EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and among
XXXXXXXX'X STORES, INC., XXXXXXXX'X INC.,
and
xxxxxxxxx.xxx, inc.
as Borrowers
and
CONGRESS FINANCIAL CORPORATION (SOUTHERN),
as Agent
and
THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME,
as Lenders
Dated: May 22, 2002
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS..................................................................................1
SECTION 2. CREDIT FACILITIES............................................................................22
2.1. Revolving Loans.......................................................................................22
2.2. Reserved..............................................................................................23
2.3. Term Loan.............................................................................................23
2.4. Commitments...........................................................................................24
2.5. Reserves..............................................................................................24
2.6. Overadvance Facility..................................................................................25
SECTION 3. INTEREST AND FEES............................................................................26
3.1. Interest..............................................................................................26
3.2. Fees..................................................................................................28
3.3. Changes in Laws and Increased Costs of Loans..........................................................28
SECTION 4. CONDITIONS PRECEDENT.........................................................................29
4.1. Conditions Precedent to Initial Loans.................................................................29
4.2. Conditions Precedent to All Loans.....................................................................31
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST....................................................32
5.1. Grant of Security Interest............................................................................32
5.2. Perfection of Security Interests......................................................................33
SECTION 6. COLLECTION AND ADMINISTRATION................................................................37
6.1. Borrowers' Loan Accounts..............................................................................37
6.2. Statements............................................................................................37
6.3. Collection of Accounts................................................................................37
6.4. Payments..............................................................................................37
6.5. Authorization to Make Loans...........................................................................38
6.6. Use of Proceeds.......................................................................................39
6.7. Pro Rata Treatment....................................................................................40
6.8. Sharing of Payments, Etc..............................................................................40
6.9. Settlement Procedures.................................................................................40
6.10. Obligations Several; Independent Nature of Lenders' Rights............................................41
6.11. Agent's Allocation of Payments and Collections........................................................43
6.12. Borrowers' Representative.............................................................................45
6.13. Nature and Extent of Each Borrower's Liability........................................................46
SECTION 7. COLLATERAL REPORTING AND COVENANTS...........................................................47
7.1. Collateral Reporting..................................................................................47
7.2. Accounts Covenants....................................................................................48
7.3. Inventory Covenants...................................................................................50
7.4. [Reserved]............................................................................................51
7.5. Power of Attorney.....................................................................................51
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7.6. Right to Cure.........................................................................................52
7.7. Access to Premises....................................................................................52
7.8. Sales Taxes...........................................................................................52
SECTION 8. REPRESENTATIONS AND WARRANTIES...............................................................52
8.1. Corporate Existence, Power and Authority..............................................................52
8.2. Name; State of Organization; Chief Executive Office; Collateral Locations.............................53
8.3. Financial Statements; No Material Adverse Change......................................................53
8.4. Priority of Liens; Title to Properties................................................................53
8.5. Tax Returns...........................................................................................54
8.6. Litigation............................................................................................54
8.7. Compliance with Other Agreements and Applicable Laws..................................................55
8.8. Environmental Compliance..............................................................................55
8.9. Employee Benefits.....................................................................................56
8.10. Bank Accounts.........................................................................................56
8.11. Intellectual Property.................................................................................57
8.12. Subsidiaries; Affiliates; Capitalization; Solvency....................................................57
8.13. Labor Disputes........................................................................................58
8.14. Restrictions on Subsidiaries..........................................................................58
8.15. Material Contracts....................................................................................58
8.16. Payable Practices.....................................................................................58
8.17. Accuracy and Completeness of Information..............................................................59
8.18. Credit Card Agreements................................................................................59
8.19. Survival of Warranties; Cumulative....................................................................59
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS...........................................................59
9.1. Maintenance of Existence..............................................................................59
9.2. New Collateral Locations..............................................................................59
9.3. Compliance with Laws, Regulations, Etc................................................................60
9.4. Payment of Taxes and Claims...........................................................................61
9.5. Insurance.............................................................................................61
9.6. Financial Statements and Other Information............................................................61
9.7. Sale of Assets, Consolidation, Merger, Dissolution, Etc...............................................63
9.8. Encumbrances..........................................................................................64
9.9. Indebtedness..........................................................................................65
9.10. Loans, Investments, Etc...............................................................................67
9.11. Dividends and Redemptions.............................................................................68
9.12. Transactions with Affiliates..........................................................................68
9.13. Compliance with ERISA.................................................................................68
9.14. End of Fiscal Years; Fiscal Quarters..................................................................69
9.15. Change in Business....................................................................................70
9.16. Limitation of Restrictions Affecting Subsidiaries.....................................................70
9.17. Consolidated Senior Debt/EBITDA Ratio.................................................................70
9.18. [Reserved]............................................................................................70
9.19. Consolidated EBITDA Less Capital Expenditures.........................................................71
9.20. Credit Card Agreements................................................................................71
9.21. License Agreements....................................................................................72
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9.22. After Acquired Real Property.......................................................................... 73
9.23. Costs and Expenses.................................................................................... 74
9.24. Collateral Access Agreements.......................................................................... 74
9.25. Survey and Title Insurance Endorsements............................................................... 74
9.26. Executive Employment Agreements....................................................................... 75
9.27. Further Assurances.................................................................................... 75
SECTION 10. EVENTS OF DEFAULT AND REMEDIES............................................................... 75
10.1. Events of Default..................................................................................... 75
10.2. Remedies.............................................................................................. 78
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW................................. 82
11.1. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver................................. 82
11.2. Waiver of Notices..................................................................................... 83
11.3. Amendments and Waivers................................................................................ 84
11.4. Waiver of Counterclaims............................................................................... 86
11.5. Indemnification....................................................................................... 86
SECTION 12. THE AGENT.................................................................................... 86
12.1. Appointment, Powers and Immunities.................................................................... 86
12.2. Reliance by Agent..................................................................................... 87
12.3. Events of Default..................................................................................... 87
12.4. Congress in its Individual Capacity................................................................... 88
12.5. Indemnification....................................................................................... 88
12.6. Non-Reliance on Agent and Other Lenders............................................................... 89
12.7. Failure to Act........................................................................................ 89
12.8. Additional Loans...................................................................................... 89
12.9. Concerning the Collateral and the Related Financing Agreements........................................ 90
12.10. Field Audit, Examination Reports and other Information; Disclaimer by Lenders......................... 91
12.11. Collateral Matters.................................................................................... 92
12.12. Agency for Perfection................................................................................. 92
12.13. Successor Agent....................................................................................... 92
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS............................................................. 92
13.1. Term.................................................................................................. 92
13.2. Interpretative Provisions............................................................................. 92
13.3. Notices............................................................................................... 94
13.4. Partial Invalidity.................................................................................... 95
13.5. Confidentiality....................................................................................... 95
13.6. Successors............................................................................................ 96
13.7. Assignments; Participations........................................................................... 97
13.8. Entire Agreement...................................................................................... 97
13.9. Counterparts, Etc.....................................................................................100
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Compliance Certificate
Schedule 1.37 Existing Lenders
Schedule 1.38 Existing Letters of Credit
Schedule 8.10 Deposit Accounts
Schedule 8.18 Credit Card Agreements
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated May ___, 2002 (this
"Agreement") is entered into by and among XXXXXXXX'X STORES, INC., a Tennessee
corporation ("Kirkland's"), XXXXXXXX'X, INC., a Tennessee corporation
("Parent"), and xxxxxxxxx.xxx, inc., a Tennessee corporation ("xxxxxxxxx.xxx;"
Kirkland's, Parent and xxxxxxxxx.xxx being referred to collectively as
"Borrowers," and individually as a "Borrower"), the financial institutions from
time to time parties hereto as lenders, whether by execution of this Agreement
or an Assignment and Acceptance (each individually, a "Lender" and
collectively, "Lenders") and CONGRESS FINANCIAL CORPORATION (SOUTHERN), a
Georgia corporation, in its capacity as agent for Lenders (together with its
successors and assigns in such capacity, "Agent").
RECITALS:
Each Borrower has requested that Lenders enter into certain financing
arrangements with Borrowers, pursuant to which Lenders may make loans and
provide other financial accommodations to Borrowers, which shall be used by
Borrowers to finance their mutual and collective enterprise of retail sales of
decorative home accessories and gifts. In order to utilize the financial powers
of each Borrower in the most efficient and economical manner, and in order to
facilitate the financing of each Borrower's needs, Lenders will, at the request
of any Borrower, make loans to all Borrowers under the term loan and revolving
credit facility on a combined basis and in accordance with the provisions
hereinafter set forth. Borrowers' business is a mutual and collective
enterprise, and Borrowers believe that the consolidation of all term and
revolving credit loans under this Agreement will enhance the aggregate
borrowing powers of each Borrower and ease the administration of their term and
revolving credit loan relationship with Lenders, all to the mutual advantage of
Borrowers. Lenders' willingness to extend credit to Borrowers and to administer
each Borrower's collateral security therefor, on a combined basis as more fully
set forth in this Agreement, is done solely as an accommodation to Borrowers
and at Borrowers' request in furtherance of Borrowers' mutual and collective
enterprise.
Each Lender is willing to agree (severally and not jointly) to make
such loans and provide such financial accommodations to Borrowers on a pro rata
basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and in the other Financing
Agreements.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
"Ableco" shall mean Ableco Finance LLC, a Delaware limited liability
company.
"Accounts" shall mean, all present and future rights of a Borrower to
payment of a monetary obligation, whether or not earned by performance, which
is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed, assigned, or otherwise disposed of,
(b) for services rendered or to be rendered, (c) for a secondary obligation
incurred or to be incurred, or (d) arising out of the use of a credit or charge
card or information contained on or for use with the card.
"Adjusted Eurodollar Rate" shall mean, for any day during the term
hereof, the rate per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) determined by dividing (a) the
Eurodollar Rate by (b) a percentage equal to: (i) one (1) minus (ii) the
Reserve Percentage. For purposes hereof, "Reserve Percentage" shall mean the
reserve percentage, expressed as a decimal, prescribed by any United States or
foreign banking authority for determining the reserve requirement which is or
would be applicable to deposits of United States dollars in a non-United States
or an international banking office of Reference Bank used to fund a 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.
"Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person
of which such Person beneficially owns or holds five (5%) percent or more of
any class of Voting Stock or in which such Person beneficially owns or holds
five (5%) percent or more of the equity interests and (c) any director or
executive officer of such Person. For the purposes of this definition, the term
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise.
"Agent" shall mean Congress Financial Corporation (Southern), in its
capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.
"Agent Payment Account" shall mean account no. 00000000 of Agent at
Fleet National Bank or such other account of Agent as Agent may from time to
time designate to Borrowers as the Agent Payment Account for purposes of this
Agreement and the other Financing Agreements.
"Applicable Law" shall mean all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant or Financing Agreement in
question, including all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies; and orders, judgments and
decrees of all courts and arbitrators.
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"Assignment and Acceptance" shall mean an (i) Assignment and
Acceptance substantially in the form of EXHIBIT A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder (other than Term Lender) to an Eligible
Transferee in accordance with the provisions of SECTION 13.7 hereof, and (ii)
with respect to Term Lender, the Term Loan Assignment.
"Bankruptcy Code" shall mean title 11 of the United States Code.
"Blocked Accounts" shall have the meaning set forth in SECTION 6.3
hereof.
"Borrower Agent" shall mean Kirkland's Stores, Inc.
"Borrowing Base" shall mean, at any time, the amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) for the
period from January 1 through June 30 of each calendar year, the lesser of: (x)
sixty-two and one-half percent (62.5%) multiplied by the Cost of the Eligible
Inventory or (y) ninety percent (90%) percent of the Net Recovery Percentage of
the Inventory multiplied by the Cost of the Eligible Inventory, and (B) for the
period from July 1 through December 31 of each calendar year, the lesser of:
(x) seventy-two and one-half percent (72.5%) multiplied by the Cost of the
Eligible Inventory or (y) ninety percent (90%) of the Net Recovery Percentage
of the Inventory multiplied by the Cost of the Eligible Inventory; or
(ii) the Revolving Loan Limit;
minus
(b) any and all Reserves.
"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Georgia, the State of New York, or the State of North
Carolina, and a day on which Agent is open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
"Business Interruption Insurance Assignments" shall mean the
Collateral Assignments of Business Interruption Insurance to be executed by
each Borrower on the date hereof in favor of Agent, for the benefit of Agent
and Lenders, as security for the payment of the Obligations.
"Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
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"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or
directly and fully guaranteed or insured by the United States of America of any
agency or instrumentality thereof; provided, that, the full faith and credit of
the United States of America is pledged in support thereof; (b) certificates of
deposit or bankers' acceptances with a maturity of ninety (90) days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of a Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx Companies,
Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial institution having combined capital and surplus and undivided profits
of not less than $250,000,000; (e) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any governmental agency
thereof and backed by the full faith and credit of the United States of
America, in each case maturing within ninety (90) days or less from the date of
acquisition; provided, that, the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (f) investments in money market funds
and mutual funds which invest substantially all of their assets in securities
of the types described in clauses (a) through (e) above.
"Cash Management Agreement" shall mean any agreement entered into from
time to time between any Borrower or any of its Subsidiaries, on the one hand,
and Wachovia or any of its Affiliates, on the other, in connection with cash
management services for operating, collections, payroll and trust accounts of
such Borrower or its Subsidiaries provided by such banking or financial
institution, including automatic clearinghouse services, controlled
disbursement services, electronic funds transfer services, information
reporting services, lockbox services, stop payment services and wire transfer
services.
"Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially all of the assets of a
Borrower or any other Obligor to any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the transfer of stock of
Parent in connection with an initial public offering of Parent; (b) the
liquidation or dissolution of a Borrower or any other Obligor or the adoption
of a plan by the stockholders of a Borrower or any other Obligor relating to
the dissolution or liquidation of such Borrower or any other such Obligor; or
(c) the failure by Parent to own one hundred percent (100%) of the Voting Stock
of either of Kirkland's or Xxxxxxxxx.xxx.
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"Closing Date" shall mean the date on which all of the conditions
precedent in SECTION 4 of this Agreement are satisfied (or waived by Agent in
its sole and absolute discretion) and the initial Loans are made under this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
"Collateral" shall have the meaning set forth in SECTION 5 hereof.
"Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to a
Borrower, or any other Person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located,
pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of and Lien of Agent in such
Collateral, agrees to waive or subordinate any and all claims such lessor,
consignee or other person may, at any time, have against such Collateral,
whether for processing, storage or otherwise, and agrees to permit Agent access
to, and the right to remain on, the premises of such lessor, consignee or other
person so as to exercise Agent's rights and remedies and otherwise deal with
such Collateral and in the case of any consignee or other Person who at any
time has custody, control or possession of any Collateral, acknowledges that it
holds and will hold possession of the Collateral for the benefit of Agent and
Lenders and agrees to follow all instructions of Agent with respect thereto.
"Commitment" shall mean, at any time, as to each Lender, the principal
amount set forth below such Lender's signature on the signatures pages hereto
designated as the Commitment or on SCHEDULE 1 to the Assignment and Acceptance
Agreement pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of SECTION 13.7 hereof, as the same may be adjusted from
time to time in accordance with the terms hereof; sometimes being collectively
referred to herein as "Commitments".
"Congress" shall mean Congress Financial Corporation (Southern), a
Georgia corporation, in its individual capacity, and its successors and
assigns.
"Consolidated" shall mean the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
"Consolidated EBITDA" shall mean, for any fiscal period of Borrowers,
on a Consolidated basis, Borrowers' and their Consolidated Subsidiaries' (i)
income (or loss) before interest and taxes (excluding therefrom (to the extent
otherwise included therein) any gains or losses, together with any related
provisions for taxes, realized upon any sale of assets other than in the
ordinary course of business) plus (ii) to the extent deducted in determining
such income (or loss), depreciation, amortization, any non-cash extraordinary
expenses or non-cash charges, any extraordinary expenses directly related to
the proposed initial public offering of Parent's Capital Stock if Parent is not
able to successfully consummate such initial public offering, so long as the
aggregate amount of such extraordinary expenses does not exceed $1,000,000, any
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applicable non-cash restructuring charge-offs, and write-down of goodwill and
intangibles and other non-cash charges.
"Consolidated Senior Debt" shall mean, as to Borrowers, on a
Consolidated basis, on any date, an amount equal to the principal balance of
the Term Loan and the Revolving Loans outstanding on the applicable date of
determination.
"Consolidated Senior Debt/EBITDA Ratio" shall mean, at any date of
determination, the ratio of Consolidated Senior Debt as of the last day of the
most recently ended fiscal quarter of Borrowers to Consolidated EBITDA for the
four (4) fiscal quarters ended on such date.
"Consolidated Subsidiaries" shall mean, as to a Borrower, those
Subsidiaries of such Borrower whose accounts are at the time in question, in
accordance with GAAP (and, with respect to any Subsidiaries created, to the
extent permitted by this Agreement, after the date hereof, pursuant to the
written consent of Agent, which consent may be withheld in Agent's absolute
discretion and which may be conditioned upon, inter alia, the execution and
delivery of guaranties, security agreements, mortgages and other documents
required by Agent in its absolute discretion), consolidated with those of such
Borrower.
"Cost" shall mean, as determined by Agent in good faith, with respect
to Inventory as of any date, the lower of (a) the cost of such Inventory as of
such date, determined on the weighted average cost basis in accordance with
GAAP or (b) market value.
"Credit Card Agreements" shall mean all agreements now or hereafter
entered into by any Borrower with any Credit Card Issuer or any Credit Card
Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including the agreements
set forth on SCHEDULE 8.18 hereto.
