation thereof to the above
Borrowing Base calculations. At such times as may be requested by
Lender from time to time hereafter, Borrower shall deliver to Lender
(A) such additional schedules, certificates, reports and information
with respect to the Collateral as Lender may from time to time
require and (B) a collateral assignment of any or all items of
Collateral to Lender. Lender, through its officers, employees or
agents, shall have the right, at any time and from time to time in
Lender's name, in the name of a nominee of Lender or in Borrower's
name, to verify the validity, amount or any other matter relating to
any of the Accounts, by mail, telephone, telegraph or otherwise.
Borrower shall reimburse Lender, on demand, for all costs, fees and
expenses incurred by Lender in this regard.
(b) Without limiting the generality of the foregoing, Borrower shall
deliver to Lender, at least once a month each of the following (each
in such form as Lender from time to time may specify and (except as
otherwise provided below) certified as to the accuracy thereof by any
two of the following persons: President, Treasurer, Chief Financial
Officer, or Controller of Borrower):
(i) Within fifteen (15) days after the end of each month:
(A) A certificate (signed by the Borrower's President
or Chief Financial Officer) concerning the Borrower's Inventory.
(B) A written versus delivered sales summary.
(C) A monthly Inventory turns by department and by
category report.
(D) A comparison of markets Gross Margin by category.
(E) Major sales summary - sales totals by SKU range
category.
(F) Deposit balances aging schedule summary/total page
by region.
(G) "NAS" summary report by location by division.
(ii) Within twenty (20) days after the end of the previous month:
(A) Reconciliation of the above described Inventory
certificate (paragraph 7(c)(i)(A)) to Availability and to the
general ledger as of the end of the subject month.
(B) A Gross Margin reconciliation.
(C) An aging of the Borrower's accounts payable.
(D) A store activity report.
(E) An internally prepared financial statement of the
Borrower's financial condition and the results of its operations
for, the period ending with the end of the subject month, which
financial statement shall include, at a minimum, a balance sheet,
income statement (on a regional and on a "consolidated" basis),
detailed account of capital expenditures and comparison of same
store sales for the corresponding month of the then immediately
previous year, as well as to the Borrower's business plan provided
to Lender, certified as to the accuracy thereof and compliance with
GAAP (subject to year-end audit adjustments) by any two (2) of the
following officers: the President, Chief Executive Officer, the
Chief Accounting Officer, the Chief Financial Officer, and
Treasurer.
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(c) The Borrower shall cause the Borrower's President and Chief Financial
Officer, respectively, to provide such Person's certificate with those
monthly statements to be furnished pursuant to this PARAGRAPH 7, which
certificate shall:
(A) Indicate that the subject statement was prepared
in accordance with GAAP consistently applied and presents fairly
the financial condition of the Borrower at the close of, and the
results of the Borrower's operations and capital expenditures
schedule or cash flows, as applicable, for, the period(s) covered,
subject, however to the following:
(i) usual year end adjustments (this
exception shall not be included in the certificate
which accompanies any annual statement).
(ii) material accounting changes (in
which event, such certificate shall include a schedule
(in reasonable detail) of the effect of each such
material accounting change).
(B) Indicate either that (i) no Event of Default has
occurred or ( ii) if such an event has occurred, its nature (in
reasonable detail) and the steps (if any) being taken or
contemplated by the Borrower to be taken on account thereof.
(C) Include calculations concerning the Borrower's
compliance (or failure to comply) at the date of the subject
statement with each of the financial performance covenants included
in PARAGRAPH 10.3.
(d) Borrower shall immediately notify Lender of any event causing loss or
depreciation in value of its Inventory (other than normal depreciation
occurring in the ordinary course of business). Further, Lender shall
perform or arrange for quarterly Inventory appraisals at the sole cost
and expense of Borrower.
(e) As soon as practicable, and in any event no later than 30 days prior to
the end of the last period set forth on the Budget attached hereto as
EXHIBIT F, Borrower shall furnish to the Lender an updated Budget,
which shall be in form and substance satisfactory to Lender, and
Borrower shall make its senior officers available to discuss the same
with the Lender upon the Lender's reasonable request.
(f) All schedules, certificates, reports and assignments and other items
delivered by Borrower to Lender hereunder shall be in such form and
contain such information as Lender shall reasonably request. Borrower
shall deliver from time to time such other schedules and reports
pertaining to the Collateral as Lender may reasonably request.
(g) Borrower shall deliver to Lender, within the period specified, those
additional reports specified in PARAGRAPH 10.1.
8. TERMINATION. This Agreement shall be in effect from the date hereof
until the earlier of: (i) the date occurring twenty-seven (27) months from the
date hereof or (ii) the effective date of a Reorganization Plan, unless sooner
terminated pursuant to the terms hereof (the "Term") at which time the
Obligations shall become due and payable. If one or more of the events specified
in SUBPARAGRAPHS (i) OR (ii) above occurs, this Agreement shall terminate on the
date thereafter that the Obligations are paid in full; provided, however, that
the security interests and liens created under the Loan Documents shall survive
such termination until the date upon which payment and satisfaction in full of
the Obligations shall have occurred. At such time as the Borrower has repaid all
of the Obligations and this Agreement has terminated, (i) Borrower shall deliver
to Lender a release, in form and substance reasonably satisfactory to Lender, of
all obligations and liabilities of Lender and its officers, directors,
employees, agents, parents, subsidiaries and affiliates to Borrower, and if
Borrower is obtaining new financing from another lender, Borrower shall deliver
its indemnification of Lender, in form and substance satisfactory to Lender, for
checks which Lender has credited to Borrower's account, but which subsequently
are dishonored for any reason and (ii) upon Borrower's request, Lender shall
deliver to Borrower a release in form and substance reasonably satisfactory to
Borrower.
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21
9. WARRANTIES AND REPRESENTATIONS.
------------------------------
9.1 GENERAL WARRANTIES AND REPRESENTATIONS. Borrower warrants and
represents that at all times during the Term this Agreement:
(a) Borrower is a corporation duly organized and existing and in good
standing under the laws of the state of its incorporation and is
qualified or licensed to do business in all other countries, states and
provinces the laws of which require Borrower to be so qualified or
licensed; Borrower does not have any Subsidiary except as set forth on
the Information Certificate.