"Credit Card Issuer" shall mean any Person (other than Borrowers) who
issues or whose members issue credit cards, including MasterCard or VISA bank
credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and
American Express, Discover, Diners Club, Xxxxx Xxxxxxx and other non-bank
credit or debit cards, including credit or debit cards issued by or through
American Express Travel Related Services Company, Inc. and Novus Services, Inc.
"Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any Borrower's sales transactions involving credit card or
debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer.
"Credit Facility" shall mean the Loans provided to or for the benefit
of Borrowers pursuant to SECTIONS 2.1 and 2.3 hereof.
"Debt for Money Borrowed" shall mean, as applied to any Person, (i)
Indebtedness arising from the lending of money by any other Person to such
Person (whether interest-bearing or not); (ii) Indebtedness, whether or not in
any such case arising from the lending of money by another Person to such
Person, (A) which is represented by notes payable or drafts accepted that
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evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued
or assumed as full or partial payment for property; (iii) Indebtedness under a
Capital Lease; (iv) reimbursement obligations with respect to letters of credit
or guaranties of letters of credit; and (v) Indebtedness of such Person under
any guaranty of obligations that would constitute Debt for Money Borrowed under
clauses (i) through (iv) hereof, if owed directly by such Person.
"Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
"Defaulting Lender" shall have the meaning set forth in SECTION 6.9
hereof.
"Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, a
Borrower or other Obligor with a deposit account at any bank and the bank at
which such deposit account is at any time maintained which provides that such
bank will comply with instructions originated by Agent directing disposition of
the funds in the deposit account without further consent by such Borrower or
such Obligor and such other terms and conditions as Agent may require,
including as to any such agreement with respect to any Blocked Account,
providing that all items received or deposited in the Blocked Accounts are the
property of Agent, and that the bank has no Lien upon, or right to setoff
against, the Blocked Accounts, or the items received for deposit therein, or
the funds from time to time on deposit therein.
"Discretionary Overadvance" shall mean any Loan made by a Lender under
the Overadvance Facility described in SECTION 2.6 hereof.
"Domestic Subsidiary" shall mean a Subsidiary of a Borrower (other
than a Subsidiary that is a Borrower) that is incorporated under the laws of a
state of the United States.
"Early Termination Fee" shall mean the meaning set forth in SECTION
13.1 hereof.
"Eligible Inventory" shall mean, Inventory (after giving effect to the
Borrowers' inventory shrinkage reserve as shown on Borrowers' weekly inventory
report delivered in accordance with SECTION 7.1(a)(iii) consisting of finished
goods held for resale in the ordinary course of the business of a Borrower,
which are acceptable to Agent based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) packaging and shipping
materials; (b) supplies used or consumed in a Borrower's business; (c)
Inventory at premises other than those owned and controlled by a Borrower
unless such location is a leased location and such Borrower has provided a
written certificate to Agent that such Borrower is current in the payment of
its rent with respect to such location; (d) Inventory subject to a Lien in
favor of any Person other than Agent except those permitted in this Agreement
(but without limiting the right of Agent to establish any Reserves with respect
to amounts secured by such Lien in favor of any Person even if permitted
herein); (e) xxxx and hold goods; (f) obsolete Inventory, or Slow-Moving
Inventory, to the extent that (i) the aggregate value of Slow-Moving Inventory
(as reported on Borrowers' inventory aging report delivered in accordance with
SECTION 7.1(a)(ii) hereof) minus (ii) Borrowers' obsolescence reserve (as
reported on Borrowers' inventory report
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delivered in accordance with SECTION 7.1(a)(iii) hereof) exceeds the product of
(A) the aggregate value of all of Borrowers' Inventory (as so reported)
multiplied by (B) three percent (3%); (g) Inventory which is not subject to the
first priority, valid and perfected security interest and Lien of Agent; (h)
returned, damaged and/or defective Inventory; (i) Inventory purchased or sold
on consignment; (j) Inventory located outside the United States of America or
Inventory in transit (unless such Inventory in transit is otherwise deemed to
be Eligible Inventory by Agent in its sole discretion at such time); (k)
Inventory that is to be returned to vendors; (l) lay-away Inventory; and (m)
Inventory subject to deposits made by customers for sales of Inventory that has
not been delivered. The criteria for Eligible Inventory set forth above may
only be changed and any new criteria for Eligible Inventory may only be
established by Agent in good faith based on either: (i) an event, condition or
other circumstance arising after the date hereof, or (ii) an event, condition or
other circumstance existing on the date hereof to the extent Agent has no
written notice thereof from a Borrower prior to the date hereof, in either case
under clause (i) or (ii) which adversely affects or could reasonably be
expected to adversely affect the Inventory in the good faith determination of
Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part
of the Collateral.
"Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any Person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business
and is administered or managed by a Lender or with respect to any Lender that
is a fund or similar investment vehicle which invests in commercial loans and
similar extensions of credit, any other fund or similar investment vehicle that
invests in commercial loans and similar extensions of credit and is managed or
advised by the same investment advisor as such Lender or by an Affiliate of
such investment advisor; and (d) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D under the
Securities Act of 1933) approved by Agent (and so long as no Event of Default
exists, approved by Borrower Agent also, but such consent not to be
unreasonably withheld, conditioned or delayed); provided, that, (i) neither any
Borrower nor any other Obligor or any Affiliate of any Borrower or any other
Obligor shall qualify as an Eligible Transferee and (ii) no Person to whom any
Indebtedness which is in any way subordinated in right of payment to any other
Indebtedness of any Borrower or any other Obligor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree.
"Enforcement Action" shall mean the exercise by Agent, on behalf of
Lenders, in good faith of any of its material enforcement rights and remedies
under the Financing Agreements, Applicable Law or otherwise at any time on and
after the occurrence and during the continuance of an Event of Default,
including the commencement of any action to foreclose on the security interests
or Liens of Agent, on behalf of Lenders, in all or any material portion of the
Collateral, notification of account debtors to make payments to Agent, any
action to take possession of all or any material portion of the Collateral or
commencement of any legal proceedings or actions against or with respect to all
or any portion of the Collateral.
"Environmental Indemnity Agreement" shall mean the Agreement Regarding
Environmental Matters to be executed by Borrowers on the Closing Date in favor
of Agent and Lenders.
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"Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and
any Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (a) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization
Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water
Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery
Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe
Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
"Equipment" shall mean all of a Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment (whether owned or licensed and including embedded software),
vehicles, tools, furniture, fixtures, all attachments, accessions and property
now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
"Equity Documents" shall mean the Amended and Restated Charter of
Xxxxxxxx'x, Inc., as filed with the Secretary of State of the State of
Tennessee and effective August 8, 2000, the Shareholders Agreement among
Kirkland Holdings L.L.C., Parent, affiliates of Parent, Capital Resource
Lenders II, L.P., Allied Capital Corporation, Allied Capital Corporation II,
The Marlborough Capital Investment Fund, L.P., Capital Trust Investments, Ltd.,
Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxxxx, as amended by
the First Amendment to Shareholders Agreement dated December 31, 1999, and the
Registration Rights Agreement among Kirkland Holdings L.L.C., Parent,
affiliates of Parent, Capital Resource Lenders II, L.P., Allied Capital
Corporation, Allied Capital Corporation II, The Marlborough Capital Investment
Fund, L.P., Capital Trust Investments, Ltd., Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx,
Xxxxx Xxxxx and Xxxxxx Xxxxxxxx, as amended by the First Amendment to
Registration Rights Agreement dated December 31, 1999.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
"ERISA Affiliate" shall mean any person required to be aggregated with
a Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
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"ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to
a Plan subject to Title IV of ERISA; (b) the adoption of any amendment to a
Plan that would require the provision of security pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect
to any Plan of an "accumulated funding deficiency" (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived; (d) the filing
pursuant to Section 412 of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (e) the occurrence of a "prohibited transaction" with respect to which
any Borrower or any other Obligor, or any of its or their respective
Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code) or with respect to which any Borrower, any other Obligor or any of
its or their respective Subsidiaries could otherwise be liable; (f) a complete
or partial withdrawal by any Borrower, any other Obligor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer Plan is in reorganization;
(g) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan; (i) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
any Borrower, any other Obligor or any ERISA Affiliate in excess of $200,000,
and (j) any other event or condition with respect to a Plan including any Plan
subject to Title IV of ERISA maintained, or contributed to, by any ERISA
Affiliate that could reasonably be expected to result in liability of any
Borrower in excess of $200,000.
"Eurodollar Rate" shall mean the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which
Reference Bank is offered deposits of United States dollars for a two (2) month
period in the London interbank market (or other Eurodollar Rate market selected
by Borrowers and approved by Agent) on or about 9:00 a.m. (New York time) in
amounts substantially equal to the principal amount of the Eurodollar Rate
Loans.
"Eurodollar Rate Election" shall have the meaning ascribed to such
term in SECTION 3.1(c).
"Eurodollar Rate Loans" shall mean any Revolving Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
"Event of Default" shall mean the occurrence or existence of any event
or condition described in SECTION 10.1 hereof.
"Excess Availability" shall mean, the amount, as determined by Agent,
calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base
(without regard to any Reserves) and (ii) the Revolving Loan Limit minus (b) the
sum of: (i) the amount of all then outstanding and unpaid Obligations of
Borrowers other than the Term Loan and any Discretionary Overadvances, plus (ii)
the amount of all Reserves, plus (iii) the aggregate amount of all then
outstanding and
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unpaid trade payables and other obligations of Borrowers which are outstanding
more than sixty (60) days past due as of such time (other than trade payables
or other obligations being contested or disputed by Borrowers in good faith),
plus (iv) without duplication, the amount of checks issued by Borrowers to pay
trade payables and other obligations which are more than sixty (60) days past
due as of such time (other than trade payables or other obligations being
contested or disputed by Borrowers in good faith), but not yet sent.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
"Existing Lenders" shall mean the lenders to Borrowers listed on
SCHEDULE 1.37 hereto and their respective predecessors, successors and assigns.
"Existing Letters of Credit" shall mean, collectively, the letters of
credit issued for the account of any Borrower or any other Obligor or for which
such Borrower is otherwise liable listed on SCHEDULE 1.38 hereto, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
"Extraordinary Expenses" shall mean all costs, expenses, fees or
advances that Agent or any Lender may suffer or incur, whether prior to or
after the occurrence of an Event of Default, and whether prior to, after or
during the pendency of an Insolvency Proceeding of an Obligor, on account of or
in connection with (i) repossession, storage, repair, appraisal, insuring,
completion of the manufacture of, preparing for sale, advertising for sale,
selling, collecting or otherwise preserving or realizing upon any Collateral;
(ii) the defense of Agent's Lien upon any Collateral or the priority thereof or
any adverse claim with respect to the Loans, the Financing Agreements or the
Collateral asserted by any Obligor, any receiver or trustee for any Obligor or
any creditor or representative of creditors of any Obligor; (iii) the
settlement or satisfaction of any Liens upon any Collateral (whether or not
such Liens are permitted hereunder); (iv) the collection or enforcement of any
of the Obligations other than through payment in accordance with the terms
hereof; (v) the negotiation, documentation, and closing of any restructuring or
forbearance agreement with respect to the Financing Agreements or Obligations;
(vi) amounts advanced by Agent pursuant to this Agreement; (vii) the
enforcement of any of the provisions of any of the Financing Agreements; or
(viii) any payment under a guaranty, indemnity or other payment agreement
provided by Agent or (with Agent's consent) any Lender, which is reimbursable
to Agent or such Lender by Borrowers pursuant to this Agreement. Such costs,
expenses and advances may include transfer fees, taxes, storage fees, insurance
costs, permit fees, utility reservation and standby fees, legal fees, appraisal
fees, brokers' fees and commissions, auctioneers' fees and commissions,
accountants' fees, environmental study fees, wages and salaries paid to
employees of any or all Borrowers or independent contractors in liquidating any
Collateral, travel expenses, all other fees and expenses payable or
reimbursable by Borrowers or any other Obligor under any of the Financing
Agreements, and all other fees and expenses associated with the enforcement of
rights or remedies under any of the Financing Agreements, but excluding
compensation paid to employees (including inside legal counsel who are
employees) of Agent.
"Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Agent and Lenders, setting forth certain fees
payable by Borrowers to Agent for the
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benefit of itself and Lenders, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
"Financing Agreements" shall mean, collectively, this Agreement, the
Notes, the Fee Letter, the Collateral Access Agreements, the Subordination
Agreement, the Security Documents, the Guaranty Agreements, and all other
notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or any other Obligor in connection with this
Agreement.
"Fiscal Year" shall mean the fiscal year of Borrowers for accounting
and tax purposes, which shall begin on the Sunday after the Saturday nearest
January 31 of each calendar year and end on the Saturday nearest January 31 of
the next succeeding calendar year and when followed by the designation of a
calendar year (e.g., Fiscal Year 2002) means the fiscal year of Borrowers ended
on the Saturday nearest January 31 of the next succeeding calendar year.
"Foreign Subsidiary" shall mean a Subsidiary that is not a Domestic
Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of SECTIONS 9.17 and 9.19 hereof, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent
with those used in the preparation of the most recent audited financial
statements delivered to Agent prior to the date hereof.
"Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guarantors" shall mean each Person who may at any time guarantee
payment or performance of the whole or any part of the Obligations.
"Guaranty Agreement" shall mean a guaranty that is at any time
executed by a Guarantor in favor of Agent and Lenders.
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other
kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are
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or become regulated under any Environmental Law (including any that are or
become classified as hazardous or toxic under any Environmental Law).
"Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of Debt for Money Borrowed (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an
Affiliate) created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services that is not overdue by more than ninety (90) days, unless
the trade payable is being contested in good faith); (c) all obligations as
lessee under leases which have been, or should be, in accordance with GAAP
recorded as Capital Leases; (d) any contractual obligation, contingent or
otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this definition of another Person, including, without
limitation, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances, drafts or
similar documents or instruments issued for such Person's account; (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such person against fluctuations in interest rates or currency or commodity
values; and (i) all obligations owed by such Person under License Agreements
with respect to non-refundable, advance or minimum guarantee royalty payments.
"Indemnified Amount" shall mean the amount of any loss, cost, expenses
or damages suffered or incurred by Agent or any of its Indemnities, or by any
Lender or any of its Indemnitees and against which any Lender or any Obligor
has agreed to indemnify them pursuant to the terms of this Agreement or any of
the other Financing Agreements.
"Information Certificate" shall mean the Information Certificate of
Borrowers constituting EXHIBIT B hereto containing material information with
respect to Borrowers, their businesses and assets provided by or on behalf of
Borrowers to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
"Insolvency Proceeding" shall mean any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for (i) the
entry of an order for relief under
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any chapter of the Bankruptcy Code or other insolvency or debt adjustment law
(whether state, federal or foreign), (ii) the appointment of a receiver,
trustee, liquidator or other custodian for such Person or any part of its
property, (iii) an assignment or trust mortgage for the benefit of creditors of
such Person, or (iv) the liquidation, dissolution or winding up of the affairs
of such Person.
"Intellectual Property@ shall mean a Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service
xxxx applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill (including any
goodwill associated with any trademark or the license of any trademark);
customer and other lists in whatever form maintained; trade secret rights,
copyright rights, rights in works of authorship, domain names and domain name
registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
"Interest Rate" shall mean,
(a) Subject to clause (b) of this definition
below:
(i) as to any Revolving Loan, the
applicable rate set forth in SECTION 3.1(b) hereof; and
(ii) as to all or any portion of the
Term Loan, a rate equal to seven and one-quarter percent (7.25%) in excess of
the Prime Rate; provided, that for purposes of this subsection (iii), in no
event shall the Prime Rate be less than four and three-quarters percent
(4.75%).
(b) Notwithstanding anything to the contrary
contained in clause (a) of this definition, the Interest Rate shall mean (i)
the rate of two percent (2%) per annum in excess of the Prime Rate as to Prime
Rate Loans (other than the Term Loan) and the rate of two percent (2%) per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at
Agent's option, and (ii) the rate of two percent (2%) per annum in excess of
the interest rate otherwise applicable under clause (a)(iii) above as to the
Term Loan, in each case without notice, (A) either (I) for the period on and
after the date of termination or non-renewal hereof until such time as all
Obligations are indefeasibly paid and satisfied in full in immediately
available funds, or (II) for the period from and after the date of the
occurrence of any Event of Default, and for so long as such Event of Default is
continuing as determined by Agent and (B) on the Revolving Loans to at any time
outstanding in excess of the Borrowing Base or the Revolving Loan Limit (other
than Discretionary Overadvances) (whether or not such excess(es) arise or are
made with or without Agent's or any Lender's knowledge or consent and whether
made before or after an Event of Default).
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"Interest Rate Contract" shall mean any interest rate agreement,
interest rate collar agreement, interest rate swap agreement, or other
agreement or arrangement at any time entered into by a Borrower with Wachovia
that is designed to protect against fluctuations in interest rates.
"Inventory" shall mean all of a Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by such
Borrower as lessor; (b) are held by such Borrower for sale or lease or to be
furnished under a contract of service; (c) are furnished by such Borrower under
a contract of service; or (d) consist of raw materials, work in process,
finished goods or materials used or consumed in its business.
"Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or any other Obligor (as the case may be) and any securities
intermediary, commodity intermediary or other Person who has custody, control
or possession of any investment property of such Borrower or such other Obligor
acknowledging that such securities intermediary, commodity intermediary or
other Person has custody, control or possession of such investment property on
behalf of Agent, that it will comply with entitlement orders originated by
Agent with respect to such investment property, or other instructions of Agent,
or (as the case may be) apply any value distributed on account of any commodity
contract as directed by Agent, in each case, without the further consent of
such Borrower or such other Obligor and including such other terms and
conditions as Agent may require.
"Lenders" shall mean the financial institutions who are signatories
hereto as Lenders and other persons made a party to this Agreement as a Lender
in accordance with SECTION 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a "Lender".
"License Agreements" shall have the meaning set forth in SECTION 8.11
hereof.
"Liens" shall mean any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting property. For the purpose of this
Agreement, a Borrower shall be deemed to be the owner of any property which it
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the property has been retained by or
vested in some other Person for security purposes.
"Loans" shall mean, collectively, the Revolving Loans, the Term Loan
and any Discretionary Overadvances.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operations of any Borrower;
(b) the legality, validity or enforceability of this Agreement or any of the
other Financing Agreements; (c) the legality, validity, enforceability,
perfection or priority of the security interests and Liens of Agent upon the
Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to
repay the
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Obligations or of any Borrower to perform its obligations under this Agreement
or any of the other Financing Agreements as and when to be performed; or (f)
the ability of Agent or any Lender to enforce the Obligations or realize upon
the Collateral or otherwise with respect to the rights and remedies of Agent
and Lenders under this Agreement or any of the other Financing Agreements.
"Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower
involving monetary liability of or to any Person in an amount in excess of
$250,000 in any Fiscal Year and (b) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which any
Borrower is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a Material Adverse Effect.
"Maximum Credit" shall mean the amount of $60,000,000.
"Maximum Revolving Credit" shall mean $45,000,000.
"Minimum Return Fee" shall have the meaning ascribed to such term in
the Fee Letter.
"Mortgage" shall mean the Tennessee Deed of Trust, Security Agreement
and Assignment of Rents, dated or to be dated on or before the Closing Date, by
Parent in favor of Agent with respect to the Real Property and related assets
of Parent located in Madison County, Tennessee.
"Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower or
any ERISA Affiliate.
"Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the dollar amount equal to the amount
of the recovery in respect of the Inventory at such time a "net orderly
liquidation value" basis as set forth in the most recent acceptable appraisal
of Inventory received by Agent in accordance with SECTION 7.3, net of operating
expenses, liquidation expenses and commissions, and (b) the denominator of
which is the Cost of the aggregate amount of the Inventory subject to such
appraisal.
"Notes" shall mean each Revolving Note, the Term Note and any other
promissory note executed by Borrowers at Agent's request to evidence any of the
Obligations.
"Obligations" shall mean, in each case, whether now in existence or
hereafter arising, (i) the principal of, and interest and premium, if any, on
the Loans, (ii) all letter of credit accommodations, (iii) all indebtedness and
other obligations of any Borrower to Congress or Wachovia under or in
connection with any Interest Rate Contract or any Cash Management Agreement,
and (iv) all other obligations, liabilities and indebtedness of every kind,
nature and description owing by any or all Borrowers to Agent or any Lender
and/or any of their Affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under this Agreement or any of the other
Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of
-16-
any case with respect to any Borrower under the Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, or secured or unsecured.
"Obligor" shall mean each Borrower, each Guarantor and any other
Person who is liable on or with respect to any of the Obligations or who is the
owner of any property that is security for any of the Obligations.
"Overadvance Facility" shall have the meaning ascribed to such term in
SECTION 2.6 hereof.
"Parent Pledge Agreements" shall mean the Stock Pledge Agreements
executed by Parent on or before the Closing Date in favor of Agent, and by
which Parent shall pledge to Agent, for the benefit of Agent and Lenders, as
security for the Obligations and the Guaranty of Parent, 100% of the capital
stock of each of Kirkland's and xxxxxxxxx.xxx.
"Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans in
conformity with the provisions of SECTION 13.7 of this Agreement governing
participations.
"Payment Direction Letter" shall have the meaning set forth in SECTION
6.3 hereof.
"Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or any other Obligor sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
"Preferred Equity Capital" shall mean the Series A through D preferred
stock of Parent.
"Prime Rate" shall mean the rate from time to time publicly announced
by Wachovia or its successors, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
"Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
"Priority Event" shall mean the occurrence of any one or more of the
following events: (i) the acceleration by Agent, on behalf of Lenders, of all
or a material portion of the Obligations by demanding payment therefor as a
consequence of an Event of Default, (ii) the commencement of any Enforcement
Action by Agent, on behalf of Lenders, as a consequence of an Event of
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Default, (iii) the commencement of an Insolvency Proceeding by any Obligor or
(iv) the commencement of an Insolvency Proceeding against any Obligor and such
Insolvency Proceeding is not dismissed within 60 days thereafter or an order
for relief is entered in such Insolvency Proceeding.
"Pro Rata Share" shall mean as to any Lender, the fraction (expressed
as a percentage) the numerator of which is such Lender's Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
SECTION 13.7 hereof; provided, that, (i) if the Commitments have been
terminated, the numerator shall be the unpaid principal amount of such Lender's
Loans and the denominator shall be the aggregate principal amount of all unpaid
Loans and (ii) from and after the making of the Term Loan, such Lender's
Commitment in respect of the Term Loan shall be the unpaid principal amount of
such Lender's Term Loan.
"Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, county or
local, and whether foreign or domestic, that are paid or payable by any Person
in respect of any period in accordance with GAAP.
"Qualifying Liquidity Event" shall have the meaning ascribed to such
term in the Senior Subordinated Loan Agreement as in effect on the date hereof.
"Real Property" shall mean all now owned and hereafter acquired real
property of a Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgage.
"Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of a Borrower: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of such Borrower; (d) letters of credit, indemnities, guarantees,
security or other deposits and proceeds thereof issued payable to such Borrower
or otherwise in favor of or delivered to such Borrower in connection with any
Account; or (e) all other accounts, contract rights, chattel paper, instruments,
notes, general intangibles and other forms of obligations owing to such
Borrower, whether from the sale and lease of goods or other property, licensing
of any property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by such Borrower or to or for
the benefit of any third Person (including loans or advances to any Affiliates
or Subsidiaries of such Borrower) or otherwise associated with any Accounts,
Inventory or general intangibles of such Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to such Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to such Borrower from any Plan or other employee benefit plan, rights
and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which such Borrower is a beneficiary).
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"Records" shall mean all of a Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any
account debtor, together with the tapes, disks, diskettes and other data and
software storage media and devices, file cabinets or containers in or on which
the foregoing are stored (including any rights of such Borrower with respect to
the foregoing maintained with or by any other Person).
"Reference Bank" shall mean Wachovia or such other bank as Agent may
from time to time designate.
"Register" shall have the meaning set forth in SECTION 13.7 hereof.
"Required Lenders" shall mean, at any time, those Lenders whose Pro
Rata Shares aggregate sixty-six and two-thirds percent (66 2/3%) or more of the
aggregate of the Commitments of all Lenders, or if the Commitments shall have
been terminated, Lenders to whom at least sixty-six and two-thirds percent
(66 2/3%) of the then outstanding Obligations are owing.
"Reserves" shall mean as of any date of determination, the sum of (I)
the Subordinated Debt Reserve, (II) the Warehouse Reserve, and (III) such other
amounts as Agent may from time to time establish and revise in good faith
reducing the amount of Revolving Loans which would otherwise be available to
Borrowers under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Agent in
good faith, adversely affect, or would have a reasonable likelihood of
adversely affecting, either (i) the Collateral or any other property which is
security for the Obligations or its value or (ii) the assets, business or
prospects of any Borrower or any other Obligor or (iii) the security interests
and other rights of Agent or any Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Agent's good
faith belief that any collateral report or financial information furnished by
or on behalf of any Borrower or any other Obligor to Agent is or may have been
incomplete, inaccurate or misleading in any material respect (c) in respect of
any state of facts which Agent determines in good faith constitutes a Default
or an Event of Default. To the extent Agent may revise the lending formulas
used to determine the Borrowing Base or establish new criteria or revise
existing criteria for Eligible Inventory so as to address any circumstances,
condition, event or contingency in a manner satisfactory to Agent, Agent shall
not establish a Reserve for the same purpose. The amount of any Reserve
established by Agent shall have a reasonable relationship to the event,
condition or other matter which is the basis for such reserve as determined by
Agent in good faith.
"Revolving Lenders" shall mean Congress and any other Lender that
makes any Revolving Loans in accordance with the terms of this Agreement.
"Revolving Loan Limit" shall mean, at any time, the amount equal to:
(i) for the period from January 1 through June 30 of each calendar year,
$30,000,000; and (ii) for the period from July 1 through December 31 of each
calendar year, $45,000,000.
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"Revolving Loans" shall mean the loans now or hereafter made by or on
behalf of any Lender or by Agent for the account of any Lender on a revolving
basis pursuant to the Credit Facility (involving advances, repayments and
readvances) as set forth in SECTION 2.1 hereof.
"Revolving Notes" shall mean a Revolving Note to be executed by
Borrowers in favor of each Lender, which shall evidence all Revolving Loans
made by such Lender to Borrowers pursuant to this Agreement.
"Security Documents" shall mean the Mortgage, the Business
Interruption Insurance Assignments, the Deposit Account Control Agreements, the
Environmental Indemnity Agreement, the Trademark Security Agreements, the
Parent Pledge Agreements and the Stock Pledge Agreements and any and all other
documents, instruments or agreements that at any time secure any of the
Obligations.
"Senior Officer" shall mean the chairman of the board of directors,
the president, the chief financial officer or the controller of, or in-house
legal counsel to any Borrower.
"Senior Subordinated Loan Agreement" shall mean that certain Senior
Subordinated Note and Warrant Purchase Agreement dated as of June 12, 1996,
among Borrowers (individually and as successor by merger to the entities listed
on Schedule I annexed thereto), Capital Resource Lenders II, L.P., Allied
Capital Corporation, Allied Capital Corporation II, The Marlborough Capital
Investment Fund, L.P. and Capital Trust Investments, Ltd., as amended.
"Senior Subordinated Notes" shall mean those certain Senior
Subordinated Notes, due 2003, in the original principal amount of $20,000,000,
as the same may be extended, renewed or otherwise modified from time to time.
"Settlement Loan" shall mean a Loan made by Agent pursuant to SECTION
6.9 hereof.
"Slow-Moving" shall mean that the applicable Inventory is more than
three hundred and thirty (330) days old.
"Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
"Special Agent Advances" shall have the meaning set forth in SECTION
12.11 hereof.
"Stock Pledge Agreements" shall mean each Stock Pledge Agreement
executed by a Borrower in favor of Agent and by which such Borrower shall
pledge to Agent, for the benefit of
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Agent and Lenders, as security for the Obligations, 65% of the capital stock of
each Foreign Subsidiary, if any, of such Borrower and 100% of the capital stock
of each Domestic Subsidiary, if any, of such Borrower.
"Subordinated Debt" shall mean all Indebtedness of any or all
Borrowers that is fully and absolutely subordinated in right or payment to the
Obligations in a manner satisfactory to Agent and Lenders, including, without
limitation, the Senior Subordinated Notes and the Warrants.
"Subordinated Debt Documents" shall mean (i) the Senior Subordinated
Loan Agreement, (ii) the Senior Subordinated Notes, (iii) the Warrants, (iv)
the Subordination Agreement, and (v) any and all other documents, instruments
and agreements executed in connection therewith or pursuant thereto.
"Subordinated Debt Reserve" shall mean an amount equal to $1,538,462
per month, commencing June 1, 2002.
"Subordination Agreement" shall mean that certain Subordination and
Intercreditor Agreement dated on or about the date hereof among the holders of
the Senior Subordinated Notes, Agent and Lenders, pursuant to which such
holders have agreed to subordinate the payment and performance of all
obligations owing by Borrowers to them to the prior payment in full of the
Obligations.
"Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency), managers,
trustees or other controlling persons, or an equivalent controlling interest
therein, of such Person is, at the time, directly or indirectly, owned by such
Person and/or one or more subsidiaries of such Person.
"Term" shall have the meaning set forth in SECTION 13.1 hereof.
"Term Lender" shall mean Ableco and its successors and assigns.
"Term Loan" shall mean the term loan made by or on behalf of the Term
Lender to Borrowers as provided for in SECTION 2.3 hereof.
"Term Note" shall have the meaning ascribed to such term in SECTION
2.3 hereof.
"Trademark Security Agreements" shall mean a Trademark Security
Agreement to be executed by each Borrower in favor of Agent on or about the
Closing Date and by which each Borrower shall assign to Agent, for the benefit
of Agent and Lenders, as security for the Obligations, all of such Borrower's
right, title and interest in and to all of its trademarks.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Georgia, and any successor statute, as in effect from time to time (except
that terms used herein which are
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defined in the Uniform Commercial Code as in effect in the State of Georgia on
the date hereof shall continue to have the same meaning notwithstanding any
replacement or amendment of such statute except as Agent may otherwise
determine).
"Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
"Wachovia" shall mean Wachovia Bank, National Association and its
successors and assigns.
"Warehouse Reserve" shall mean an amount equal to one month's rent for
each warehouse location of Borrowers (excluding Borrowers' central distribution
centers) based upon the most recent twelve-month average for such warehouse
location.
"Warrants" shall have the meaning ascribed to such term in the Senior
Subordinated Loan Agreement as in effect on the date hereof.
SECTION 2. CREDIT FACILITIES
2.1. Revolving Loans.
(a) Subject to and upon the terms and
conditions contained herein, each Revolving Lender severally (and not jointly)
agrees to fund its Pro Rata Share of Revolving Loans to Borrowers from time to
time in amounts requested by any Borrower up to the amount outstanding at any
time equal to the lesser of: (i) the Borrowing Base at such time or (ii) the
Revolving Loan Limit.
(b) Agent may, in its discretion, from time to
time, upon not less than five (5) days prior notice to Borrower Agent, reduce
the lending formula(s) with respect to Eligible Inventory to the extent that
Agent determines in good faith that the liquidation value or Net Recovery
Percentage of the Eligible Inventory, or any category thereof, has decreased,
including any decrease attributable to a change in the nature, quality, mix or
the number of days of the turnover of the Inventory. The amount of any decrease
in the lending formulas shall have a reasonable relationship to the event,
condition or circumstance which is the basis for such decrease as determined by
Agent in good faith. In determining whether to reduce the lending formula(s),
Agent may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Inventory or in establishing Reserves.
(c) Except in Agent's discretion, with the
consent of all Lenders, or as otherwise provided herein, (i) the aggregate
amount of the Loans outstanding at any time shall not exceed the Maximum
Credit, and (ii) the aggregate principal amount of the Revolving Loans
outstanding at any time to Borrowers shall not exceed the lesser of the
Borrowing Base or the Revolving Loan Limit.
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(d) In the event that the aggregate principal
amount of the Revolving Loans outstanding to Borrowers exceed the Borrowing
Base (except with respect to Discretionary Overadvances not yet due and
payable) or the Revolving Loan Limit of Borrowers or the aggregate amount of
the Loans exceed the Maximum Credit, such event shall not limit, waive or
otherwise affect any rights of Agent or Lenders in such circumstances or on any
future occasions and Borrowers shall, within three (3) Business Days after
written demand by Agent, which may be made at any time or from time to time,
immediately repay to Agent the entire amount of any such excess(es) for which
payment is demanded.
(e) Borrowers, Agent and Lenders further agree
that, if a Material Adverse Effect shall occur, or if an Event of Default
exists, Agent shall have the right (exercisable at such time as Agent deems
appropriate) to require that separate Borrowing Base calculations be made for
each Borrower, as well as the right to limit the use of proceeds of the Loans
by each Borrower to an amount equal to such Borrower's Borrowing Base.
2.2. Reserved.
2.3. Term Loan. (a) Subject to and upon the terms and
conditions contained herein, the Term Lender agrees to fund the Term Loan to
Borrowers in the original principal amount of $15,000,000. The Term Loan is (a)
evidenced by a Term Promissory Note (the "Term Note") in such original
principal amount duly executed and delivered by the Borrower to Agent
concurrently herewith; (b) to be repaid, together with interest and other
amounts, in accordance with this Agreement, such Term Note, and the other
Financing Agreements and (c) secured by all of the Collateral. The principal
amount of the Term Loan shall be repaid in twelve (12) consecutive quarterly
installments (or earlier as provided herein) payable on the last day of each
calendar quarter commencing June 30, 2002, each such installment to be in the
amount of $562,500 and the entire unpaid balance of the Term Loan shall be paid
on the last day of the Term.
(b) Borrowers agree to record the Term Loan on
the Term Loan Register referred to in SECTION 13.7(h)(i). The Term Loan
recorded on the Term Loan Register (the "Registered Term Loan") may not be
evidenced by promissory notes other than a Registered Term Note (as defined
below). Upon the registration of the Term Loan, any promissory note (other than
a Registered Term Note) evidencing the same shall be null and void and shall be
returned to the Borrowers. Borrowers agree, at the request of the Term Lender,
to execute and deliver to Term Lender a promissory note in registered form to
evidence such Registered Term Loan (i.e., containing registered note language)
and registered as provided in SECTION 13.7(h) hereof (a "Registered Term
Note"), payable to the order of the Term Lender and otherwise duly completed.
Once recorded on the Term Loan Register, the Obligations evidenced by such Note
may not be removed from the Term Loan Register so long as it remains
outstanding, and a Registered Term Note may not be exchanged for a promissory
note that is not a Registered Term Note. For purposes hereof, the Term Note
shall be deemed a Registered Term Note.
(c) Borrowers may, at their option, prepay any
portion of the Term Loan in whole at any time or in part from time to time, in
amounts aggregating $100,000 or any greater integral multiple of $100,000, by
paying the principal amount to be prepaid
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together with interest accrued or unpaid thereon to the date of prepayment and
any applicable breakage costs. Borrowers shall give written notice (or
telephonic notice confirmed in writing) to the Agent of any intended prepayment
not less than 2 Business Day prior to any prepayment of the Term Loan. Such
notice, once given, shall be irrevocable and, upon receipt of any such notice
of optional prepayment, Agent shall promptly notify Term Lender of the contents
thereof.