(b) Borrower has good, indefeasible and merchantable title to and ownership
of the Collateral, free and clear of Liens, except those of Lender and
Permitted Liens; the Equipment is in good operating condition and
repair and has not been permitted to become a fixture to any real
property;
(c) Except as set forth in the SCHEDULE 9.1(C) hereto, Borrower is not a
party to any contract, lease, license agreement or other agreement or
subject to any charge, corporate restriction, judgment, decree or order
which could reasonably be expected to have a Material Adverse Effect,
and is not a party to any labor dispute, and there are no strikes or
walkouts relating to any labor contract, and no such contract is
scheduled to expire during the Term; each material license is in full
force and effect and no event has occurred or failed to occur which
with the giving of notice or passage of time or both would constitute a
default under any such license;
(d) Borrower is not in violation of any applicable statute, regulation or
ordinance of any governmental entity, or of any agency thereof, which
could reasonably be expected to have a Material Adverse Effect;
(e) Other than the filing of the Voluntary Petition, Borrower is not in
default under the G.E. Capital Agreement and except as set forth on
SCHEDULE 9.1(E), Borrower is not in default under its Real Property
Leases;
(f) Borrower has not received any notice to the effect that it is not in
full compliance with any of the requirements of ERISA, and the
regulations promulgated thereunder and, to the best knowledge of
Borrower's executive officers, there exists no event described in
Section 4043(b)(3) thereof ("REPORTABLE EVENT");
(g) Borrower has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, to the extent due
and payable, all taxes, levies, assessments, charges, liens, claims or
encumbrances upon or relating to the Collateral, the Obligations, its
employees, payroll, income, and gross receipts, its ownership or use of
any of its assets, and any other aspect of its business (collectively,
the "CHARGES");
(h) The offices or locations where Borrower keeps the Collateral and books
and records concerning the Collateral, including, without limitation,
computer programs, printouts and other computer materials, are at the
locations set forth on SCHEDULE 9.1(h) hereto;
(i) The addresses specified on SCHEDULE 9.1(h) hereto include and designate
Borrower's chief executive office, chief place of business and other
offices and places of business and are the Borrower's sole offices and
places of business;
(j) Borrower has not, during the preceding five (5) years, been known as or
used any other corporate, trade or fictitious name, except as disclosed
on SCHEDULE 9.1(j) hereto;
(k) Borrower has the right and power and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the
other Agreements, and its officers executing and delivering the Loan
Documents are duly authorized and empowered to do so;
(l) The execution, delivery and performance by Borrower of the Loan
Documents shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable law or a breach of
any provision con-
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22
tained in its Articles or Certificate of Incorporation or By-Laws or
contained in any agreement, instrument or document to which it is now a
party or by which it is bound;
(m) Borrower has, and is current and in good standing with respect to, all
governmental approvals, permits, certificates, inspections, consents
and franchises necessary to continue to conduct its business as
heretofore conducted, and to own or lease and operate the properties
now owned or leased by it;
(n) Intentionally Omitted.
(o) The Financials as set forth on SCHEDULE 9.1(o)(l) hereto have been
prepared in accordance with GAAP and fairly present the assets,
liabilities and financial condition and results of operations of
Borrower and such other Persons described therein as of the dates
thereof; there are no omissions or other facts or circumstances which
are or may be material and no event has occurred since the date of the
Financials and is continuing which could reasonably be expected to have
a Material Adverse Effect other than those which customarily occur as a
result of events leading up to and following the commencement of a
proceeding under Chapter 11 of the Bankruptcy Code and the commencement
of the Bankruptcy Case; there exists no equity or long term investments
in, or outstanding advances to, any Person not reflected in the
Financials; except for trade payables arising in the ordinary course of
its business since the dates reflected in the Financials and except as
disclosed on SCHEDULE 9.1(o)(2) hereto and in the Financials, Borrower
does not have any actions or proceedings pending or any Indebtedness or
guaranteed the obligations of any other Person;
(p) The execution and delivery of the Loan Documents by Borrower does not
directly or indirectly violate or result in a violation of Section 7 of
the Securities and Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulations G,
U, T and X of the Board of Governors of the Federal Reserve System, and
Borrower does not own or intends to purchase or carry any "margin
security" as defined in said Regulations;
(q) Intentionally Omitted.
(r) Borrower has sufficient personnel and possesses adequate assets,
licenses, patents, patent applications, copyrights, trademarks and
trade names to continue to conduct its business as heretofore conducted
by it, and all such licenses, patents, patent applications, copyrights,
trademarks and trade names are listed on SCHEDULE 9.1(r) hereto;
(s) SCHEDULE 9.1(s) hereto lists all owned and leased real property and,
except as described in SCHEDULE 9.1(s), Borrower is not a party to any
contract or agreement for the sale, transfer, assignment or other
disposition of the real property or any portion thereof or interest
therein;
(t) The Liens granted to Lender under this Agreement and the other Loan
Documents constitute valid and perfected first priority liens and
security interests in and upon the Collateral subject only to the Liens
permitted under paragraph 10.2(l) hereof. 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 permitted under paragraph 10.2(l) hereof.
(u) No event has occurred other than the commencement of the Bankruptcy
Case since December 31, 1998, and is continuing which has had or could
reasonably be expected to have a Material Adverse Effect;
(v) Except as disclosed in SCHEDULE 9.1(v), all premises and facilities
owned, leased, used or operated by Borrower or any Subsidiary or, to
the knowledge of any of the Borrower's executive officers, after a
reasonable investigation, any predecessor in interest, have been, and
continue to be, owned, leased, used or operated in compliance in all
material respects with all applicable Environmental Laws. SCHEDULE
9.1(v) identifies with respect to Borrower and each Subsidiary, or, to
the knowledge of the Borrower's executive officers, after a reasonable
investigation, any predecessor in interest (i) all environmental
audits, assessments or occupational health stud-
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23
ies undertaken by, or at the direction of, governmental agencies; (ii)
any claim, or complaint concerning environmental matters; and (iii) all
permits issued under any Environmental Laws;
(w) No broker or finder acting on behalf of Borrower brought about the
obtaining, making or closing of the loans pursuant to this Agreement
and Borrower has no obligation to any other Person in respect of any
finder's or brokerage fees in connection with the loans contemplated by
this Agreement;
(x) There has been no change in the credit terms or policies which Borrower
offers to its customers from those disclosed to Lender prior to the
date of this Agreement;
(y) No information contained in the Loan Documents, the Financials or any
written statement furnished by or on behalf of Borrower pursuant to the
terms of this Agreement, which has previously been delivered to Lender,
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading at the time and in light of the circumstances
under which made.
(z) Except for the Bankruptcy Case there are no actions, suits, claims,
investigations or proceedings which are pending or, to the best
knowledge of Borrower's executive officers, threatened, against or
affecting Borrower, its assets, goodwill or business or any other
Person which could reasonably be expected to have a Material Adverse
Effect or would impair the ability of Borrower to perform its
obligations under the Loan Documents or would impair the Lender's
ability to enforce any Obligations or realize upon any Collateral;
(aa) On the date of the making of the initial Loans or the issuance of the
initial Letters of Credit hereunder, whichever first occurs, the
Interim Order will have been entered and will not have been stayed,
amended, vacated, reversed or rescinded. On the date of the making of
any Loan or the issuance of any Letter of Credit, the Interim Order or
the Final Order, as the case may be, shall have been entered and shall
not have been amended, stayed, vacated, reversed or rescinded. Upon the
maturity (whether by the acceleration or otherwise) of any of the
Obligations of the Borrower hereunder and under the other Loan
Documents, the Lender shall be entitled to immediate payment of such
Obligations, and to enforce the remedies provided for hereunder,
without further application to or order by the Bankruptcy Court.