(d) Borrowers shall be jointly and severally
obligated to prepay the entire unpaid principal balance of the Term Loan, and
all accrued but unpaid interest thereon, at the end of the Term. Borrowers shall
also be jointly and severally required to prepay the Term Loan from the net
proceeds of dispositions of Equipment by any Borrower permitted by SECTION
9.7(b)(iii) hereof and from the net proceeds of sales or other dispositions of
any Equipment, leasehold interests or fixtures in connection with any closure or
sale of retail stores that is permitted by SECTION 9.7(b)(iv) hereof, to the
extent that the aggregate amount of all such net proceeds during any Fiscal Year
exceeds $200,000.
(e) Each prepayment of the Term Loan shall be
remitted by Borrowers to Agent and be applied first to accrued but unpaid
interest on the Term Loan, and the balance to installments of principal of the
Term Loan in the inverse order of their maturities. To the extent that any
proceeds remain after the foregoing payments, the remainder of the proceeds
shall be applied to the Revolving Loans or such other Obligations as Agent may
determine.
2.4. Commitments. The aggregate amount of each Lender's
Pro Rata Share of the Loans shall not exceed the amount of such Lender's
Commitment, as the same may from time to time be amended in accordance with the
provisions hereof.
2.5. Reserves. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Revolving Loan
Limit and other applicable limits hereunder shall be subject to Agent's
continuing right to establish and revise Reserves. Without limiting any other
rights or remedies of Agent under this Agreement or any of the other Financing
Agreements with respect to the establishment of Reserves or otherwise, Agent
may establish and revise Reserves to reflect: (a) inventory shrinkage; (b) the
aggregate amount of deposits, if any, received by any Borrower from its
customers in respect of unfilled orders for merchandise; (c) amounts due or to
become due in respect of sales, use and/or withholding taxes; (d) any rental
payments, service charges or other amounts due to lessors of real or personal
property to the extent Inventory or Records are located in or on property or
such Records are needed to monitor or otherwise deal with the Collateral and
with respect to any rental payments, to the extent that Agent determines that
Borrowers are not current with respect to such payments; and (e) amounts owing
by any Borrower to Credit Card Issuers or Credit Card Processors in connection
with the Credit Card Agreements.
2.6. Overadvance Facility. Subject to the satisfaction of
all of the terms and conditions contained herein so long as no Default or Event
of Default exists and no Qualifying Liquidity Event has occurred, Revolving
Lenders and Term Lender shall make available to Borrowers on a several (but not
joint basis) their Pro Rata Share of an overadvance facility (the "Overadvance
Facility") during the period commencing on April 1, 2003 and ending on
September 30, 2003. Borrowers shall only be permitted to receive Discretionary
Overadvances
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under the Overadvance Facility only one time and only if (a) no initial public
offering for any Borrower shall have occurred and (b) Consolidated EBITDA for
the consecutive 12-fiscal month period ended on the last day of the most
recently ended fiscal month for which Agent has received Borrowers' financial
statements prepared and delivered in accordance with SECTION 9.6(A) hereof and
as shown on such financial statements equaled or exceeded the amount set forth
below for such period. No Discretionary Overadvance may be used by any Borrower
to make any payment of Indebtedness permitted to be paid under SECTION
9.12(b)(iv) hereof. The aggregate amount of all Discretionary Overadvances made
by Lenders under the Overadvance Facility shall not exceed $4,500,000, shall be
secured by the Collateral and shall bear interest at a per annum rate equal to
(i) the Interest Rate applicable to the Term Loan for any Discretionary
Overadvances advanced by Term Lender, and (ii) a variable rate equal to four
percent (4%) per annum in excess of the Adjusted Eurodollar Rate for any
Discretionary Overadvances advanced by a Revolving Lender. Any Discretionary
Overadvances advanced by a Revolving Lender shall be deemed to be Revolving
Loans for all purposes of this Agreement, except as expressly provided in this
SECTION 2.6 with respect to repayment and interest terms. All Discretionary
Overadvances shall be payable, if not sooner paid, in equal weekly installments
of one-twelfth of the aggregate amount of such Discretionary Overadvances,
payable on Wednesday of each week commencing on the earlier of (A) the first
Wednesday after the 180th day after the date on which such Discretionary
Overadvance(s) are made or (B) October 1, 2003, and ending on the eleventh
(11th) Wednesday after such commencement date; provided, that, if a Qualifying
Liquidity Event occurs, all Discretionary Overadvances shall be due and payable
in full at such time. If Borrowers elect to have Lenders make Discretionary
Overadvances, Borrowers shall give written notice to Agent at least ten (10)
days prior to the date on which the Discretionary Overadvance requested is to
be disbursed. Any Discretionary Overadvances may be prepaid at any time by
Borrowers, provided that each such prepayment shall be applied to the Lenders'
Discretionary Overadvance then outstanding based on each Lender's Pro Rata
Share. For purposes of this SECTION 2.6, the minimum Consolidated EBITDA for
the corresponding consecutive 12-fiscal month periods shall be as follows:
12-Fiscal Month Period Minimum
Ending on Consolidated EBITDA
---------------------- -------------------
June 1, 2002 $27,786,000
July 6, 2002 $28,025,000
August 3, 2002 $27,710,000
August 31, 2002 $27,571,000
October 5, 2002 $27,364,000
November 2, 2002 $27,521,000
November 30, 2002 $26,691,000
January 4, 2003 $28,108,000
February 1, 2003 $28,804,000
March 1, 2003 $28,724,000
April 5, 2003 $28,836,000
May 3, 2003 $28,694,000
May 31, 2003 $28,702,000
July 5, 2003 $28,942,000
August 2, 2003 $29,105,000
August 30, 2003 $29,201,000
October 4, 2003 $29,622,000
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SECTION 3. INTEREST AND FEES
3.1. Interest.
(a) Borrowers jointly and severally shall pay
to Agent, for the benefit of Lenders, interest on the outstanding principal
amount of the Loans at the applicable Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination hereof
shall be payable ON DEMAND.
(b) Unless Agent shall have received a Prime
Rate Election in accordance with SECTION 3.1(C) hereof, the outstanding
principal amount of the Revolving Loans shall bear interest for any month at
the per annum rate equal to two and one-quarter percent (2.25%) per annum in
excess of the Adjusted Eurodollar Rate. For any month when Agent shall have
received a Prime Rate Election in accordance with SECTION 3.1(c) hereof, the
outstanding principal amount of the Revolving Loans shall bear interest for
such month at the per annum rate equal to the Prime Rate.
(c) Any Borrower may from time to time request
that Eurodollar Rate Loans be converted to Prime Rate Loans effective as of the
first day of the immediately succeeding calendar month. Such request (a "Prime
Rate Election") shall be effective for the month specified and for each
succeeding month unless Agent shall receive a Eurodollar Rate Election in
accordance with is SECTION 3.1(c) and shall be delivered to Agent no later than
three (3) Business Days prior to the first day of such calendar month;
provided, that, no Default or Event of Default shall exist or have occurred and
be continuing and no party hereto shall have sent any notice of termination of
this Agreement. Any Borrower may from time to time request that Prime Rate
Loans be converted to Eurodollar Rate Loans effective as of the first day of
the immediately succeeding calendar month. Such request (a "Eurodollar Rate
Election") shall be effective for the month specified and for each succeeding
month unless Agent shall receive a Prime Rate Election in accordance with is
SECTION 3.1(c) and shall be delivered to Agent no later than three (3) Business
Days prior to the first day of such calendar month; provided, that, no Default
or Event of Default shall exist or have occurred and be continuing and no party
hereto shall have sent any notice of termination of this Agreement. Any request
by or on behalf of any Borrower to convert Eurodollar Rate Loans to Prime Loans
or Prime Rate Loans to Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Agent and Lenders
shall not be required to purchase United States Dollar deposits in the London
interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Agent and Lenders had purchased such deposits to fund the Eurodollar Rate
Loans.
(d) Interest shall be payable by Borrowers to
Agent, for the account of Lenders, monthly in arrears not later than the first
day of each calendar month and
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shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate on non-contingent Obligations (other
than Eurodollar Rate Loans) shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrowers to Agent and
Lenders exceed the maximum amount or the rate permitted under any Applicable
Law, and if any such part or provision of this Agreement is in contravention of
any such Applicable Law, such part or provision shall be deemed amended to
conform thereto.
(e) On the date hereof, the Prime Rate is
four and three quarters percent (4.75%). Therefore, the rate of interest in
effect hereunder on the date hereof for Revolving Loans bearing interest as a
Prime Rate Loan on the date of this Agreement, expressed in simple interest
terms, is four and three quarters percent (4.75%) per annum; and the rate of
interest in effect hereunder on the date hereof for all or any portion of the
Term Loan bearing interest as a Prime Rate Loan on the date of this Agreement,
expressed in simple interest terms, is twelve percent (12.0%) per annum.
3.2. Fees.
(a) Borrowers jointly and severally shall pay
to Agent, for the account of the Revolving Lenders, monthly an unused line fee
at a rate equal to one half of one percent (0.50%) per annum calculated upon
the amount by which the Revolving Loan Limit exceeds the average daily
principal balance of the outstanding Revolving Loans during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
(b) Borrowers jointly and severally agree to
pay to Agent and Lenders the other fees and amounts set forth in the Fee Letter
in the amounts and at the times specified therein.
3.3. Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any
change in, or in the interpretation of, any law or regulation is introduced,
including, without limitation, with respect to reserve requirements, applicable
to any Lender or any banking or financial institution from whom any Lender
borrows funds or obtains credit (a "Funding Bank"), or (ii) a Funding Bank or
any Lender complies with any future guideline or request from any central bank
or other Governmental Authority or (iii) a Funding Bank or any Lender determines
that the adoption of any Applicable Law regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof has or would have the effect
described below, or a Funding Bank or any Lender complies with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, and in the case of
any event set forth in this clause (iii), such adoption, change or compliance
has or would have the direct or indirect effect of
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reducing the rate of return on any Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Funding Bank's or Lender's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, and the result of any of the
foregoing events described in clauses (i), (ii) or (iii) is or results in an
increase in the cost to any Lender of funding or maintaining the Loans then
Borrowers shall from time to time upon demand by Agent pay to Agent additional
amounts sufficient to indemnify Lenders against such increased cost on an
after-tax basis (after taking into account applicable deductions and credits in
respect of the amount indemnified). A certificate as to the amount of such
increased cost shall be submitted to Borrower Agent by Agent and shall be
conclusive, absent manifest error.
(b) If prior to the first day of any month, (i)
Agent shall have determined in good faith (which determination shall be
conclusive and binding upon Borrowers) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate, (ii) Agent has received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined for
such month will not adequately and fairly reflect the cost to such Lenders of
making or maintaining their Eurodollar Rate Loans during such month, or (iii)
Dollar deposits in the principal amounts of the Eurodollar Rate Loans for such
two month period on which the Eurodollar Rate is to be based are not generally
available in the London interbank market, Agent shall give telecopy or
telephonic notice thereof to Borrowers and Lenders as soon as practicable
thereafter, and will also give prompt written notice to Borrowers and Lenders
when such conditions no longer exist. If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such month shall
be made as Prime Rate Loans, (B) any Loans that were to have been converted on
the first day of such month to or continued as Eurodollar Rate Loans shall be
converted to or continued as Prime Rate Loans and (C) each outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then-current
month to Prime Rate Loans. Until such notice has been withdrawn by Agent, no
further Eurodollar Rate Loans shall be made or continued as such, nor shall
Borrowers have the right to convert Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein,
if the adoption of or any change in any law, treaty, rule or regulation or
final, non-appealable determination of an arbitrator or a court or other
Governmental Authority or in the interpretation or application thereof
occurring after the date hereof shall make it unlawful for Agent or any Lender
to make or maintain Eurodollar Rate Loans as contemplated by this Agreement,
(i) Agent or such Lender shall promptly give written notice of such
circumstances to Borrower Agent and Agent (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of such Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such
and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for such Lender
to make or maintain Eurodollar Rate Loans, such Lender shall then have a
commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) such Lender's Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current months with respect to such Loans or
within such earlier period as required by law.
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SECTION 4. CONDITIONS PRECEDENT
4.1. Conditions Precedent to Initial Loans. Each of the
following is a condition precedent to Agent and Lenders making the initial
Loans hereunder:
(a) Agent shall have received, in form and
substance satisfactory to Agent, all releases, terminations and such other
documents as Agent may request to evidence and effectuate the termination by
the Existing Lenders of their respective financing arrangements with Borrowers
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of each Borrower and each other
Obligor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and such Borrower or any other Obligor, as
debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust
or deeds to secure debt by any Borrower or any other Obligor in favor of it or
any of them, in form acceptable for recording with the appropriate Governmental
Authority;
(b) all requisite corporate action and
proceedings in connection with this Agreement and the other Financing
Agreements shall be satisfactory in form and substance to Agent, and Agent
shall have received all information and copies of all documents, including
records of requisite corporate action and proceedings which Agent may have
requested in connection therewith, such documents where requested by Agent or
its counsel to be certified by appropriate corporate officers or Governmental
Authority (and including a copy of the certificate of incorporation of each
Borrower and each Guarantor certified by the Secretary of State (or equivalent
Governmental Authority) which shall set forth the same complete corporate name
of such Borrower or such Guarantor, as is set forth herein and such document as
shall set forth the organizational identification number of such Borrower, or
such Guarantor, if one is issued in its jurisdiction of incorporation);
(c) no material adverse change shall have
occurred in the assets, business or prospects of any Obligor since the date of
Agent's latest field examination (not including for this purpose the field
review referred to in clause (d) below) and no change or event shall have
occurred which would impair the ability of any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which
it is a party or of Agent or any Lender to enforce the Obligations or realize
upon the Collateral;
(d) Agent shall have completed a field review
of the Records and such other information with respect to the Collateral as
Agent may require to determine the amount of Loans available to Borrowers
(including, without limitation, current perpetual inventory records and/or
roll-forwards of Accounts and Inventory through the date of closing and test
counts of the Inventory in a manner satisfactory to Agent, together with such
supporting documentation as may be necessary or appropriate, and other
documents and information that will enable Agent to accurately identify and
verify the Collateral), the results of which each case shall be satisfactory to
Agent and the Term Lender, not more than three (3) Business Days prior to the
date hereof;
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(e) Agent shall have received, in form and
substance satisfactory to Agent, all consents, waivers, acknowledgments and
other agreements from third Persons which Agent may deem necessary or desirable
in order to permit, protect and perfect its security interests in and Liens
upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation,
subject to the provisions of SECTION 9.24 hereof, Collateral Access Agreements
by owners and lessors of leased premises of each Borrower and by processors and
warehouses at which Collateral is located;
(f) the Excess Availability as determined by
Agent, as of the date hereof, shall be not less than $5,000,000 after giving
effect to the initial Loans made or to be made in connection with the initial
transactions hereunder and the payment of accrued interest on Subordinated Debt
and the payment of all fees and expenses in connection with the transactions
contemplated hereby;
(g) Agent shall have received, in form and
substance satisfactory to Agent, (i) a Deposit Account Control Agreement by and
among Agent, Parent and Fleet National Bank, and Deposit Account Control
Agreements among Agent, Xxxxxxxx'x and Bank of America, N.A., AmSouth Bank, and
Wachovia, respectively, in each case duly authorized, executed and delivered by
such bank and such Obligor, and (ii) evidence of Borrowers' delivery of a
Payment Direction Letter to each other bank at which any Borrower maintains a
deposit account;
(h) Agent shall have received evidence, in form
and substance satisfactory to Agent, that Agent has a valid perfected first
priority security interest in and Lien upon all of the Collateral;
(i) Agent shall have received and reviewed lien
and judgement search results for the jurisdiction of incorporation of each
Obligor, the jurisdiction of the chief executive office of each Obligor and all
jurisdictions in which assets of each Obligor is located, which search results
shall be in form and substance satisfactory to Agent;
(j) Agent shall have received environmental
audits of the Real Property to be subject to the Mortgage conducted by an
independent environmental engineering firm acceptable to Agent, and in form,
scope and methodology satisfactory to Agent, confirming that (i) each Borrower
is in compliance with all material applicable Environmental Laws and (ii) the
absence of any material environmental problems;
(k) Agent shall have received evidence of
insurance and loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance satisfactory to Agent, and
certificates of insurance policies and/or endorsements naming Agent as lender's
loss payee, mortgagee and additional insured;
(l) Agent shall have received, in form and
substance satisfactory to Agent, such opinion letters of counsel to Borrowers
and Guarantors with respect to the Financing Agreements and such other matters
as Agent may request;
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(m) the other Financing Agreements (including
the Mortgage) and all instruments and documents hereunder and thereunder shall
have been duly executed and delivered to Agent, in form and substance
satisfactory to Agent and the Term Lender; and
(n) Agent shall have reviewed, and found
acceptable in all respects, each of the Subordinated Debt Documents, and all
Subordinated Debt shall be expressly subordinated in right of payment to the
prior payment and satisfaction in full of all of the Obligations, all in a
manner and pursuant to such written agreements binding on the holders of such
Subordinated Debt as will be satisfactory to Agent and Lenders and their
respective counsel.