9.2 ACCOUNT WARRANTIES AND REPRESENTATIONS. With respect to its Accounts,
Borrower warrants and represents to Lender that Lender may rely, in
determining which Accounts listed on any schedule of Accounts are
Eligible Accounts, on all statements or representations made by
Borrower on or with respect to any such schedule and, unless otherwise
indicated in writing by Borrower, that:
(a) They are genuine, are in all respects what they purport to be, are not
evidenced by a judgment and are evidenced by executed original
instruments, agreements, contracts, or documents, which will be
delivered to Lender upon request therefor;
(b) They represent undisputed bona fide transactions completed in
accordance with the terms and provisions contained in any documents
related thereto;
(c) The face amounts shown on any schedule of Accounts provided to Lender
and all invoices and statements delivered to Lender with respect to any
Account are actually and absolutely owing to a Borrower and are not
contingent for any reason;
(d) To the best knowledge of the Borrower's executive officers, there are
no setoffs, counterclaims or disputes existing or asserted with respect
thereto and Borrower has not made any agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances
allowed by such Borrower in the ordinary course of its business for
prompt payment, all of which discounts and allowances are either (x)
reflected in the calculation of the face amount of the invoices to
which such discounts or allowances relate, or (y) evidenced on a
general ledger account of such Borrower;
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(e) To the best knowledge of the Borrower's executive officers, there are
no facts, events or occurrences which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable thereunder
from the invoice face amount shown on any schedule of Accounts and on
all contracts, invoices and statements delivered to Lender with respect
thereto;
(f) To the best knowledge of the Borrower's executive officers, all Account
Debtors thereunder (i) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and
(ii) are Solvent;
(g) They are not subject to any Liens, except those of Lender;
(h) No executive officer of Borrower has knowledge of any fact or
circumstance which would impair the validity or collectability thereof;
(i) To the best knowledge of the Borrower's executive officers, there are
no proceedings or actions which are threatened or pending against any
Account Debtor thereunder which could reasonably be expected to have a
Material Adverse Effect;
(j) The goods giving rise thereto are not, and were not at the time of the
sale thereof, subject to any Liens, except those of Lender and those
removed or terminated prior to the date hereof; and
(k) They comply in all respects with all applicable laws and regulations,
including, but not limited to, truth-in-lending and consumer credit
disclosure laws and regulations and, in the case of Account Debtors who
are subject to the Bankruptcy Code, Section 524(c) thereof.
9.3 INVENTORY WARRANTIES AND REPRESENTATIONS. With respect to its
Inventory, Borrower warrants and represents to Lender that Lender may
rely, in determining which items of Inventory listed on any Schedule of
Inventory are Eligible Inventory, on all statements or representations
made by Borrower or with respect to any such Schedule and, unless
otherwise indicated in writing by Borrower that:
(a) All Inventory is located on premises listed on SCHEDULE 9.1(h) hereto;
(b) No Inventory is now, or shall at any time or times hereafter be, stored
with a bailee, warehouseman or similar party without Lender's prior
written consent and if Lender gives such consent, Borrower will
concurrent therewith, cause any such bailee, warehouseman or similar
party to issue and deliver to Lender, in form and substance acceptable
to Lender, warehouse receipts therefor in Lender's name;
(c) No Inventory is under consignment to any Person; and
(d) All Inventory is currently usable or currently saleable in the normal
course Borrower's business.
9.4 YEAR 2000 PREPAREDNESS. Borrower has not experienced, and Borrower has
no reason to expect Borrower to experience any Material Adverse Effect
on its operations as a result of any failure of Borrower's computer
hardware or software applications to function at least as effectively
with respect to dates or time periods occurring after December 31,
1999, as such applications functioned for dates or time periods
occurring prior to January 1, 2000.
9.5 WARRANTY AND REAFFIRMATION OF WARRANTIES AND REPRESENTATIONS; SURVIVAL
OF WARRANTIES AND Representations. Each request for an Advance made by
Borrower pursuant to the Loan Documents shall constitute (i) a warranty
and representation by Borrower to Lender that there does not then exist
an Event of Default or a Default, except as otherwise notified to the
Lender by Borrower and (ii) a reaffirmation as of the date of said
request of the representations and warranties of Borrower contained in
paragraphs (a) through (j) of PARAGRAPH 9.1 and in PARAGRAPHS 9.2, 9.3
AND 9.4 with respect to Collateral then existing. All representations
and warranties of
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25
Borrower contained in the Loan Documents shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing
of the transactions described therein or related thereto.
10. COVENANTS AND CONTINUING AGREEMENTS.
10.1 AFFIRMATIVE COVENANTS. Borrower covenants that it shall:
(a) Keep books of account and prepare financial statements and shall cause
to be furnished to Lender the following (all of the foregoing and
following to be kept and prepared in accordance with GAAP):
(i) as soon as available, but not later than seven days after the date of
this Agreement, audited consolidated financial statements of Borrower
and the Subsidiaries as at December 31, 1998, certified by a firm of
independent certified public accountants of recognized standing,
reasonably acceptable to Lender and selected by Borrower (and which has
acknowledged a letter of the type referred to in PARAGRAPH 12.4(j))
which do not reflect changes, if any, of greater than 5% in any
material item from those presented to Lender prior to the date of this
Agreement;
(ii) as soon as available, but not later than ninety (90) days after the
close of Borrower's Fiscal Year hereafter, audited consolidated
financial statements of Borrower and the Subsidiaries as at the end of
such year certified by a firm of independent certified public
accountants of recognized standing, reasonably acceptable to Lender and
selected by Borrower (and which has acknowledged a letter of the type
referred to in PARAGRAPH 12.4(j)), together with any management letter
or other letters or certificates supplied by the Borrower to such
accountants;
(iii) concurrently with the delivery of the financial statements described in
subparagraph (ii) above, (a) a statement in reasonable detail showing
the calculations used in determining the financial covenants, and (b) a
certificate of such certified public accountants certifying to Lender
that, based upon their examination of the affairs of Borrower performed
in connection with the preparation of said financial statements, they
are not aware of the existence of any condition or event which
constitutes or would, upon notice or lapse of time or both, constitute
an Event of Default or, if they are aware of such condition or event,
the nature thereof;
(iv) as soon as available, but not later than twenty-five (25) days after
the end of each month thereafter, unaudited interim internal,
consolidating and consolidated income statements, an unaudited internal
consolidated balance sheet, an unaudited internal consolidated
statement of cash flows of Borrower and its Subsidiaries as at the end
of the portion of the Borrower's Fiscal Year then elapsed and a
reconciliation of Borrower's actual cash flow results in relation to
its cash flow budget as submitted to Lender together with: (a) a
statement in reasonable detail showing the calculations used in
determining the financial covenants, and (b) the certification of
Borrower's principal financial officer that all such financial
statements were prepared in accordance with GAAP (subject to normal
year-end adjustments and the absence of footnotes) and fairly present
the financial position and results of operations of the Borrower for
such period;
(v) as soon as possible, but not less than thirty (30) days prior to each
ninety-day period during the Term, a copy of Borrower's cash flow
budget for such ninety-day period, in form and substance satisfactory
to Lender;
(vi) such other data and information (financial and otherwise) as Lender,
from time to time, may reasonably request, bearing upon or related to
the Collateral, Borrower's financial condition or results of
operations;
(b) Promptly upon, but in no event later than three Business Days after,
Borrower's learning thereof, inform Lender, in writing, of (i) any
material delay in its performance of any of its obligations to any
Account Debtor and of any assertion of any material claims, offsets or
counterclaims by any Account Debtor and of any material allowances,
credits or other monies granted by any Borrower to any Account Debtor;
(ii) all material adverse information relating to the financial
condition of any Account Debtor; (iii) any facts relating to any
Ac-
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26
count or Inventory which would render untrue any representation or
warranty made pursuant to PARAGRAPHS 9.2 OR 9.3 hereof with respect to
such Account or Inventory; and (iv) any litigation affecting Borrower,
whether or not the claim is considered by Borrower to be covered by
insurance, and of the institution of any suit or administrative
proceeding which litigation, suit or administrative proceeding could
reasonably be expected to have a Material Adverse Effect;
(c) Keep and maintain the Equipment in good operating condition and repair;
make all necessary replacements thereof so that the value and operating
efficiency thereof shall at all times be maintained and preserved;
promptly inform Lender of any additions to or deletions from the
Equipment; and prevent any such Equipment in excess of $50,000 in the
aggregate from becoming a fixture to real estate or accession to other
personal property;
(d) Pay, and cause its Subsidiaries to pay, promptly when due, all of the
Charges and promptly discharge any liens, encumbrances or other claims
against the Collateral;
(e) Maintain, and cause each Subsidiary to maintain, such insurance as may
be required by law and such other insurance to such extent and against
such hazards and liabilities as is customarily maintained by companies
similarly situated, and (i) include Lender as an additional insured on
all liability policies and (ii) provide Lender with a loss payee
endorsement in favor of the Lender satisfactory to the Lender;
(f) Comply, and cause each Subsidiary to comply, strictly and in all
respects with all applicable Environmental Laws, notify Lender, and
cause each Subsidiary to notify Lender, promptly in the event of any
Release of any Hazardous Substance reportable under Section 103 of
CERCLA upon any premises owned or operated by any Borrower or any
Subsidiary, and promptly forward, and cause each Subsidiary to promptly
forward, to Lender a copy of any order, notice, permit, application, or
any other communication or report in connection with any such Release
of any Hazardous Substance or any other matter relating to the
Environmental Laws as they may affect such premises. Borrower shall
indemnify Lender and hold Lender harmless from and against any loss,
liability, damage or expense, including attorneys' fees, suffered or
incurred by Lender, whether as mortgagee pursuant to any mortgage or
leasehold mortgage, as mortgagee in possession, or as successor in
interest to Borrower or any of its Subsidiaries as owner or lessee of
any premises by virtue of foreclosure or acceptance of deed in lieu of
foreclosure (i) under or on account of the Environmental Laws,
including the assertion of any lien thereunder; and (ii) with respect
to any Release of any Hazardous Substance whether or not reportable
under Section 103 of CERCLA affecting such premises or facility,
whether or not the same originates or emanates from such premises or
any contiguous real estate, including any loss of value of such
premises as a result of a Release of any Hazardous Substance; provided,
however, that Borrower will not be liable for such indemnification to
Lender to the extent that any such loss, liability, damage or expense
results from the gross negligence or willful misconduct of the Person
who would otherwise be entitled to be indemnified pursuant to this
PARAGRAPH 10.1(f);
(g) Keep or cause to be kept in full force and effect each material
license.