4.2. Conditions Precedent to All Loans. Each of the
following is an additional condition precedent to the Loans to Borrowers,
including the initial Loans and any future Loans:
(a) all representations and warranties
contained herein and in the other Financing Agreements shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of the
making of each such Loan and after giving effect thereto, except to the extent
that such representations and warranties expressly relate solely to an earlier
date (in which case such representations and warranties shall have been true
and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or
decree of any Governmental Authority shall exist, and no action, suit,
investigation, litigation or proceeding shall be pending or threatened in any
court or before any arbitrator or Governmental Authority, which (i) purports to
enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans, or
(B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or has a reasonable
likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist
or have occurred and be continuing on and as of the date of the making of such
Loan and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1. Grant of Security Interest. To secure payment and
performance of all Obligations, each Borrower hereby grants to Agent, for
itself and the ratable benefit of Lenders, a continuing security interest in, a
Lien upon, and a right of set off against, and hereby assigns to Agent, for
itself and the ratable benefit of Lenders, as security, all personal and real
property and fixtures, and interests in property and fixtures, of such
Borrower, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Agent or any Lender, collectively, the
"Collateral"):
(a) all Accounts;
(b) all general intangibles, including, without
limitation, all Intellectual Property;
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(c) all goods, including, without limitation,
Inventory and Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper, including, without
limitation, all tangible and electronic chattel paper;
(f) all instruments, including, without
limitation, all promissory notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances
and similar instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present
and future liens, security interests, rights, remedies, title and interest in,
to and in respect of Receivables and other Collateral, including (i) rights and
remedies under or relating to guaranties, contracts of suretyship, letters of
credit and credit and other insurance related to the Collateral, (ii) rights of
stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (iii) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Receivables or other Collateral, including
returned, repossessed and reclaimed goods, and (iv) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
(k) all (i) investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts) and (ii)
monies, credit balances, deposits and other property of Borrower now or
hereafter held or received by or in transit to Agent, any Lender or its
Affiliates or at any other depository or other institution from or for the
account of such Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise;
(l) all commercial tort claims, including,
without limitation, those identified in the Information Certificate;
(m) to the extent not otherwise described
above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing,
in any form, including insurance proceeds and all claims against third parties
for loss or damage to or destruction of or other involuntary conversion of any
kind or nature of any or all of the other Collateral.
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5.2. Perfection of Security Interests.
(a) Each Borrower irrevocably and
unconditionally authorizes Agent (or its agent) to file at any time and from
time to time such financing statements with respect to the Collateral naming
Agent or its designee as the secured party and such Borrower as debtor, as
Agent may require to perfect its security interest in the Collateral, and
including any other information with respect to such Borrower or otherwise
required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Agent may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
hereby ratifies and approves all financing statements naming Agent or its
designee as secured party and such Borrower, as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if
any). Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower
any symbol required for authenticating any electronic filing. In the event that
the description of the collateral in any financing statement naming Agent or
its designee as the secured party and such Borrower as debtor includes assets
and properties of such Borrower that do not at any time constitute Collateral,
whether hereunder, under any of the other Financing Agreements or otherwise,
the filing of such financing statement shall nonetheless be deemed authorized
by such Borrower to the extent of the Collateral included in such description
and it shall not render the financing statement ineffective as to any of the
Collateral or otherwise affect the financing statement as it applies to any of
the Collateral. In no event shall any Borrower at any time file, or permit or
cause to be filed, without the prior written consent of Agent, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming Agent or its designee as
secured party and such Borrower as debtor.
(b) No Borrower has any chattel paper (whether
tangible or electronic) or instruments as of the date hereof, except as set
forth in the Information Certificate. In the event that a Borrower shall be
entitled to or shall receive any chattel paper or instrument after the date
hereof, such Borrower shall promptly notify Agent thereof in writing. Promptly
upon the receipt thereof by or on behalf of such Borrower (including by any
agent or representative), such Borrower shall deliver, or cause to be delivered
to Agent, all tangible chattel paper and instruments that such Borrower has or
may at any time acquire, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify, in
each case except as Agent may otherwise agree. At Agent's option, Borrowers
shall, or Agent may at any time on behalf of Borrowers, cause the original of
any such instrument or chattel paper to be conspicuously marked in a form and
manner acceptable to Agent with the following legend referring to chattel paper
or instruments as applicable: "This [chattel paper][instrument] is subject to
the security interest of Congress Financial Corporation (Southern), as agent
and any sale, transfer, assignment or encumbrance of this [chattel
paper][instrument] violates the rights of such secured party."
(c) In the event that any Borrower shall at any
time hold or acquire an interest in any electronic chattel paper or any
Atransferable record@ (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
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jurisdiction), such Borrower shall promptly notify Agent thereof in writing.
Promptly upon Agent's request, such Borrower shall take, or cause to be taken,
such actions as Agent may request to give Agent control of such electronic
chattel paper under Section 9-105 of the UCC and control of such transferable
record under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as in effect in such jurisdiction.
(d) No Borrower has any deposit accounts as of
the date hereof, except as set forth in the Information Certificate. No
Borrower shall directly or indirectly, after the date hereof open, establish or
maintain any deposit account unless each of the following conditions is
satisfied: (i) Agent shall have received not less than five (5) Business Days
prior written notice of the intention of a Borrower to open or establish such
account which notice shall specify in reasonable detail and specificity
acceptable to Agent the name of the account, the owner of the account, the name
and address of the bank at which such account is to be opened or established,
the individual at such bank with whom such Borrower is dealing and the purpose
of the account, (ii) the bank where such account is opened or maintained shall
be acceptable to Agent, and (iii) on or before the opening of such deposit
account, such Borrower shall, as Agent may specify, either (A) deliver to Agent
a Deposit Account Control Agreement with respect to such deposit account duly
authorized, executed and delivered by such Borrower and the bank at which such
deposit account is opened and maintained, (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and
conditions acceptable to Agent or (C) deliver a Payment Direction Letter to
such bank. The terms of this subsection (d) shall not apply to deposit accounts
specifically and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of a Borrower's salaried
employees.
(e) Each Borrower owns or holds, directly or
indirectly, beneficially or as record owner or both, any investment property, as
of the date hereof, or have any investment account, securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
date hereof, in each case except as set forth in the Information Certificate.
(i) In the event that any Borrower
shall be entitled to or shall at any time after the date hereof hold or acquire
any certificated securities, such Borrower shall promptly endorse, assign and
deliver the same to Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify. If
any securities, now or hereafter acquired by any Borrower is uncertificated and
are issued to such Borrower or its nominee directly by the issuer thereof, such
Borrower shall immediately notify Agent thereof and shall as Agent may specify,
either (A) cause the issuer to agree to comply with instructions from Agent as
to such securities, without further consent of such Borrower or such nominee,
or (B) arrange for Agent to become the registered owner of the securities.
(ii) No Borrower shall directly or
indirectly, after the date hereof open, establish or maintain any investment
account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Agent
shall have received not less than five (5) Business Days prior written notice
of the
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intention of such Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of
the account, the owner of the account, the name and address of the securities
intermediary or commodity intermediary at which such account is to be opened or
established, the individual at such intermediary with whom such Borrower is
dealing and the purpose of the account, (B) the securities intermediary or
commodity intermediary (as the case may be) where such account is opened or
maintained shall be acceptable to Agent, and (C) on or before the opening of
such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Agent
may specify either (1) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.
(f) No Borrower is a beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker's
acceptance or similar instrument as of the date hereof, except as set forth in
the Information Certificate. In the event that any Borrower shall be entitled
to or shall receive any right to payment under any letter of credit, banker's
acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower shall promptly notify Agent
thereof in writing. Each Borrower shall immediately, as Agent may specify,
either (i) deliver, or cause to be delivered to Agent, with respect to any such
letter of credit, banker's acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance satisfactory to Agent, consenting to the assignment of the
proceeds of the letter of credit to Agent by such Borrower and agreeing to make
all payments thereon directly to Agent or as Agent may otherwise direct or (ii)
cause Agent to become, at Borrowers' expense, the transferee beneficiary of the
letter of credit, banker's acceptance or similar instrument (as the case may
be).
(g) No Borrower has any commercial tort claims
as of the date hereof, except as set forth in the Information Certificate. In
the event that any Borrower shall at any time after the date hereof have any
commercial tort claims, such Borrower shall promptly notify Agent thereof in
writing, which notice shall (i) set forth in reasonable detail the basis for and
nature of such commercial tort claim and (ii) include the express grant by such
Borrower to Agent of a security interest in such commercial tort claim (and the
proceeds thereof). In the event that such notice does not include such grant of
a security interest, the sending thereof by such Borrower to Agent shall be
deemed to constitute such grant to Agent. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. Without limiting the authorization of
Agent provided in SECTION 5.2(a) hereof or otherwise arising by the execution by
Borrowers of this Agreement or any of the other Financing Agreements, Agent is
hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and any
Borrower as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower shall
promptly upon Agent's request, execute and deliver, or cause to be executed and
delivered, to Agent such other agreements, documents and instruments as Agent
may require in connection with such commercial tort claim.
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(h) No Borrower has any goods, documents of
title or other Collateral in the custody, control or possession of a third
party as of the date hereof, except as set forth in the Information Certificate
and except for goods located in the United States in transit to a location of
such Borrower permitted herein in the ordinary course of business of such
Borrower in the possession of the carrier transporting such goods. In the event
that any goods, documents of title or other Collateral are at any time after
the date hereof in the custody, control or possession of any other Person not
referred to in the Information Certificate or such carriers, Borrowers shall
promptly notify Agent thereof in writing. Promptly upon Agent's request, each
Borrower shall use its best efforts to deliver to Agent a Collateral Access
Agreement duly authorized, executed and delivered by such Person and such
Borrower.
(i) Each Borrower shall take any other actions
reasonably requested by Agent from time to time to cause the attachment,
perfection and first priority of, and the ability of Agent to enforce, the
security interest and Lien of Agent in any and all of the Collateral,
including, without limitation, (i) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the UCC or other Applicable Law, to the extent, if any, that such Borrower's
signature thereon is required therefor, (ii) causing Agent's name to be noted as
secured party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iii) complying with
any provision of any statute, regulation or treaty of the United States as to
any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security
interest of Agent in such Collateral, (iv) obtaining the consents and approvals
of any Governmental Authority or third party, including, without limitation,
any consent of any licensor, lessor or other person obligated on Collateral,
and taking all actions required by any earlier versions of the UCC or by other
law, as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1. Borrowers' Loan Accounts. Agent shall maintain one
or more loan account(s) on its books in which shall be recorded (a) all Loans
and other Obligations and the Collateral, (b) all payments made by or on behalf
of any Borrower and (c) all other appropriate debits and credits as provided in
this Agreement, including fees, charges, costs, expenses and interest. All
entries in the loan account(s) shall be made in accordance with Agent's
customary practices as in effect from time to time.
6.2. Statements. Agent shall render to Borrower Agent
each month a statement setting forth the balance in the Borrowers' loan
account(s) maintained by Agent for Borrower pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Agent but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrowers and conclusively binding upon Borrowers as an account stated except
to the extent that Agent receives a written notice from Borrower Agent of any
specific exceptions of Borrowers thereto within thirty (30) days after the date
such statement has been received by Borrower Agent. Until such time as Agent
shall have rendered to Borrower Agent a written statement as provided above,
the balance in Borrowers' loan account(s) shall be presumptive evidence of the
amounts due and owing to Agent and Lenders by Borrowers.
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6.3. Collection of Accounts.
(a) Borrowers shall establish and maintain, at
their expense, deposit account arrangements and merchant payment arrangements
with the banks set forth on SCHEDULE 8.10 hereto and after prior written notice
to Agent, such other banks as Borrowers may hereafter select as are acceptable
to Agent. The banks set forth on SCHEDULE 8.10 constitute all of the banks with
whom Borrowers have deposit account arrangements and merchant payment
arrangements as of the date hereof and identifies the Borrower maintaining such
arrangements and identifies each of the deposit accounts at such banks to a
retail store location of Borrowers or otherwise describes the nature of the use
of such deposit account by Borrowers.
(b) Each Borrower shall deposit all proceeds
from sales of Inventory in every form, including cash, checks, credit card
sales drafts, credit card sales or charge slips or receipts and other forms of
daily store receipts, from each retail store location of such Borrower on each
Business Day into the deposit accounts of such Borrower used solely for such
purpose and identified to each retail store location as set forth on SCHEDULE
8.10. Borrowers shall cause all such funds deposited into the separate deposit
accounts to be sent by wire transfer or by automated clearinghouse transfer at
least every three (3) Business Days (or more frequently as required by Agent if
an Event of Default exists) and all other proceeds of Collateral to be sent by
wire transfer, to the Blocked Accounts or the Agent Payment Account. Each
Borrower shall irrevocably direct in writing, in form and substance
satisfactory to Agent (a "Payment Direction Letter"), each of the banks in
which any such deposit account is located and into which proceeds from sales of
Inventory from a retail store location of such Borrower are at any time
deposited not to honor any instruction from a Borrower with respect to such
deposit account or any funds in such account other than an instruction of such
Borrower to send all funds deposited in such account by wire transfer or
automated clearinghouse transfer to a Blocked Account or the Agent Payment
Account, and to honor any direction of Agent with respect to such deposit
account and the funds in such account, even if Agent's direction is contrary to
any instruction of a Borrower. Such direction shall not be rescinded, revoked
or modified without the prior written consent of Agent.
(c) Borrowers shall establish and maintain, at
its expense, deposit accounts with such banks as are acceptable to Agent (the
"Blocked Accounts"). Each Borrower shall promptly either cause all amounts on
deposit in its deposit accounts used by each retail store location to be sent
as provided in SECTION 6.3(b) above, or shall itself deposit or cause to be
deposited to the Blocked Accounts or cause to be sent directly to the Agent
Payment Account all proceeds from sales of Inventory, all amounts payable to
such Borrower from Credit Card Issuers and Credit Card Processors and all other
proceeds of Collateral. The banks at which the Blocked Accounts are established
shall enter into an agreement, in form and substance satisfactory to Agent,
providing that all items received or deposited in the Blocked Accounts are the
Property of Agent, that the depository bank has no Lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein,
or the funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on Borrower's
or Agent's instruction, all funds received or deposited into the Blocked
Accounts into the Agent Payment Account, and will not honor any instruction
from a Borrower other than an instruction to transfer such funds to the Agent
Payment Account. Borrowers agrees that all amounts deposited in such Blocked
Accounts or other funds received
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and collected by Agent, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the Property of Agent held for the
benefit of Agent and Lenders; provided that, so long as no Event of Default
exists and Excess Availability does not fall below $3,000,000 for any period of
more than two (2) consecutive weeks, Agent agrees to remit monies in the Agent
Payment Account to Borrowers for working capital purposes.
(d) For purposes of calculating the amount of
the Loans available to Borrowers such payments will be applied (conditional
upon final collection) to the Obligations (except to the extent remitted to
Borrowers as provided in SECTION 6.3(c) above) on the Business Day of receipt
by Agent of immediately available funds in the Agent Payment Account provided
such payments and notice thereof are received in accordance with Agent's usual
and customary practices as in effect from time to time and within sufficient
time to credit Borrowers' loan account on such day, and if not, then on the
next Business Day. For purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Agent in the Agent Payment Account
provided such payments or other funds and notice thereof are received in
accordance with Agent's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrowers' Loan Account on such day,
and if not, then on the next Business Day.
6.4. Payments.
(a) All Obligations shall be payable to the
Agent Payment Account as provided in SECTION 6.3 or such other place as Agent
may designate from time to time. Except to the extent remitted to Borrowers as
provided in SECTION 6.3(c) above, Agent shall apply payments received or
collected from any Borrower or any other Obligor or for the account of
Borrowers (including the monetary proceeds of collections or of realization
upon any Collateral) in accordance with SECTION 6.11 hereof. Notwithstanding
anything to the contrary contained in this Agreement, to the extent Borrowers
use any proceeds of the Loans to acquire rights in or the use of any Collateral
or to repay any Indebtedness used to acquire rights in or the use of any
Collateral, payments in respect of the Obligations shall be deemed applied
first to the Obligations arising from Loans that were not used for such
purposes and second to the Obligations arising from Loans the proceeds of which
were used to acquire rights in or the use of any Collateral in the
chronological order in which Borrowers acquired such rights in or the use of
such Collateral. So long as no Event of Default has occurred and is continuing,
SECTION 6.4(a) shall not be deemed to apply to any payment by Borrowers
specified by Borrowers to be for the payment of specific Obligations then due
and payable (or prepayable) under any provision of this Agreement.
(b) Notwithstanding the last proviso contained
in SECTION 6.3(c), at Agent's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers. So long
as no Event of Default exists, Agent shall charge the loan account(s) of
Borrowers for all principal, interest, fees, costs, expenses and other charges
(to the extent then due and payable) provided for in this Agreement and the
other Financing Agreements; provided, that this sentence shall be for the
benefit of the Lenders only and shall not be enforceable by Borrowers and in no
event shall Agent be required to charge the loan
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account(s) for any of the foregoing amounts if such amounts would exceed the
Borrowing Base. Borrowers shall make all payments to Agent and Lenders on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Agent or any Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Agent or such Lender. Borrowers
shall be jointly and severally liable to pay to Agent, and do hereby indemnify,
defend and hold Agent and Lenders harmless for the amount of any payments or
proceeds surrendered or returned. This SECTION 6.4(b) shall remain effective
notwithstanding any contrary action which may be taken by Agent or any Lender in
reliance upon such payment or proceeds. This SECTION 6.4 shall survive the
payment of the Obligations and the termination of this Agreement.
6.5. Authorization to Make Loans. Agent and Lenders are
authorized to make the Loans based upon telephonic or other instructions
received from anyone purporting to be an officer of any Borrower or other
authorized Person or, at the discretion of Agent, if such Loans are necessary
to satisfy any Obligations then due and payable as determined by Agent. All
requests for Loans hereunder shall specify the date on which the requested
advance is to be made (which day shall be a Business Day) and the amount of the
requested Loan. Requests received after 11:00 a.m., Atlanta, Georgia time on
any day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrowers or when deposited to the credit of Borrowers or otherwise
disbursed or established in accordance with the instructions of any Borrower or
in accordance with the terms and conditions of this Agreement.
6.6. Use of Proceeds. Borrowers shall use the initial
proceeds of the Loans provided by Agent to Borrowers hereunder only for: (a)
payments to each of the Persons listed in the disbursement direction letter
furnished by Borrowers to Agent on the Closing Date and (b) costs, expenses and
fees in connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Financing Agreements. All other Loans made to or
for the benefit of Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital and other proper
corporate purposes of Borrowers not otherwise prohibited by the terms hereof.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any margin security or for any other purpose which might cause any of the Loans
to be considered a "purpose credit" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, as amended.
6.7. Pro Rata Treatment. Except to the extent otherwise
provided in this Agreement: (a) the making and conversion of Loans shall be
made among the Lenders based on their respective Pro Rata Shares as to the
Loans and (b) each payment on account of any Obligations to or for the account
of one or more of Lenders in respect of any Obligations due on
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a particular day shall be allocated among the Lenders entitled to such payments
based on their respective Pro Rata Shares and shall be distributed accordingly.
6.8. Sharing of Payments, Etc.
(a) Each Borrower agrees that, in addition to
(and without limitation of) any right of setoff, banker's lien or counterclaim
Agent or any Lender may otherwise have, each Lender shall be entitled, at its
option (but subject, as among Agent and Lenders, to the provisions of SECTION
12.3(b) hereof), to offset balances held by it for the account of Borrowers at
any of its offices, in dollars or in any other currency, against any principal
of or interest on any Loans owed to such Lender or any other amount payable to
such Lender hereunder, that is not paid when due (regardless of whether such
balances are then due to Borrowers), in which case it shall promptly notify
Borrower Agent and Agent thereof; provided, that, such Lender's failure to give
such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall
obtain from any Borrower payment of any principal of or interest on any Loan
owing to it or payment of any other amount under this Agreement or any of the
other Financing Agreements through the exercise of any right of setoff,
banker's lien or counterclaim or similar right or otherwise (other than from
Agent as provided herein), and, as a result of such payment, such Lender shall
have received more than its Pro Rata Share of the principal of the Loans or
more than its share of such other amounts then due hereunder or thereunder by
any Borrower to such Lender than the percentage thereof received by any other
Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount
of such excess and simultaneously purchase from such other Lenders a
participation in the Loans or such other amounts, respectively, owing to such
other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining
or preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold
or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender
purchasing a participation (or direct interest) as provided in this Section may
exercise, in a manner consistent with this Section, all rights of setoff,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or other
amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) Nothing contained herein shall require any
Lender to exercise any right of setoff, banker's lien, counterclaims or similar
rights or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness
or obligation of any Borrower. If, under any applicable bankruptcy, insolvency
or other similar law, any Lender receives a secured claim in lieu of a setoff
to which this Section applies, such Lender shall, to the extent practicable,
assign such rights to Agent for the benefit of Lenders and, in any event,
exercise its rights in respect of such secured claim in a
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manner consistent with the rights of Lenders entitled under this Section to
share in the benefits of any recovery on such secured claim.
6.9. Settlement Procedures.
(a) In order to administer the Credit Facility
in an efficient manner and to minimize the transfer of funds between Agent and
Lenders, Agent may, at its option, subject to the terms of this Section, make
available, on behalf of Lenders, the full amount of the Loans requested or
charged to Borrowers' loan account(s) or otherwise to be advanced by Lenders
pursuant to the terms hereof, without requirement of prior notice to Lenders of
the proposed Loans.
(b) With respect to all Loans made by Agent on
behalf of Lenders as provided in this Section, the amount of each Lender's Pro
Rata Share of the outstanding Loans shall be computed weekly, and shall be
adjusted upward or downward on the basis of the amount of the outstanding Loans
as of 5:00 p.m. New York time on the Business Day immediately preceding the
date of each settlement computation; provided, that, Agent retains the absolute
right at any time or from time to time to make the above described adjustments
at intervals more frequent than weekly, but in no event more than twice in any
week. Agent shall deliver to each of the Lenders after the end of each week, or
at such lesser period or periods as Agent shall determine, a summary statement
of the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a "Settlement Period"). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m.
New York time, then such Lender shall make the settlement transfer described in
this Section by no later than 3:00 p.m. New York City time on the same Business
Day and if received by a Lender after 12:00 p.m. New York City time, then such
Lender shall make the settlement transfer by not later than 3:00 p.m. New York
City time on the next Business Day following the date of receipt. If, as of the
end of any Settlement Period, the amount of a Lender's Pro Rata Share of the
outstanding Loans is more than such Lender's Pro Rata Share of the outstanding
Loans as of the end of the previous Settlement Period, then such Lender shall
forthwith (but in no event later than the time set forth in the preceding
sentence) transfer to Agent by wire transfer in immediately available funds the
amount of the increase. Alternatively, if the amount of a Lender's Pro Rata
Share of the outstanding Loans in any Settlement Period is less than the amount
of such Lender's Pro Rata Share of the outstanding Loans for the previous
Settlement Period, Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Agent. Agent and each Lender agrees to xxxx its books and records
at the end of each Settlement Period to show at all times the dollar amount of
its Pro Rata Share of the outstanding Loans. Each Lender shall only be entitled
to receive interest on its Pro Rata Share of the Loans to the extent such Loans
have been funded by such Lender. Because the Agent on behalf of Lenders may be
advancing and/or may be repaid Loans prior to the time when Lenders will
actually advance and/or be repaid such Loans, interest with respect to Loans
shall be allocated by Agent in accordance with the amount of Loans actually
advanced by and repaid to each Lender and the Agent and shall accrue from and
including the date such Loans are so advanced to but excluding the date such
Loans are either repaid by Borrowers or actually settled with the applicable
Lender as described in this Section.
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(c) To the extent that Agent has made any such
amounts available and the settlement described above shall not yet have
occurred, upon repayment of any Loans by Borrowers, Agent may apply such
amounts repaid directly to any amounts made available by Agent pursuant to this
Section. In lieu of weekly or more frequent settlements, Agent may, at its
option, at any time require each Lender to provide Agent with immediately
available funds representing its Pro Rata Share of each Loan, prior to Agent's
disbursement of such Loan to Borrowers. In such event, all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their Pro Rata Shares. No Lender shall be responsible for any default by any
other Lender in the other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender be increased or decreased as a
result of the default by any other Lender in the other Lender's obligation to
make a Loan hereunder.
(d) If Agent is not funding a particular Loan
to Borrowers pursuant to this Section on any day, Agent may assume that each
Lender will make available to Agent such Lender's Pro Rata Share of the Loan
requested or otherwise made on such day and Agent may, in its discretion, but
shall not be obligated to, cause a corresponding amount to be made available to
or for the benefit of Borrowers on such day. If Agent makes such corresponding
amount available to Borrowers and such corresponding amount is not in fact made
available to Agent by such Lender, Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon
for each day from the date such payment was due until the date such amount is
paid to Agent at the Federal Funds Rate for each day during such period (as
published by the Federal Reserve Bank of New York or at Agent's option based on
the arithmetic mean determined by Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of the three leading brokers of Federal funds transactions in
New York City selected by Agent) and if such amounts are not paid within three
(3) days of Agent's demand, at the highest Interest Rate provided for in
SECTION 3.1 hereof applicable to Prime Rate Loans. During the period in which
such Lender has not paid such corresponding amount to Agent, notwithstanding
anything to the contrary contained in this Agreement or any of the other
Financing Agreements, the amount so advanced by Agent to or for the benefit of
Borrowers shall, for all purposes hereof, be a Loan made by Agent for its own
account. Upon any such failure by a Lender to pay Agent, Agent shall promptly
thereafter notify Borrower Agent of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days
of Borrower Agent's receipt of such notice. A Lender who fails to pay Agent its
Pro Rata Share of any Loans made available by the Agent on such Lender's
behalf, or any Lender who fails to pay any other amount owing by it to Agent,
is a "Defaulting Lender". Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender's
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, relend to Borrowers the amount of all such
payments received or retained by it for the account of such Defaulting Lender.
For purposes of voting or consenting to matters with respect to this Agreement
and the other Financing Agreements and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero (0). This Section shall remain effective
with respect to a Defaulting Lender until such default is cured. The operation
of this Section shall not be construed to increase or otherwise affect the
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Commitment of any Lender, or relieve or excuse the performance by Borrowers or
any other Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in
this Agreement or the other Financing Agreements shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any Lender from
its obligation to fulfill its Commitment hereunder or to prejudice any rights
that Borrowers may have against any Lender as a result of any default by any
Lender hereunder in fulfilling its Commitment.
6.10. Obligations Several; Independent Nature of Lenders'
Rights. The obligation of each Lender hereunder is several, and no Lender shall
be responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements
and no action taken by the Lenders pursuant hereto or thereto shall be deemed
to constitute the Lenders to be a partnership, an association, a joint venture
or any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to SECTION 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
6.11. Agent's Allocation of Payments and Collections.
(a) Except to the extent otherwise expressly
provided with respect to Defaulting Lenders under SECTION 6.9, prior to the
occurrence of a Priority Event, all monies to be applied to the Obligations
shall be allocated among Agent and such of the Lenders as are entitled thereto
(and, with respect to monies allocated to Lenders, on a Pro Rata Share basis,
unless otherwise provided herein):
first, to pay any fees or expense reimbursements
(including any Extraordinary Expenses) then due and payable
by Borrowers to Agent under the Financing Agreements and to
pay any Indemnified Amount then due and payable by Borrowers
to Agent under the Financing Agreements;
second, to pay any fees (other than the Early
Termination Fee and Minimum Return Fee), expense
reimbursements (including any Extraordinary Expenses) and any
Indemnified Amount then due and payable by Borrowers to
Lenders under the Financing Agreements;
third, to pay interest then due and payable in
respect of all Special Agent Advances which Agent has not
been reimbursed;
fourth, to pay interest then due and payable in
respect of all Settlement Loans;
fifth, to pay interest then due and payable in
respect of the Loans (including interest payable in respect
of the Revolving
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Loans and the Term Loan but excluding Settlement Loans and
Special Agent Advances);
sixth, to pay the outstanding principal amount of
Special Agent Advances;
seventh, to pay the outstanding principal amount of
any Settlement Loans;
eighth, to pay the outstanding principal amount of
the Revolving Loans (other than Settlement Loans, Special
Agent Advances and Discretionary Overadvances);
ninth, to pay the principal amount of the Term Loan
that is then due and payable by Borrowers;
tenth, to pay any other Obligations (including the
Early Termination Fee and Minimum Return Fee but excluding
any Discretionary Overadvances) then due and payable by
Borrowers to Agent or any Lender; and
eleventh, to pay any Discretionary Overadvances;
provided that, any monies to be applied to the payment of
Discretionary Overadvances that are paid when due in
accordance with SECTION 2.6 hereof shall be allocated to the
Lenders as and when paid.
(b) Except to the extent otherwise expressly
provided with respect to Defaulting Lenders under SECTION 6.9, if a Priority
Event has occurred and is continuing, all monies to be applied to the
Obligations shall be allocated among Agent and such of the Lenders as are
entitled thereto (and, with respect to monies allocated to Lenders, on a Pro
Rata Share basis, unless otherwise provided herein):
first, to pay any fees, expense reimbursements
(including any Extraordinary Expenses) and any Indemnified
Amount then due and payable by Borrowers to Agent under the
Financing Agreements;
second, to pay any fees (other than the Early
Termination Fee and the Minimum Return Fee and any other fees
payable solely to the Term Lender), expense reimbursements
(including any Extraordinary Expenses), and any Indemnified
Amount then due and payable by Borrowers to the Lenders under
the Financing Agreements;
third, to pay principal and interest then due and
payable in respect of all Loans (other than the Term Loan and
Discretionary Overadvances);
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fourth, to pay any principal and interest of the
Term Loan and any fees (including the Minimum Return Fee)
then due to Term Lender under the Financing Agreements;
fifth, to pay the Early Termination Fee and any
other Obligations (other than any Discretionary Overadvances)
due to Agent or any Lender by Borrowers; and
sixth, to pay any Discretionary Overadvances.
(c) In the event of a direct conflict between
the allocation provisions of SECTIONS 6.11(a) and (b) and other provisions
contained in any other Financing Agreement, it is the intention of Agent and
Lenders that the allocation provisions in such documents shall be read together
and construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual conflict that cannot be resolved as
aforesaid, the provisions of SECTION 6.11(a) and (b) shall control and govern.
(d) The allocations set forth in this SECTION
6.11 are solely to determine the rights and priorities of Agent and Lenders as
among themselves and may be changed by Agent and Lenders without notice to or
the consent or approval of Borrowers or any other Person.
6.12. Borrowers' Representative. Each Borrower hereby
irrevocably appoints Borrower Agent and Borrower Agent agrees to act under this
Agreement, as the agent and representative of itself and each other Borrower
for all purposes under this Agreement, including requesting Borrowings,
selecting whether any Loan or portion thereof is to bear interest as a Prime
Rate Loan or an Eurodollar Rate Loan, and receiving account statements and
other notices and communications to Borrowers (or any of them) from Agent.
Agent may rely, and shall be fully protected in relying, on any notice of
borrowing, disbursement instructions, reports, information or any other notice
or communication made or given by Borrower Agent, whether in its own name, on
behalf of any Borrower or on behalf of "the Borrowers," and Agent shall have no
obligation to make any inquiry or request any confirmation from or on behalf of
any other Borrower as to the binding effect on such Borrower of any such
request, instruction, report, information, notice or communication, nor shall
the joint and several character of Borrowers' liability for the Obligations be
affected, provided that the provisions of this SECTION 6.12 shall not be
construed so as to preclude any Borrower from directly requesting Borrowings or
taking other actions permitted to be taken by "a Borrower" hereunder. Agent may
maintain a single Loan Account in the name of "Kirkland's Stores, Inc."
hereunder, and each Borrower expressly agrees to such arrangement and confirms
that such arrangement shall have no effect on the joint and several character
of such Borrower's liability for the Obligations.
6.13. Nature and Extent of Each Borrower's Liability.
(a) Joint and Several Liability. Each Borrower
shall be liable for, on a joint and several basis, and hereby guarantees the
timely payment by all other Borrowers of, all of the Loans and other
Obligations, regardless of which Borrower actually may have received the
proceeds of any Loans or other extensions of credit hereunder or the amount of
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such Loans received or the manner in which Agent or any Lender accounts for
such Loans or other extensions of credit on its books and records, it being
acknowledged and agreed that Loans to any Borrower inure to the mutual benefit
of all Borrowers and that Agent and Lenders are relying on the joint and
several liability of Borrowers in extending the Loans and other financial
accommodations hereunder. Each Borrower hereby unconditionally and irrevocably
agrees that upon default in the payment when due (whether at stated maturity,
by acceleration or otherwise) of any principal of, or interest owed on, any of
the Loans or other Obligations, such Borrower shall forthwith pay the same,
without notice or demand.
(b) Unconditional Nature of Liability. Each
Borrower's joint and several liability hereunder with respect to, and guaranty
of, the Loans and other Obligations shall, to the fullest extent permitted by
Applicable Law, be unconditional irrespective of (i) the validity,
enforceability, avoidance or subordination of any of the Obligations or of any
promissory note or other document evidencing all or any part of the
Obligations, (ii) the absence of any attempt to collect any of the Obligations
from any other Obligor or any Collateral or other security therefor, or the
absence of any other action to enforce the same, (iii) the waiver, consent,
extension, forbearance or granting of any indulgence by Agent or any Lender
with respect to any provision of any instrument evidencing or securing the
payment of any of the Obligations, or any other agreement now or hereafter
executed by any other Borrower and delivered to Agent or any Lender, (iv) the
failure by Agent to take any steps to perfect or maintain the perfected status
of its security interest in or Lien upon, or to preserve its rights to, any of
the Collateral or other security for the payment or performance of any of the
Obligations or Agent's release of any Collateral or of its Liens upon any
Collateral, (v) Agent's or Lenders' election, in any proceeding instituted
under the Bankruptcy Code, for the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security interest by any
other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy
Code, (vii) the release or compromise, in whole or in part, of the liability of
any Obligor for the payment of any of the Obligations, (viii) any amendment or
modification of any of the Financing Agreements or waiver of any Default or
Event of Default thereunder, (ix) any increase in the amount of the Obligations
beyond any limits imposed herein or in the amount of any interest, fees or
other charges payable in connection therewith, or any decrease in the same, (x)
the disallowance of all or any portion of Agent's or any Lender's claims for
the repayment of any of the Obligations under Section 502 of the Bankruptcy
Code, or (xi) any other circumstance that might constitute a legal or equitable
discharge or defense of any Borrower. After the occurrence and during the
continuance of any Event of Default, Agent may proceed directly and at once,
without notice to any Obligor, against any or all of Obligors to collect and
recover all or any part of the Obligations, without first proceeding against
any other Obligor or against any Collateral or other security for the payment
or performance of any of the Obligations, and each Borrower waives any
provision that might otherwise require Agent under Applicable Law to pursue or
exhaust its remedies against any Collateral or Obligor before pursuing another
Obligor. Each Borrower consents and agrees that Agent shall be under no
obligation to xxxxxxxx any assets in favor of any Obligor or against or in
payment of any or all of the Obligations.
(c) No Reduction in Liability for Obligations.
No payment or payments made by an Obligor or received or collected by Agent
from a Borrower or any other Person by virtue of any action or proceeding or
any setoff or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to
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modify, reduce, release or otherwise affect the liability of any Borrower under
this Agreement, each of whom shall remain jointly and severally liable for the
payment and performance of all Loans and other Obligations until the
Obligations are paid in full and this Agreement is terminated.