(h) Furnish to Lender (i) promptly after the filing thereof with the
Commission, a copy of each report, notice or other filing, if any, by
Borrower with the Commission, and (ii) a copy of each written
communication received by Borrower from or delivered by Borrower to the
Commission, promptly after such receipt or delivery; and
(i) Obtain and perfect first priority security interests on all merchandise
sold on credit and, in the case of Account Debtors who are subject to
the Bankruptcy Code, to the extent Borrower accepts payment from such
Account Debtor, with respect to obligations incurred prior to the
Account Debtor becoming subject to the Bankruptcy Code, require
compliance with respect to Bankruptcy Code Section 524(c) thereunder.
(j) Permit representatives of Lender, from time to time, as often as may be
reasonably requested, to visit and inspect all properties of Borrower
for all reasonable purposes to protect the interests, financial or
otherwise, of the Lender under the Loan Documents.
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10.2 NEGATIVE COVENANTS. Without Lender's prior written consent, which
Lender may or may not in its sole discretion give, Borrower covenants
that it shall not:
(a) Merge or consolidate with or acquire any Person;
(b) Make any investment other than in the ordinary course of its business;
(c) Declare or pay dividends upon any of its capital stock or make any
distributions of its property or assets; provided that a Subsidiary may
declare or pay dividends upon its stock to Borrower;
(d) Redeem, retire, purchase or otherwise acquire, directly or indirectly,
any of its capital stock, or make any material change in its capital
structure or in any of its business objectives, purposes and operations
which might in any way adversely affect the repayment of the
Obligations;
(e) Enter into, or be a party to, any transaction with any Affiliate,
except in the ordinary course of and pursuant to the reasonable
requirements of its business and upon fair and reasonable terms which
are fully disclosed to Lender and are no less favorable than would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate;
(f) Guarantee or otherwise, in any way, become liable with respect to the
obligations or liabilities of any Person except (i) its Affiliates'
obligations to Lender and (ii) by endorsement of instruments or items
of payment for deposit to its general account or for delivery to Lender
on account of the Obligations;
(g) Except as otherwise expressly permitted in the Loan Documents or with
respect to Permitted Sale Assets, encumber, pledge, mortgage, grant a
security interest in, assign, sell (except for the sale of inventory
and property in the ordinary course of business), lease or otherwise
dispose of or transfer, whether by sale, merger, consolidation,
liquidation, dissolution, or otherwise, any of its assets; provided,
however, that the terms and conditions of any of the foregoing actions
with respect to Permitted Sale Assets must be satisfactory to Lender
and the proceeds thereof must be applied in accordance with PARAGRAPH
5(a);
(h) Make any loans or advances of money to any Person (other than
intercompany loans between Borrower and Borrowing Subsidiaries),
including, without limitation, its employees or Affiliates (other than
salary and routine travel or expense account advances made in the
ordinary course of business) or permit the annual salary and bonus,
including any stock option or incentive plans, to its officers to
exceed the amounts set forth in SCHEDULE 10.2(H) except as such amounts
and all other direct and indirect remuneration may be adjusted for cost
of living increases, without the prior written consent of Lender;
(i) Make Capital Expenditures (including Capital Leases) during any Fiscal
Year, which, in the aggregate, exceed $2,000,000;
(j) Remove its books and records and/or the Collateral from the locations
set forth in SCHEDULE 9.1(H) or keep any of such books and records
and/or the Collateral at any other office(s) or location(s) unless (i)
it gives Lender written notice thereof and of the new location of said
books and records and/or the Collateral at least thirty (30) days prior
thereto and (ii) the other office or location is within the continental
United States of America;
(k) Create, incur, assume or have outstanding any Indebtedness, except: (i)
Indebtedness owing to Lender; (ii) Indebtedness incurred prior to the
Filing Date; or (iii) Indebtedness incurred by it subsequent to the
Filing Date in the ordinary course of business and in accordance with
the Budget;
(l) Create or permit any Lien on any of its properties or assets except:
(i) presently existing or hereinafter created Liens in favor of Lender;
and (b) Permitted Liens;
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(m) Create any new Subsidiaries or permit any Subsidiary to incur
Indebtedness or other fixed or contingent obligations of more than
$10,000 in any Fiscal Year;
(n) Make any payment of any part or all of any Subordinated Debt or take
any action or omit to take any action in respect of any Subordinated
Debt, except in accordance with the agreements existing as of the date
hereof giving rise to such Subordinated Debt, which agreements have
been provided to the Lender and shall not be amended, modified or
altered in any manner without the prior written consent of the Lender;
(o) Incur, create, assume, suffer or exist or permit any other
Superpriority Claim which is PARI PASSU with or senior to the claims of
the Lender against the Borrower hereunder, except for the Carve-Out, or
apply to the Bankruptcy Court for the authority to do so;
(p) File, support or endorse any Reorganization Plan that does not provide
for the immediate and full payment of the Obligations upon confirmation
unless Lender has given prior written consent to any such plan;
(q) Engage in any business other than the business in which it is currently
engaged or a business reasonably related thereto;
(r) Close any stores operated by Borrower except as set forth on SCHEDULE
10.2(R) without Lender's consent, which consent shall not be
unreasonably withheld or delayed;
(s) Open any new retail stores without Lender's consent, which consent
shall not be unreasonably withheld;
(t) Amend the G.E. Capital Agreement.