(d) Contribution. Each Borrower is
unconditionally obligated to repay the Obligations as a joint and several
obligor under this Agreement. If, as of any date, the aggregate amount of
payments made by a Borrower on account of the Obligations and proceeds of such
Borrower's Collateral that are applied to the Obligations exceeds the aggregate
amount of Loan proceeds actually used by such Borrower in its business (such
excess amount being referred to as an "Accommodation Payment"), then each of
the other Borrowers (each such Borrower being referred to as a "Contributing
Borrower") shall be obligated to make contribution to such Borrower (the
"Paying Borrower") in an amount equal to (A) the product derived by multiplying
the sum of each Accommodation Payment of each Borrower by the Allocable
Percentage of the Borrower from whom contribution is sought less (B) the
amount, if any, of the then outstanding Accommodation Payment of such
Contributing Borrower (such last mentioned amount which is to be subtracted
from the aforesaid product to be increased by any amounts theretofore paid by
such Contributing Borrower by way of contribution hereunder, and to be
decreased by any amounts theretofore received by such Contributing Borrower by
way of contribution hereunder); provided, however, that a Paying Borrower's
recovery of contribution hereunder from the other Borrowers shall be limited to
that amount paid by the Paying Borrower in excess of its Allocable Percentage
of all Accommodation Payments then outstanding of all Borrowers. As used
herein, the term "Allocable Percentage" shall mean, on any date of
determination thereof, a fraction the denominator of which shall be equal to
the number of Borrowers who are parties to this Agreement on such date and the
numerator of which shall be 1; provided, however, that such percentages shall
be modified in the event that contribution from a Borrower is not possible by
reason of insolvency, bankruptcy or otherwise by reducing such Borrower's
Allocable Percentage equitably and by adjusting the Allocable Percentage of the
other Borrowers proportionately so that the Allocable Percentages of all
Borrowers at all times equals 100%.
(e) Subordination. Each Borrower hereby
subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have from or against any other Obligor,
and any successor or assign of any other Obligor, including any trustee,
receiver or debtor-in-possession, howsoever arising, due or owing or whether
heretofore, now or hereafter existing, to the payment in full of all of the
Obligations.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1. Collateral Reporting.
(a) Borrowers shall provide Agent with the
following documents in a form satisfactory to Agent:
(i) on a weekly basis on or before
Tuesday of each week for the week ended on the immediately preceding Saturday
(or if an Event of Default
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exists, more frequently as required by Agent), schedules of sales made, credits
issued and cash received;
(ii) on a weekly basis on or before
Tuesday of each week for the week ended on the immediately preceding Saturday
(or if an Event of Default exists, more frequently as required by Agent), (A)
perpetual inventory reports, and (B) inventory reports by location, category
and mix (and including the amounts of Inventory and the value thereof at any
store, leased locations and premises of warehouses, processors or other third
parties);
(iii) on a monthly basis, on or before
the first Tuesday after the last day of each of Borrowers' fiscal months, (A)
an aging of inventory report which includes as the oldest category of inventory
the inventory that is aged over 330 days, and (B) agings of accounts payable
(and including information indicating the amounts owing to owners and lessors
of leased premises, warehouses, processors and other third parties from time to
time in possession of any Collateral);
(iv) upon Agent's request, (A) copies
of customer statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of purchase orders, invoices and delivery
documents for Inventory acquired by any Borrower;
(v) on a monthly basis on or before
the twentieth (20th) day after the end of each of Borrowers' fiscal months,
reports by retail store location of sales and contribution to Consolidated
EBITDA for each such retail store location,
(vi) on a monthly basis, on or before
the fifth (5th) day of each calendar month, a written certificate that all rent
payable by any Borrower with respect to each leased location of a Borrower had
been paid as of the last day of the immediately preceding month and that all
sales taxes payable by any Borrower through the last day of the immediately
preceding month have been paid;
(vii) on a monthly basis, on or before
the 20th day after the end of each of Borrowers' fiscal months, a written
report listing the address and lessor of each leased premises at which any
Inventory is located, other than Borrowers' leased retail store locations; and
(viii) such other reports as to the
Collateral as Agent shall request from time to time.
(b) If any Borrower's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Agent and to follow Agent's instructions with respect to further
services at any time that an Event of Default exists or has occurred and is
continuing.
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7.2. Accounts Covenants.
(a) Each Borrower shall notify Agent promptly
of the assertion of any material claims, offsets, defenses or counterclaims by
any account debtor, Credit Card Issuer or Credit Card Processor or any disputes
with any of such Persons or any settlement, adjustment or compromise thereof
and (ii) all material adverse information relating to the financial condition
of any account debtor, Credit Card Issuer or Credit Card Processor. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor, Credit Card Issuer or Credit Card Processor
except in the ordinary course of a Borrower's business in accordance with the
current practices of a Borrower as in effect on the date hereof. So long as no
Event of Default exists or has occurred and is continuing, Borrowers shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with
any account debtor, Credit Card Issuer, or Credit Card Processor. At any time
that an Event of Default exists or has occurred and is continuing, Agent shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors, Credit Card
Issuers or Credit Card Processors or grant any credits, discounts or
allowances.
(b) Each Borrower shall notify Agent promptly
of: (i) any notice of a material default by such Borrower under any of the
Credit Card Agreements or of any default which might result in the Credit Card
Issuer or Credit Card Processor ceasing to make payments or suspending payments
to such Borrower, (ii) any notice from any Credit Card Issuer or Credit Card
Processor that such Person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to such Borrower from such
Person, or that such Person is terminating or will terminate any of the Credit
Card Agreements, and (iii) the failure of such Borrower to comply with any
material terms of the Credit Card Agreements or any terms thereof which might
result in the Credit Card Issuer or Credit Card Processor ceasing or suspending
payments to such Borrower.
(c) With respect to each Account: (i) no
payments shall be made thereon except payments delivered to Agent pursuant to
the terms of this Agreement, (ii) there shall be no setoffs, deductions,
contras, defenses, counterclaims or disputes existing or asserted with respect
thereto except as reported to Agent in accordance with the terms of this
Agreement and (iii) none of the transactions giving rise thereto will violate
any applicable State or Federal Laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) Agent may, at any time or times that an
Event of Default exists or has occurred, (i) unless such amounts are already
being directly deposited in the Agent Payment Account, notify any or all
account debtors, Credit Card Issuers and Credit Card Processors that the
Accounts have been assigned to Agent and that Agent has a security interest
therein and Agent may direct any or all account debtors, Credit Card Issuers
and Credit Card Processors to make payments of Accounts directly to Agent, (ii)
extend the time of payment of, compromise, settle or adjust for cash, credit,
return of merchandise or otherwise, and upon any terms or conditions, any and
all Accounts or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any
way liable for payment thereof without affecting any of the Obligations, (iii)
demand, collect or enforce
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payment of any Accounts or such other obligations, but without any duty to do
so, and Agent shall not be liable for its failure to collect or enforce the
payment thereof not for the negligence of its agents or attorneys with respect
thereto and (iv) take whatever other action Agent may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Agent's request, all
invoices and statements sent to any account debtor, Credit Card Issuer or
Credit Card Processor shall state that the Accounts due from such account
debtor, Credit Card Issuer or Credit Card Processor and such other obligations
have been assigned to Agent and are payable directly and only to Agent, and
each Borrower shall deliver to Agent such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Agent may require.
(e) Agent shall have the right at any time or
times, in Agent's name or in the name of a nominee of Agent, to verify the
validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(f) Each Borrower shall deliver or cause to be
delivered to Agent, with appropriate endorsement and assignment, with full
recourse to such Borrower, all chattel paper and instruments which such
Borrower now owns or may at any time acquire immediately upon such Borrower's
receipt thereof, except as Agent may otherwise agree in writing.
7.3. Inventory Covenants. With respect to the Inventory:
(a) each Borrower shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality, quantity and aging of Inventory, such
Borrower's cost therefor and daily withdrawals therefrom and additions thereto;
(b) each Borrower shall conduct a physical count of the Inventory at least once
each year, but at any time or times as Agent may request on or after an Event
of Default, and promptly following such physical inventory shall supply Agent
with a report in the form and with such specificity as may be reasonably
satisfactory to Agent concerning such physical count; (c) no Borrower shall
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Agent, except for sales of Inventory in the
ordinary course of a Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Agent's request, Borrowers shall, at its expense, no more than two times
in any twelve (12) month period, but at any time or times as Agent may request
at Agent's expense, or at any time or times as Agent may request at Borrowers'
expense on or after an Event of Default, deliver or cause to be delivered to
Agent written reports or appraisals or appraisal updates as to the Inventory in
form, scope and methodology acceptable to Agent and by an appraiser acceptable
to Agent, addressed to Agent and upon which Agent is expressly permitted to
rely; (e) upon Agent's request, Borrowers shall, at their expense, conduct
through RGIS Inventory Specialists, Inc. or another inventory counting service
acceptable to Agent, a physical count of the Inventory in form, scope and
methodology acceptable to Agent no more than once in any twelve (12) month
period, but at any time or times as Agent may request on or after an Event of
Default or at any time or times as Agent may request in the event of test count
variances is in excess of 5% of the Cost of all Eligible Inventory, the results
of which shall be reported directly by such inventory counting service to Agent
and Borrowers shall promptly
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deliver confirmation in a form satisfactory to Agent that appropriate
adjustments have been made to the inventory records of each Borrower to
reconcile the inventory count to each Borrower's inventory records; (f) each
Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with Applicable Law (including, but not limited to,
the requirements of the Federal Fair Labor Standards Act of 1938, as amended
and all rules, regulations and orders related thereto); (g) each Borrower
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (h) no Borrower
shall sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate a Borrower to repurchase such
Inventory except for the right of return given to retail customers of a
Borrower in the ordinary course of the business of a Borrower in accordance
with the then current return policy of such Borrower; (i) each Borrower shall
keep the Inventory in good and marketable condition; and (j) no Borrower shall
acquire or accept any Inventory on consignment or approval.
7.4. [Reserved]
7.5. Power of Attorney. Each Borrower hereby irrevocably
designates and appoints Agent (and all persons designated by Agent) as such
Borrower's true and lawful attorney-in-fact, and authorizes Agent, in such
Borrower's, or Agent's name, to: (a) at any time an Event of Default exists or
has occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as the Agent deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Receivable, (vii) prepare, file and sign such Borrower's name on any
proof of claim in bankruptcy or other similar document against an account debtor
or other obligor in respect of any Receivables or other Collateral, (viii)
notify the post office authorities to change the address for delivery of
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Agent, and open and
dispose of all mail addressed to such Borrower and handle and store all mail
relating to the Collateral; and (ix) do all acts and things which are necessary,
in Agent's determination, to fulfill such Borrower's obligations under this
Agreement and the other Financing Agreements and (b) at any time to (i) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, (ii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse such Borrower's name upon any items of payment in
respect of Receivables or constituting Collateral or otherwise received by Agent
and any Lender and deposit the same in Agent's account for application to the
Obligations, (iv) endorse such Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods pertaining thereto or any other Collateral, including any warehouse
or other receipts, or bills of lading and other negotiable or non-negotiable
documents, and (v) sign such Borrower's name on any verification of Receivables
and notices thereof to account debtors or any secondary obligors or other
obligors in respect thereof. Each Borrower hereby releases Agent and Lenders and
their respective officers, employees and designees from any liabilities arising
from any act or acts under this power of
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attorney and in furtherance thereof, whether of omission or commission, except
as a result of Agent's or any Lender's own gross negligence or wilful
misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
7.6. Right to Cure. Agent may, at its option, upon notice
to Borrower Agent, (a) cure any default by any Borrower under any material
agreement with a third party that affects the Collateral, its value or the
ability of Agent to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Agent or any Lender therein or the ability of any
Borrower or any other Obligor to perform its obligations hereunder or under any
of the other Financing Agreements, (b) pay or bond on appeal any judgment
entered against any Borrower, (c) discharge taxes, Liens, security interests or
other encumbrances at any time levied on or existing with respect to the
Collateral and (d) pay any amount, incur any expense or perform any act which,
in Agent's judgment, is necessary or appropriate to preserve, protect, insure
or maintain the Collateral and the rights of Agent and Lenders with respect
thereto. Agent may add any amounts so expended to the Obligations and charge
Borrowers' account therefor, such amounts to be repayable by Borrowers on
demand. Agent and Lenders shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of any Borrower or any other Obligor. Any payment made
or other action taken by Agent or any Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
7.7. Access to Premises. From time to time as requested
by Agent or Term Lender, at the cost and expense of Borrowers, (a) Agent, Term
Lender or their respective designees shall have complete access to all of each
Borrower premises during normal business hours and after notice to, or at any
time and without notice to any Borrower if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrowers' books and records, including the
Records, and (b) each Borrower shall promptly furnish to Agent such copies of
such books and records or extracts therefrom as Agent may request, and (c)
Agent or any Lender or Agent's designee may use during normal business hours
such of each Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of
other Collateral.
7.8. Sales Taxes. Borrowers shall segregate collections
of sales tax in a separate Blocked Account at any time upon Agent's request if
an Event of Default exists.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Agent and Lenders the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans by Lenders to Borrowers:
8.1. Corporate Existence, Power and Authority. Each
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation or organization and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership
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of assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a Material Adverse Effect. The
execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder (a) are
all within such Borrower's corporate powers, (b) have been duly authorized, (c)
are not in contravention of law or the terms of such Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which such Borrower is a party or by
which such Borrower or its property are bound and (d) will not result in the
creation or imposition of, or require or give rise to any obligation to grant,
any Lien, security interest, charge or other encumbrance upon any property of
such Borrower. This Agreement and the other Financing Agreements to which a
Borrower is a party constitute legal, valid and binding obligations of such
Borrower enforceable in accordance with their respective terms.
8.2. Name; State of Organization; Chief Executive Office;
Collateral Locations.
(a) The exact legal name of each Borrower is as
set forth on the signature page of this Agreement and in the Information
Certificate applicable to such Borrower. No Borrower has, during the past five
years, been known by or used any other corporate or fictitious name or been a
party to any merger or consolidation, or acquired all or substantially all of
the assets of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth in the Information
Certificate.
(b) Each Borrower is an organization of the
type and organized in the jurisdiction set forth in the Information Certificate
applicable to such Borrower. The Information Certificate accurately set forth
the organizational identification numbers of each Borrower or accurately state
that such Borrower has none and accurately set forth the federal employer
identification number of each Borrower.
(c) The chief executive office and mailing
address of each Borrower and each Borrower's Records concerning Accounts are
located only at the address identified as such in SCHEDULE 8.2 to the
Information Certificate and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in SCHEDULE
8.2 to the Information Certificate applicable to such Borrower, subject to the
rights of Borrowers to establish new locations in accordance with SECTION 9.2
below. The Information Certificate correctly identify any of such locations
which are not owned by a Borrower and set forth the owners and/or operators
thereof.
8.3. Financial Statements; No Material Adverse Change.
All financial statements relating to Borrowers which have been or may hereafter
be delivered by Borrowers to Agent and Lenders have been prepared in accordance
with GAAP (except as to any interim financial statements, to the extent such
statements are subject to normal year-end adjustments and do not include any
notes) and fairly present in all material respects the financial condition and
the results of operation of each Borrower as at the dates and for the periods
set forth therein. Except as disclosed in any interim financial statements
furnished by Borrowers to Agent prior to the date of this Agreement, there has
been no act, condition or event which has had or is reasonably likely to have a
Material Adverse Effect since the date of the most recent audited
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financial statements of Borrowers furnished by Borrowers to Agent prior to the
date of this Agreement.
8.4. Priority of Liens; Title to Properties. The security
interests and Liens granted to Agent under this Agreement and the other
Financing Agreements constitute valid and perfected first priority Liens and
security interests in and upon the Collateral subject only to the Liens
indicated on SCHEDULE 8.4 to the Information Certificate and the other Liens
permitted under SECTION 9.8 hereof. Each Borrower has good and marketable fee
simple title to or valid leasehold interests in all of its Real Property and
good, valid and merchantable title to all of its other properties and assets
subject to no Liens, of any kind, except those granted to Agent and such others
as are specifically listed on SCHEDULE 8.4 to the Information Certificate or
permitted under SECTION 9.8 hereof.
8.5. Tax Returns. Each Borrower has filed, or caused to
be filed, in a timely manner all tax returns, reports and declarations which
are required to be filed by it. All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Each
Borrower has paid or caused to be paid all taxes due and payable or claimed due
and payable in any assessment received by it, except taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower and with respect to which adequate
reserves have been set aside on its books. Adequate provision has been made for
the payment of all accrued and unpaid Federal, State, county, local, foreign
and other taxes whether or not yet due and payable and whether or not disputed.
8.6. Litigation. Except as set forth on SCHEDULE 8.6 to
the Information Certificate, (a) there is no investigation by any Governmental
Authority pending, or to the best of each Borrower's knowledge threatened,
against or affecting any Borrower, its or their assets or business and (b)
there is no action, suit, proceeding or claim by any Person pending, or to the
best of each Borrower's knowledge threatened, against any Borrower or its or
their assets or goodwill, or against or affecting any transactions contemplated
by this Agreement, in each case, which if adversely determined against such
Borrower has or could reasonably be expected to have a Material Adverse Effect.
8.7. Compliance with Other Agreements and Applicable
Laws.
(a) No Borrower is in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Each Borrower is in compliance with
the requirements of all Applicable Laws, rules, regulations and orders of any
Governmental Authority relating to its respective business, including, without
limitation, those set forth in or promulgated pursuant to the Occupational
Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of
1938, as amended, ERISA, the Code, as amended, and the rules and regulations
thereunder, and all Environmental Laws.
(b) Each Borrower has obtained all material
permits, licenses, approvals, consents, certificates, orders or authorizations
of any Governmental Authority required for the lawful conduct of its business
(the "Permits"). All of the Permits are valid and
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subsisting and in full force and effect. There are no actions, claims or
proceedings pending or to the best of each Borrower's knowledge, threatened
that seek the revocation, cancellation, suspension or modification of any of
the Permits.