10.3 FINANCIAL COVENANTS.
(a) Borrower shall continuously operate its business in full compliance
with its Budget as provided to, and approved by, Lender.
(b) Borrower shall maintain the minimum ratio of Inventory (valued in
accordance with GAAP at the lower of cost, calculated on a first-in,
first-out basis, or market) to post-petition trade payables specified
below for each of the following periods:
WEEK ENDING RATIO
----------- -----
March 3, 2000 3.52 to 1.00
March 31, 2000 2.65 to 1.00
April 28, 2000 3.50 to 1.00
10.4 PAYMENT OF CHARGES AND CLAIMS.
(a) If Borrower, at any time or times hereafter, shall fail to pay the
Charges when due or promptly obtain the discharge of such Charges or of
any Lien against the Collateral, subject to the provisions of PARAGRAPH
10.4(b) below, Lender may, without waiving or releasing any obligation
or liability of Borrower hereunder or any Event of Default, in its sole
discretion, at any time or times thereafter, make such payment, or any
part thereof, or obtain such discharge and take any other action with
respect thereto which Lender deems advisable. All sums so paid by
Lender and any expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable,
upon demand, by Borrower to Lender and shall be additional Obligations
hereunder secured by the Collateral.
(b) Borrower may in good faith contest, by proper legal actions or
proceedings, the validity or amount of any Charges or claims, and
provided it gives Lender advance notice of its intention to contest the
validity or amount of any such Charge or claim, Lender will forebear
from making any payment or otherwise obtaining the discharge of such
Charge or claim if at the time of the commencement of any such action
or proceeding,
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and during the pendency thereof (i) no Event of Default shall have
occurred and be continuing, (ii) reserves with respect thereto are
maintained on the books of Borrower in an amount acceptable to Lender,
(iii) such contest operates to suspend collection of the contested
Charges or claims and is maintained and prosecuted continuously with
diligence, (iv) none of the Collateral will be subject to forfeiture or
loss of any Lien in favor of Lender by reason of the institution or
prosecution of such contest, (v) no Lien shall exist for such Charges
or claims during such action or proceeding, (vi) Borrower shall
promptly pay or discharge such contested Charges and all additional
charges, interests, penalties and expenses, if any, and shall deliver
to Lender evidence acceptable to Lender of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to
Borrower, and (vii) Lender has not advised Borrower in writing that
Lender reasonably believes that non-payment or non-discharge thereof
would have a Material Adverse Effect.
11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.
11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "EVENT OF DEFAULT".
(a) Borrower fails to pay the Obligations when due and payable or declared
due and payable;
(b) Lender notifies Borrower that the outstanding balance of the Advances
exceeds the limitation set forth under PARAGRAPH 2.1(a) and such
condition is not corrected within two (2) Business Days after such
notice;
(c) Borrower fails or neglects to perform, keep or observe any of the
provisions of PARAGRAPHS 10.2 AND 10.3;
(d) Borrower or any Affiliate fails to perform, keep or observe any other
term, provision, condition, covenant, warranty or representation
contained in the Loan Documents, which is required to be performed,
kept or observed by Borrower or any Affiliate, and such failure is not
cured to Lender's satisfaction within fifteen (15) days after the
sooner to occur of the Borrower's receipt of notice of such failure
from Lender or the date on which such failure becomes known to any
officer of Borrower but provided such failure is capable of being cured
within such 15 day period;
(e) A default shall occur under any agreement, document or instrument,
other than the Loan Documents, to which Borrower is a party, the
consequences of which could have a Material Adverse Effect;
(f) Any statement, report, financial statement or certificate made or
delivered by Borrower, or any of its officers, employees or agents, to
Lender is untrue, incomplete or incorrect in any material respect;
(g) There shall occur any material uninsured damage to, or loss, theft, or
destruction of, any of the Collateral in excess of $50,000 in the
aggregate;
(h) The Collateral or any other assets of Borrower are attached, seized,
levied upon or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors and the same is not cured within forty-five (45)
days thereafter; an application is made by any Person, other than
Borrower, for the appointment of a receiver, trustee, or custodian for
any assets of Borrower and the same is not dismissed within forty-five
(45) days after the application therefor;
(i) The filing of any plan of reorganization with respect to the Case which
does not provide for payment in cash in full of the Obligations on or
before the effective date of such plan;
(j) Borrower ceases to conduct its business as now conducted or is
enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; a petition
under any section or chapter of the Bankruptcy Code and such
injunction, restraint or petition is not dismissed within forty-five
(45) days after the entry or filing thereof;
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(k) A notice of lien, levy or assessment is filed of record with respect to
all or any assets of Borrower by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal
or other governmental agency, including, without limitation, the
Pension Benefit Guaranty Corporation, or if any taxes or debts owing at
any time or times hereafter to any one of these becomes a lien or
encumbrance upon any assets of Borrower and the same is not released
within thirty (30) days after the same becomes a lien or encumbrance;
provided that Borrower shall have the right to contest in good faith
and by appropriate proceedings any such lien, levy or assessment if
Borrower provides Lender with a bond or indemnity satisfactory to
Lender assuring the payment of such lien, levy or assessment;
(l) Borrower fails to (i) furnish Lender, within fifteen (15) days
thereafter, with written notice upon the occurrence of any of the
following events: (a) the happening of a Reportable Event with respect
to any pension plan governed by ERISA, (b) the termination of any such
plan, (c) the appointment of a trustee by an appropriate United States
District Court to administer any such plan, or (d) the institution of
any proceedings by the Pension Benefit Guaranty Corporation to
terminate any such plan or to appoint a trustee to administer any such
plan; or (ii) notify Lender promptly upon receipt of any notice of the
institution of any proceeding or other action which may result in the
termination of such plan;
(m) Any judgment or order as to a post-petition liability or debt for the
payment of money in excess of $25,000 shall be rendered against the
Borrower and the enforcement thereof shall not have been stayed;
(n) Any non-money judgment or order with respect to a post-petition event
shall be rendered against the Borrower which does or would reasonably
be expected to (i) cause a material adverse change in the financial
condition, business prospects, operations or assets of the Borrower,
(ii) have a material adverse effect on the ability of the Borrower to
perform its obligations under any Loan Document, or (iii) have a
material adverse effect on the rights and remedies of the Lender under
any Loan Document, and there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect;
(o) Except as permitted by the Orders, the Borrower shall make any
Pre-Petition Payment other than Pre-Petition Payments authorized by the
Bankruptcy Court and as provided for in the Budget;
(p) Any Change of Control shall occur with respect to Borrower;
(q) The Bankruptcy Case shall be dismissed or converted to a case under
Chapter 7 of the Bankruptcy Code; a trustee under Chapter 7 or Chapter
11 of the Bankruptcy Code, a responsible officer or an examiner with
enlarged powers relating to the operation of the business (powers
beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy
Code) under Section 1106(b) of the Bankruptcy Code shall be appointed
in the Bankruptcy Case and the order appointing such trustee,
responsible officer or examiner shall not be reversed or vacated within
30 days after the entry thereof; or an application shall be filed by
the Borrower for the approval of any other Superpriority Claim (other
than the Carve-Out) in the Bankruptcy Case which is PARI PASSU with or
senior to the claims of the Lender against the Borrower, or there shall
arise or be granted any such PARI PASSU or senior Superpriority Claim;
(r) The Bankruptcy Court shall enter an order or orders granting relief
from the automatic stay applicable under Section 362 of the Bankruptcy
Code to the holder or holders of any security interest to permit
foreclosure (or the granting of a deed in lieu of foreclosure or the
like) on any assets of the Borrower which have a value in excess of
$50,000;
(s) An order of the Bankruptcy Court shall be entered reversing, amending,
supplementing, staying for a period in excess of 10 days, vacating or
otherwise modifying either of the Orders;
(t) Any judgment or order as to a post-petition liability or debt for the
payment of money in excess of $50,000 shall be rendered against the
Borrower and the enforcement thereof shall not have been stayed;
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(u) Any event shall have occurred and be continuing which could reasonably
be expected to have a Material Adverse Effect;
(v) The failure of Borrower, for any reason, to maintain at all times and
materially comply with the terms of the G.E. Capital Agreement;
(w) The occurrence of any of the foregoing Events of Default with respect
to any guarantor of the obligations; or
(x) The termination or attempted termination of any guaranty of the
Obligations.
11.2 ACCELERATION OF THE OBLIGATIONS. Upon the occurrence of an Event of
Default, all of the Obligations may, at the option of Lender and
without demand, notice, or legal process of any kind, including without
further order of or application to the Bankruptcy Court, be declared,
and immediately shall become, due and payable and upon notice to the
Borrower (with a copy to counsel for the Official Creditors' Committee
appointed in the Case and the United States Trustee for the Southern
District of Ohio, Western Division); Lender shall have the following
rights and remedies without further order of or application to the
Bankruptcy Court:
(a) The right to terminate the financing arrangements under the Loan
Documents;
(b) In addition to any other rights and remedies contained in the Loan
Documents, all of the rights and remedies under all applicable law and
all of the rights and remedies of a secured party under the Bankruptcy
Code, the UCC or other applicable law, all of which rights and remedies
shall be cumulative and non-exclusive, to the extent permitted by law,
and may be exercised, in the 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 Borrower
of this Agreement or any of the other Loan Documents. Lender may, at
any time or times, proceed directly against Borrower or any obligor to
collect the Obligations without prior recourse to the Collateral.;
(c) The right to open Borrower's mail and collect any and all amounts due
the Borrower from Account Debtors;
(d) The right to (i) enter upon the premises of Borrower, without any
obligation to pay rent to Borrower, through self-help and without
judicial process, without first obtaining a final judgment or giving
Borrower notice and opportunity for a hearing on the validity of
Lender's claim, or any other place or places where the Collateral is
located and kept, and remove the Collateral therefrom to the premises
of Lender or any agent of Lender, for such time as Lender may desire,
in order to effectively collect or liquidate the Collateral, or (ii)
require the Borrower, at its expense, to assemble the Collateral and
make it available to Lender at a place to be designated by Lender, in
its sole discretion;
(e) The right to (i) sell or to otherwise dispose of all or any Collateral
at public or private sale or sales, with such notice as may be required
by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable; (ii) adjourn such sales from
time to time with or without notice; (iii) conduct such sales on
Borrower's premises or elsewhere and use Borrower's premises without
charge for such sales for such time or times as Lender may see fit;
provided, however, with respect to the disposition of any Collateral,
Lender shall provide Borrower (with a copy to counsel to the Official
Creditors' Committee in the Case and the United States Trustee for the
Southern District of Ohio, Western Division) with five (5) Business
Days written notice prior to taking the action contemplated thereby.
Lender is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrower's rights
under all licenses and all franchise agreements shall inure to Lender's
benefit. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu
of actual payment of such purchase price, may setoff the amount of such
price against the Obligations. The proceeds realized from the sale of
any Collateral shall be applied first to the reasonable costs, expenses
and attorneys' fees and expenses incurred by
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Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second to
interest due upon any of the Obligations; and third to the principal of
the Obligations; provided, however, that if applicable law requires
otherwise, such proceeds shall be applied in the order applicable law
requires. If any deficiency shall arise, the Borrower shall remain
liable to Lender therefor with interest at the highest rate provided
for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
11.3 NOTICE. Any notice required to be given by Lender of a sale, lease,
other disposition of the Collateral or any other intended action by
Lender, if given ten (10) days prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to Borrower.
11.4 MARSHALLING; PAYMENTS SET ASIDE. Lender shall be under no obligation to
xxxxxxxx any assets in favor of Borrower or any other party or against
or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lender or Lender enforces its
security interests or exercises its rights of set-off, and such payment
or payments or the proceeds of such enforcement or set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set-aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or set-off had not
occurred.
12. CONDITIONS PRECEDENT.
This Agreement shall become effective upon the satisfaction of the following
conditions precedent:
12.1 EXCESS REVOLVING LOAN AVAILABILITY. Lender shall have determined, in
its sole discretion, that immediately after Lender has made the Loans
and Advances to Borrower contemplated hereby, Excess Availability will
not be less than $5,000,000 on a pro forma basis deeming all debt
(post-petition and critical allowed pre-petition) current.
12.2 FINANCIAL STATEMENTS. Lender shall have received and reviewed with
Borrower's independent certified public accountants a draft of the
audited consolidated financial statements of Borrower and any
Subsidiaries as of December 31, 1998, and such financial statements
shall be satisfactory to Lender in its sole discretion.
12.3 EXECUTION AND DELIVERY OF AGREEMENT. This Agreement or counterparts
thereof shall have been duty executed by, and delivered to Borrower and
Lender.
12.4 LOAN DOCUMENTS. Lender shall have received all of the following, each
in form and substance satisfactory to Lender:
(a) The Notes;
(b) A Certificate of the Secretary of Borrower, together with true and
correct copies of the Articles or Certificate of Incorporation and
By-Laws of Borrower, and all amendments thereto, and correct copies of
the resolutions of the Board of Directors of Directors of Borrower
authorizing or ratifying the execution, delivery and perform of the
Loan Documents to be executed by Borrower, and the names of the officer
or officers of Borrower authorized to sign said documents, together
with a sample of true signature of each such officer;
(c) The Opinion of Xxxxxxx, Xxxxxxxxx & Xxxxxxx, LPA, addressed to Lender,
in the form of EXHIBIT B attached hereto and made a part hereof;
(d) Articles or Certificate of Incorporation of Borrower, certified by the
Secretary of State of the jurisdiction of incorporation of Borrower;
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(e) Good Standing Certificates for Borrower from the Secretaries of State
of each state in which Borrower is authorized to do business;
(f) UCC lien search reports of filings against Borrower and each Subsidiary
and tax lien and judgment searches relating thereto for such
jurisdictions as Lender deems appropriate;
(g) UCC financing statements filed against Borrower and Subsidiary in
respect to the locations listed in PARAGRAPH 9.1 (h);
(h) Collateral Assignment of Patents, Copyright, Trademarks (Security
Agreement) respecting those copyrights, patents, trademarks, trade
names and all related applications, licenses and such other materials
as described on SCHEDULE 9.1(r);
(i) Pledge Agreement in favor of Lender with respect to the pledge by
Borrower of all issued and outstanding capital stock of Roberd
Insurance Agency, Inc., in form and substance satisfactory to Lender;
(j) A letter from Borrower to its independent certified public accountant
advising that Borrower intends Lender to rely on the opinions and
reports of such accountants described in PARAGRAPH 10.1(a)(i), (ii) AND
(iii);
(k) Agreements with all financial institutions which Borrower maintains an
account regarding Lender's rights in such accounts, in form and
substance satisfactory to the Lender and an agreement with G.E. Capital
in form and substance satisfactory to Lender, which provides for the
transfer of all amounts due Borrower to be deposited to the Blocked
Account;
(l) Appraisals of the Inventory prepared by The Xxxxxxx Group;
(m) Originals or copies of each policy of insurance, and evidence of
payment of all premiums therefor, together with a properly executed
Lender's Loss Payee Endorsement;
(n) A guarantee from Roberd Insurance Agency, Inc. in favor of Lender in
form and substance satisfactory to Lender;
(o) Pay-off letters and releases and UCC termination statements with
respect to any and all existing liens and encumbrances affecting the
Collateral other than Permitted Liens;
(p) Any other Loan Documents and such additional materials as Lender may
reasonably request.
12.5 ABSENCE OF MATERIAL ADVERSE CHANGE. As of the date hereof, other than
commencement of the Bankruptcy Case and these events which customarily
lead up to or follow the commencement of a proceeding under Chapter 11
of the Bankruptcy Code and the commencement of the Bankruptcy Case,
since December 31, 1998, there shall have been (i) no material adverse
change in the business, financial or other condition of Borrower or
their Subsidiaries or in the Collateral or in the prospects or
projections of Borrower and its Subsidiaries, (ii) no material increase
in the Indebtedness of Borrower or any Subsidiary, whether or not
disclosed or required to be reserved against on any pro forma balance
sheet, and (iii) no material decrease in the assets of Borrower or its
Subsidiaries nor any distribution by any Subsidiary either by dividends
or otherwise, except such distributions as would be permitted by
PARAGRAPH 10.2 hereof. As of the date hereof, no litigation other than
the Bankruptcy Case against Borrower or any of its Subsidiaries shall
have been commenced or threatened which, if successful, would be
materially adverse thereto or challenge any transaction contemplated by
this Agreement, and the financing contemplated by this Agreement would
not violate any agreement of Borrower or any of its Subsidiaries or any
law, statute, court order, administrative rule or regulation by which
such Party are bound. The Borrower and the Subsidiaries shall have paid
their Indebtedness in accordance with good business and historical
practices. As of the date hereof, no Default or Event of Default shall
exist.
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12.6 INTERIM ORDER. At the time of the making of the initial Loans or at the
time of the issuance of the initial Letters of Credit whichever first
occurs, the Lender shall have received a certified copy of an order of
the Bankruptcy Court in substantially the form of EXHIBIT D (the
"INTERIM ORDER") approving the Loan Documents and granting of the
Superpriority Claim status and liens described herein which (i) shall
have been entered upon an application of the Borrower satisfactory in
form and substance to the Lender, on no less than two (2) days' prior
notice to the twenty (20) largest unsecured creditors of the Borrower,
(ii) shall be in full force an effect, and (iii) shall not have been
stayed, reversed, modified or amended in any respect and, if the
Interim Order is the subject of a pending appeal in any respect,
neither the making of such Loans nor the issuance of such Letters of
Credit nor the performance by the Borrower of any of its obligations
hereunder or under the Loan Documents or under any other instrument or
agreement referred to herein shall be the subject of presently
effective stay pending appeal.
12.7 APPROVAL OF LOAN DOCUMENTS. Each of the Loan Documents shall have been
approved by the Bankruptcy Court in an order or orders acceptable to
Lender
12.8 G.E. CAPITAL AGREEMENT. The G.E. Capital Agreement shall be in full
force and effect in the form provided to the Lender.
12.9 CONDITIONS TO THE INITIAL ADVANCE AND TO THE ISSUANCE OF THE INITIAL
LETTER OF CREDIT. It shall be a condition to the initial Advance and to
the issuance of the initial Letter of Credit that the conditions
contained in paragraphs 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7 and
12.8 shall have been fulfilled and that Borrower shall have delivered
to Lender a Borrowing Base Certificate (as of the day immediately
preceding the day of the requested initial Advance or issuance of the
initial Letter of Credit).
12.10 CONDITIONS TO EACH ADVANCE AND THE ISSUANCE OF EACH LETTER OF CREDIT.
It shall be a further condition to the funding of each initial Advance
and each subsequent Advance after the initial Advance and the issuance
of the initial Letter of Credit and each subsequent Letter of Credit
that the following statements shall be true on the date of each such
advance or issuance:
(a) All of the representations and warranties of Borrower contained in the
Loan Documents shall be correct in all material respects on and as of
the date of each such Advance and the issuance of each such Letter of
Credit as though made on and as of such date, except (i) to the extent
that any such representation or warranty expressly relates to an
earlier date, and (ii) for changes therein permitted or contemplated by
this Agreement.
(b) No event shall have occurred and be continuing, or would result from
the funding of the Advance or the issuance of such Letter of Credit,
which constitutes or would constitute a Default or an Event of Default.
(c) The sum of the aggregate unpaid principal amount of all Advances plus
the outstanding Letter of Credit Obligations, after giving effect to
such Advance or the issuance of such Letter of Credit, shall not exceed
the lesser of (i) the Borrowing Base or (ii) the Revolving Loan
Commitment.
(d) ORDERS. The Interim Order shall be in full force and effect and shall
not have been stayed, reversed, modified or amended in any respect,
PROVIDED, that at the time of the making of any Loan or the issuance of
any Letter of Credit the aggregate amount of either of which, when
added to the sum of the principal amount of all Loans then outstanding
and the Letter of Credit would exceed the amount thereof which was
authorized by the Bankruptcy Court in the Interim Order (collectively,
the "ADDITIONAL CREDIT"), Lender shall have received a certified copy
of an order of the Bankruptcy Court in form and substance satisfactory
to Lender in its sole discretion (the "FINAL ORDER"), which, in any
event, shall have been entered by the Bankruptcy Court no later than 30
days after the entry of the Interim Order, and at the time of the
extension of any Additional Credit the Final Order shall be in full
force and effect, and shall not have been stayed, reversed, modified or
amended in any respect; and if either the Interim Order or the Final
Order is the subject of a pending appeal in any respect, neither the
making of the Loans nor the issuance of any Letter of Credit nor the
performance by the Borrower of any of its obligations under any of the
Loan Documents shall be the subject of a presently effective stay
pending appeal.
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The acceptance by Borrower of the proceeds of any Advance shall be deemed to
constitute, as of the date of such acceptance, (i) a representation and warranty
by Borrower that the conditions in this PARAGRAPH 12.10 have been satisfied, and
(ii) a confirmation by Borrower of the granting and continuance of Lender's Lien
pursuant hereto.
13. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to Lender), protect, indemnify and hold harmless (to the fullest
extent permitted by law) Lender, each affiliate or subsidiary of Lender, and
each of their respective officers, directors, employees, attorneys, agents and
attorneys-in-fact (each an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, reasonable costs, expenses and disbursements of any kind or nature
(including, without limitation, the disbursements and the reasonable fees of
counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of the
execution, delivery, enforcement, performance and administration of any Loan
Document, or any act, event, transaction or omission, related or attendant
thereto, the making and the management of the Loans or any Letters of Credit or
the use or intended use of the proceeds of the Loans or any Letters of Credit
and with respect to any investigation, litigation or proceeding related to the
Loan Documents; provided, however, that Borrower shall not have any obligation
hereunder to any Indemnified Party with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Advances hereunder from the date
incurred by each Indemnified Party until paid by Borrower, be added to the
Obligations of Borrower and be secured by the Collateral. The provisions of this
PARAGRAPH 13 shall survive the satisfaction and payment of the Obligations and
the termination of this Agreement.
14. MISCELLANEOUS
14.1 MODIFICATION OF AGREEMENT; SALE OF INTEREST. The Loan Documents may not
be modified, altered or amended, except by an agreement in writing
signed by Borrower and Lender. Borrower may not sell, assign or
transfer the Loan Documents or any portion thereof, including, without
limitation, their rights, title, interests, remedies, powers, and/or
duties hereunder or thereunder. Borrower hereby consents to Lender's
participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of the Loan Documents, or of any portion
hereof or thereof, including, without limitation, Lender's rights,
title, interests, remedies, powers, and/or duties hereunder or
thereunder.
14.2 EXPENSES (INCLUDING ATTORNEYS' FEES). Borrower shall reimburse Lender
on demand for all of its reasonable expenses (including, but not
limited to, reasonable attorneys' fees) of, or incidental to:
(a) The preparation of, amendment of, modification of, or enforcement of
the Loan Documents;
(b) Any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Lender, Borrower or any other Person) in any way relating
to the Collateral, the Loan Documents or Borrower's affairs;
(c) Any Default or Event of Default or advice or any action in connection
with any Default or Event of Default, or any attempt to enforce any
rights of Lender or any participant or assignee of Lender against
Borrower or any other Person which may be obligated to Lender by virtue
of the Loan Documents, including, without limitation, the Account
Debtors;
(d) Any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of the Collateral; and/or
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(e) Examination of Borrower's books and records and the Collateral,
including auditor fees and monitoring fees plus expenses.
Such expenses shall be additional Obligations hereunder secured by the
Collateral. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: paralegal fees, costs and expenses;
accountants' fees, costs and expenses; court costs and expenses; photocopying
and duplicating expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram charges; secretarial over-time
charges; and expenses for travel, lodging and food.
14.3 WAIVER BY LENDER. Lender's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance. Any suspension
or waiver by Lender of an Event of Default by Borrower under the Loan
Documents shall not suspend, waive or affect any other Event of Default
by Borrower under the Loan Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None
of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in the Loan Documents and no
Event of Default by Borrower under the Loan Documents shall be deemed
to have been suspended or waived by Lender, unless such suspension or
waiver is by an instrument in writing signed by an officer of Lender
and directed to Borrower specifying such suspension or waiver.
14.4 SEVERABILITY. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law. If, however, any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement, unless the ineffectiveness of such
provision materially and adversely alters the benefits accruing to
either party hereunder.
14.5 PARTIES. The Loan Documents shall be binding upon and inure to the
benefit of the successors and assigns of Borrower. This provision,
however, shall not be deemed to modify PARAGRAPH 14.1 hereof.
14.6 INTENTIONALLY OMITTED.
14.7 CONFLICT OF TERMS. The Other Agreements and all Schedules and Exhibits
hereto are incorporated in this Agreement by this reference thereto.
Except as otherwise provided in this Agreement and except as otherwise
provided in the Other Agreements by specific reference to the
applicable provision of this Agreement, if any provision contained in
this Agreement is in conflict with, or inconsistent with, any provision
in the Other Agreements, the provision contained in this Agreement
shall govern and control.
14.8 WAIVERS BY BORROWER. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guarantees at any time held by Lender on which
Borrower may in any way be liable and hereby ratifies and confirms
whatever Lender may do in this regard; (ii) all rights to notice of a
hearing prior to Lender's taking possession or control of, or to
Lender's reply, attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to allowing Lender
to exercise any of Lender's remedies; and (iii) the benefit of all
valuation, appraisement and exemption laws. Borrower acknowledges that
it has been advised by counsel with respect to this Agreement and the
transactions evidenced by this Agreement.
14.9 REMEDIES. Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which
Lender may have under any other agreement, including without
limitation, the Other Agreements, by operation of law or otherwise.
Recourse to the Collateral shall not be required.
14.10 POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of Lender as its attorney and agent-in-fact for the
purposes specified in this Agreement is an appointment coupled with an
interest and shall be irrevocable until all of the Obligations are paid
in full and this Agreement is terminated.
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14.11 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT
OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THE LOAN DOCUMENTS.
14.12 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. BORROWER AND LENDER AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL
BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT. EACH OF THE
BORROWER AND LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 14.12.
14.13 NOTICE. Except as otherwise provided herein, any notice or demand
which, by the provisions hereof, is required or which may be given to
or served upon Borrower shall be in writing and, if by telecopy, shall
be deemed to have been validly served, given or delivered when
transmitted and confirmed by telecopy answerback, if by personal
delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery, if by overnight air courier, shall be
deemed to have been validly served, given or delivered one (1) Business
Day after delivery to the overnight air courier, and, if mailed, shall
be deemed to have been validly served, given or delivered three (3)
Business Days after deposit in the United States mails, as registered
or certified mail, with proper postage prepaid and addressed to the
party to be notified, at the following addresses (or such other
addressees) as a party may designate for itself by like notice:
H. If to Lender,
Xxxxxxx National Life Insurance Company
c/o PPM Finance, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxxx Kill & Olick, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
If to Borrower,
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By Courier:
Xxxxxxx, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
or
By Mail:
Xxxxxxx, Inc.
X.X. Xxx 0000
Xxxxxx, Xxxx 00000-0000
Attention: Xx. Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx LLP
00 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
14.14 PARAGRAPH TITLES. The paragraph titles contained in this Agreement are
and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties
hereto.
14.15 ENTIRE AGREEMENT. The Loan Documents set forth the entire agreement of
the parties hereto with respect to the matters addressed herein and
therein, and the Loan Documents supersede all prior written or oral
agreements, documents or instruments respecting such matters.
14.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute
but one and the same instrument.
14.17 NO LENDER LIABILITY. Lender shall not have any liability to Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by
Borrower in connection with, arising out of, or in any way related to
the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it
is determined by a final and non-appealable judgment or court order
binding on 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.
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XXXXXXX, INC. 1999 ANNUAL REPORT ON FORM 10-K
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39
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
specified at the beginning hereof.
XXXXXXX NATIONAL LIFE INSURANCE COMPANY
By: PPM Finance, Inc., Attorney-in-Fact
By: /s/ Xxxxx Xxxxxxx
------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
XXXXXXX, INC., debtor and debtor-in-possession
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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40
LIST OF SCHEDULES
Schedule 1.1(b) Information Certificate
Schedule 1.1(c) Permitted Sale Assets
Schedule 9.1(b) Permitted Liens
Schedule 9.1(c) Material Contracts
Schedule 9.1(e) Real Property Leases in Default
Schedule 9.1(h) List of all Borrower locations including
executive offices, other offices and where
all Collateral is kept.
Schedule 9.1(j) List of additional names under which
Borrower has conducted business during
past 5 years
Schedule 9.1(o)(1) Consolidated Financials statements of
Borrower
Schedule 9.1(o)(2) Legal Actions and Proceedings and
Indebtedness
Schedule 9.1(r) List of Intellectual Property Rights
Schedule 9.1(s) List of Owned and Leased Property
Schedule 9.1(v) Environmental
Schedule 10.2(h) Salary of Employees, Outstanding Company
Loans
Schedule 10.2(r) Stores to be Closed
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XXXXXXX, INC. 1999 ANNUAL REPORT ON FORM 10-K
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41
LIST OF EXHIBITS
Exhibit A Form of Note for Revolving Loan
Exhibit B Form of Opinion of Counsel
Exhibit C Intentionally Omitted
Exhibit D Interim Order
Exhibit E Intentionally Omitted
Exhibit F Budget
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