8.8. Environmental Compliance.
(a) Except as set forth on SCHEDULE 8.8 to the
Information Certificate or in that certain Phase I Environmental Assessment
with respect to the Real Property subject to the Mortgage dated October, 2000,
prepared by Water & Air Research, Inc. for Parent and Agent (the "Phase I
Report"), neither any Borrower nor any of its Subsidiaries has generated, used,
stored, treated, transported, manufactured, handled, produced or disposed of
any Hazardous Materials, on or off its premises (whether or not owned by it) in
any manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of each Borrower and each of
its Subsidiaries complies in all material respects with all Environmental Laws
and all Permits.
(b) Except as set forth on SCHEDULE 8.8 to the
Information Certificate or the Phase I report, there has been no investigation
by any Governmental Authority or any proceeding, complaint, order, directive,
claim, citation or notice by any Governmental Authority or any other person nor
is any pending or to the best of each Borrower's knowledge threatened, with
respect to any non-compliance with or violation of the requirements of any
Environmental Law by any Borrower or any of its Subsidiaries or the release,
spill or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be
expected to adversely affect in any material respect any Borrower or its
business, operations or assets or any properties at which any Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Except as set forth on SCHEDULE 8.8 to the
Information Certificate or the Phase I report, no Borrower nor any of its
Subsidiaries has material liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Each Borrower and each of its Subsidiaries
have all Permits required to be obtained or filed in connection with the
operations of such Borrower under any Environmental Law and all of such
licenses, certificates, approvals or similar authorizations and other Permits
are valid and in full force and effect.
8.9. Employee Benefits.
(a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal or
State law. Each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination, opinion or notification letter
from the Internal Revenue Service and to the best of each Borrower's knowledge,
nothing has occurred which would cause the loss of such qualification.
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Each Borrower and its ERISA Affiliates have made all required contributions to
any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
(b) There are no pending, or to the best of
each Borrower's knowledge, threatened claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan (other than claims for
benefits made in the ordinary course of the operation of the Plan). To the best
of each Borrower's knowledge, there has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is
reasonably expected to occur; (ii) the current value of each Plan's assets
(determined in accordance with the assumptions used for funding such Plan
pursuant to Section 412 of the Code) are not less than such Plan's liabilities
under Section 4001(a)(16) of ERISA; (iii) no Borrower nor any of its ERISA
Affiliates, has incurred and do not reasonably expect to incur, any liability
under Title IV of ERISA with respect to any Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iv) no Borrower nor any of its
Affiliates, has incurred and do not reasonably expect to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (v) no Borrower nor any of its ERISA
Affiliates, has engaged in a transaction that would be subject to Section 4069
or 4212(c) of ERISA with respect to any Plan subject to Title IV of ERISA.
8.10. Bank Accounts. All of the deposit accounts,
investment accounts or other accounts in the name of or used by any Borrower
maintained at any bank or other financial institution are set forth on SCHEDULE
8.10 to the Information Certificate, subject to the right of each Borrower to
establish new accounts in accordance with SECTION 5.2 hereof.
8.11. Intellectual Property. Each Borrower owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted or proposed to be
conducted. As of the date hereof, no Borrower has any Intellectual Property
registered, or subject to pending applications, in the United States Patent and
Trademark Office or any similar office or agency in the United States, any
State thereof, any political subdivision thereof or in any other country, other
than those described in SCHEDULE 8.11 to the Information Certificate and has
not granted any licenses with respect thereto other than as set forth in
SCHEDULE 8.11 to the Information Certificate. No event has occurred which
permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of each
Borrower's knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by such
Borrower infringes any patent, trademark, service xxxx, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting such
Borrower contesting its right to sell or use any such Intellectual Property.
SCHEDULE 8.11 to the Information Certificate sets forth all of the agreements
or other arrangements of Borrowers pursuant to which any Borrower has a license
or other right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other
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arrangements of any Borrower as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be entered into by
any Borrower after the date hereof, collectively, the "License Agreements" and
individually, a "License Agreement"). No trademark, service xxxx, copyright or
other Intellectual Property at any time used by any Borrower which is owned by
another person, or owned by any Borrower subject to any security interest, Lien,
collateral assignment, pledge or other encumbrance in favor of any Person other
than Agent, is affixed to any Eligible Inventory, except (a) to the extent
permitted under the term of the license agreements listed on SCHEDULE 8.11 to
the Information Certificate and (b) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower
under Applicable Law (including the United States Copyright Act of 1976).
8.12. Subsidiaries; Affiliates; Capitalization; Solvency.
(a) No Borrower has any direct or indirect
Subsidiaries or Affiliates nor is any Borrower engaged in any joint venture or
partnership except as set forth in SCHEDULE 8.12 to the Information
Certificate.
(b) Each Borrower is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
its Subsidiaries listed on SCHEDULE 8.12 to its Information Certificate as
being owned by such Borrower and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any kind or nature
and there are no contracts, commitments, understandings or arrangements by
which any Subsidiary is or may become bound to issue additional shares of it
Capital Stock or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of
Capital Stock of each Borrower are directly and beneficially owned and held by
the persons indicated in the Information Certificate, and in each case all of
such shares have been duly authorized and are fully paid and non-assessable,
free and clear of all claims, Liens, pledges and encumbrances of any kind,
except as disclosed in writing to Agent prior to the date hereof.
(d) Each Borrower is Solvent and will continue
to be Solvent after the creation of the Obligations, the security interests of
Agent and the other transaction contemplated hereunder.
8.13. Labor Disputes.
(a) Set forth on SCHEDULE 8.13 to each
Information Certificate is a list (including dates of termination) of all
collective bargaining or similar agreements between or applicable to any
Borrower and any union, labor organization or other bargaining agent in respect
of the employees of any Borrower on the date hereof.
(b) There is (i) no significant unfair labor
practice complaint pending against any Borrower or, to the best of each
Borrower's knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant
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arbitration proceeding arising out of or under any collective bargaining
agreement is pending on the date hereof against any Borrower or, to best of
each Borrower's knowledge, threatened against it, and (ii) no significant
strike, labor dispute, slowdown or stoppage is pending against any Borrower or,
to the best of each Borrower's knowledge, threatened against any Borrower.
8.14. Restrictions on Subsidiaries. Except for
restrictions contained in this Agreement or any other agreement with respect to
Indebtedness of any Borrower permitted hereunder as in effect on the date
hereof, there are no contractual or consensual restrictions on any Borrower or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer
of cash or other assets (i) between any Borrower and any of its Subsidiaries or
(ii) between any Subsidiaries of any Borrower or (b) the ability of any Borrower
or any of its Subsidiaries to incur Indebtedness or grant security interests to
Agent or any Lender in the Collateral.
8.15. Material Contracts. SCHEDULE 8.15 to each
Information Certificate sets forth all Material Contracts to which a Borrower
is a party or is bound as of the date hereof. Each Borrower has delivered true,
correct and complete copies of such Material Contracts to Agent on or before
the date hereof. No Borrower is in breach or in default in any material respect
of or under any Material Contract and no Borrower has received any notice of
the intention of any other party thereto to terminate any Material Contract.
8.16. Payable Practices. No Borrower has made any material
change in the historical accounts payable practices from those in effect
immediately prior to the date hereof.
8.17. Accuracy and Completeness of Information. All
information furnished by or on behalf of each Borrower in writing to Agent or
any Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, including all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and
does not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Affect, which has not been
fully and accurately disclosed to Agent in writing prior to the date hereof.
8.18. Credit Card Agreements. Set forth in SCHEDULE 8.18
hereto is a correct and complete list of (a) all of the Credit Card Agreements
and all other agreements, documents and instruments existing as of the date
hereof between or among a Borrower, any of its Affiliates, the Credit Card
Issuers, the Credit Card Processors and any of their Affiliates, (b) the
percentage of each sale payable to the Credit Card Issuer or Credit Card
Processor under the terms of the Credit Card Agreements, (c) all other fees and
charges payable by a Borrower under or in connection with the Credit Card
Agreements and (d) the term of such Credit Card Agreements. The Credit Card
Agreements constitute all of such agreements necessary for each Borrower to
operate its business as presently conducted with respect to credit cards and
debit cards and no Accounts of any Borrower arise from purchases by customers
of Inventory with credit cards or debit cards, other than those which are
issued by Credit Card Issuers with whom a Borrower has entered into one of the
Credit Card Agreements set forth on SCHEDULE 8.18 hereto or with whom a
Borrower has entered into a Credit Card Agreement in accordance with SECTION
9.21 hereof. Each of the Credit Card Agreements constitutes the legal, valid
and binding
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obligations of a Borrower and to the best of each Borrower's knowledge, the
other parties thereto, enforceable in accordance with their respective terms
and are in full force and effect. No default or event of default, or act,
condition or event which after notice or passage of time or both, would
constitute a default or an event of default under any of the Credit Card
Agreements exists or has occurred. Borrowers and the other parties thereto have
complied with all of the terms and conditions of the Credit Card Agreements to
the extent necessary for any Borrower to be entitled to receive all payments
thereunder. Each Borrower has delivered, or caused to be delivered to Agent,
true, correct and complete copies of all of the Credit Card Agreements.
8.19. Survival of Warranties; Cumulative. All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower shall
now or hereafter give, or cause to be given, to Agent or any Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1. Maintenance of Existence.
(a) Each Borrower shall at all times preserve,
renew and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on the business as presently or proposed to be
conducted.
(b) No Borrower shall change its name unless
each of the following conditions is satisfied: (i) Agent shall have received
not less than thirty (30) days prior written notice from such Borrower of such
proposed change in its corporate name, which notice shall accurately set forth
the new name; and (ii) Agent shall have received a copy of the amendment to the
Certificate of Incorporation of such Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower as soon as it is available.
(c) No Borrower shall change its chief
executive office or its mailing address or organizational identification number
(or if it does not have one, shall not acquire one) unless Agent shall have
received not less than thirty (30) days' prior written notice from such
Borrower of such proposed change, which notice shall set forth such information
with respect thereto as Agent may require and Agent shall have received such
agreements as Agent may reasonably require in connection therewith. No Borrower
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2. New Collateral Locations. A Borrower may only open
any new location within the continental United States provided such Borrower
(a) gives Agent thirty (30) days
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prior written notice of the intended opening of any such new location, if such
new location is not a new warehouse location, and (b) executes and delivers,
and uses its best efforts to cause the owner or lessor of such location to
execute and deliver, to Agent such agreements, documents, and instruments as
Agent may deem reasonably necessary or desirable to protect its interests in
the Collateral at such location. A Borrower may only lease, occupy or use any
new warehouse location provided such Borrower (i) gives Agent written notice of
such new location, including its address and the name and address of its owner
or lessor within five (5) days after such Borrower occupies or delivers
Inventory to such warehouse, and (ii) executes and delivers, and uses its best
efforts to cause the owner or lessor of such warehouse to execute and deliver,
to Agent such agreements, documents, and instruments as Agent may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location.
9.3. Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and shall cause each
of its Subsidiaries to, at all times, comply in all material respects with all
laws, rules, regulations, licenses, approvals, orders and other Permits
applicable to it and duly observe in all material respects all requirements of
any foreign, Federal, State or local Governmental Authority, including ERISA,
the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including all of the Environmental Laws.
(b) Each Borrower shall give written notice to
Agent immediately upon such Borrower's receipt of any notice of, or such
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by such Borrower or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material other than
in the ordinary course of business and other than as permitted under any
applicable Environmental Law. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall
be promptly furnished, or caused to be furnished, by such Borrower to Agent.
Each Borrower shall take prompt action to respond to any material
non-compliance with any of the Environmental Laws and shall regularly report to
Agent on such response.
(c) Without limiting the generality of the
foregoing, whenever Agent reasonably determines that there is non-compliance,
or any condition which requires any action by or on behalf of a Borrower in
order to avoid any non-compliance, with any Environmental Law, that could
reasonably be expected to have a Material Adverse Effect, such Borrower shall,
at Agent's request and Borrowers' expense: (i) cause an independent
environmental engineer reasonably acceptable to Agent to conduct such tests of
the site where non-compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and deliver to Agent a
report as to such non-compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Agent a
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supplemental report of such engineer whenever the scope of such non-compliance,
or such Borrower's response thereto or the estimated costs thereof, shall
change in any material respect.
(d) Each Borrower shall indemnify, defend and
hold harmless Agent and Lenders and their respective directors, officers,
employees, agents, invitees, representatives, successors and assigns, from and
against any and all losses, claims, damages, liabilities, costs, and expenses
(including reasonable attorneys' fees and expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property
of a Borrower and the preparation and implementation of any closure, remedial
or other required plans. All representations, warranties, covenants and
indemnifications in this SECTION 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4. Payment of Taxes and Claims. Each Borrower shall,
and shall cause each of its Subsidiaries to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower or such Subsidiary, as the case may be, and with
respect to which adequate reserves have been set aside on its books. Borrowers
shall be jointly and severally liable for any tax or penalties imposed on Agent
or any Lender as a result of the financing arrangements provided for herein and
each Borrower agrees to indemnify and hold Agent harmless with respect to the
foregoing, and to repay to Agent, for the benefit of Lenders, on demand the
amount thereof, and until paid by Borrowers such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrowers to pay any income or franchise taxes
attributable to the income of Lenders from any amounts charged or paid
hereunder to Lenders. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement.
9.5. Insurance. Each Borrower shall, and shall cause each
of its Subsidiaries to, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or
damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated. Said policies of
insurance shall be reasonably satisfactory to Agent as to form, amount and
insurer. Each Borrower shall furnish certificates, policies or endorsements to
Agent as Agent shall reasonably require as proof of such insurance, and, if any
Borrower fails to do so, Agent is authorized, but not required, to obtain such
insurance at the expense of Borrowers. All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction
of coverage and that Agent may act as attorney for each Borrower in obtaining,
and at any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance. Each Borrower shall
cause Agent to be named as a loss payee and an additional insured (but without
any liability for any premiums) under such insurance policies and Borrowers
shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance satisfactory to Agent. Such lender's
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Agent as its interests may appear and further specify that
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Agent and Lenders shall be paid regardless of any act or omission by any
Borrower or any of its or their Affiliates.
9.6. Financial Statements and Other Information.
(a) Each Borrower shall, and shall cause each
of its Subsidiaries to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its
Subsidiaries in accordance with GAAP. Each Borrower shall promptly furnish to
Agent and Lenders all such financial and other information as Agent shall
reasonably request relating to the Collateral and the assets, business and
operations of such Borrower, and to notify the auditors and accountants of such
Borrower that Agent is authorized to obtain such information directly from
them. Without limiting the foregoing, Borrowers shall furnish or cause to be
furnished to Agent, the following: (i) within thirty (30) days after the end of
each fiscal month (unless such month is the last month of a fiscal quarter, and
then within forty-five (45) days after the end of such month, and if the
initial public offering of Parent occurs, concurrently with each delivery of
its 10-Q for any period), monthly unaudited consolidated financial statements,
and unaudited consolidating financial statements (including in each case
balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly
presenting the financial position and the results of the operations of
Borrowers and their Subsidiaries as of the end of and through such fiscal
month, certified to be correct by the chief financial officer of Borrowers,
subject to normal year-end adjustments and no footnotes and accompanied by a
compliance certificate substantially in the form of EXHIBIT C hereto, along
with a schedule in a form satisfactory to Agent of the calculations used in
determining, as of the end of such month, whether Borrower are in compliance
with the covenants set forth in SECTIONS 9.17 and 9.19 of this Agreement for
such month and (ii) within ninety (90) days after the end of each Fiscal Year,
audited consolidated financial statements and unaudited consolidating financial
statements of Borrowers and their Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrowers and their Subsidiaries as of the end of and for such
Fiscal Year, together with the unqualified opinion (which shall not contain a
"going concern" qualification) of independent certified public accountants with
respect to the audited consolidated financial statements, which accountants
shall be an independent accounting firm selected by Borrowers and acceptable to
Agent, that such audited consolidated financial statements have been prepared
in accordance with GAAP, and present fairly the results of operations and
financial condition of Borrowers and their Subsidiaries as of the end of and
for the Fiscal Year then ended.
(b) Borrowers shall promptly notify Agent in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to Collateral having a value of more than $250,000
or which if adversely determined would result in any material adverse change in
any Borrower's business, properties, assets, goodwill or condition, financial
or otherwise, (ii) any Material Contract being terminated or amended or any new
Material Contract entered into (in which event Borrowers shall provide Agent
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $250,000 shall have been entered against any Borrower any of its
properties or assets, (iv) any notification of a
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material violation of laws or regulations received by any Borrower, (v) any
ERISA Event, and (vi) the occurrence of any Default or Event of Default.
(c) Each Borrower shall promptly after the
sending or filing thereof furnish or cause to be furnished to Agent copies of
all reports which such Borrower sends to its stockholders generally and copies
of all reports and registration statements which such Borrower files with the
Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.
(d) Each Borrower shall furnish or cause to be
furnished to Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of such Borrower, as Agent may, from
time to time, reasonably request. Agent is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
such Borrower to any court or other Governmental Authority, or to any Lender or
Participant or prospective Lender or Participant, or any Affiliate of any
Lender or Participant, subject to SECTION 13.5 hereof. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Agent, at Borrowers' expense, copies of the financial statements of Borrowers
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrowers and to disclose to Agent and Lenders such information as
they may have regarding the business of any Borrower. Any documents, schedules,
invoices or other papers delivered to Agent or any Lender may be destroyed or
otherwise disposed of by Agent or such Lender one (1) year after the same are
delivered to Agent or such Lender, except as otherwise designated by party to
Agent or such Lender in writing.
9.7. Sale of Assets, Consolidation, Merger, Dissolution,
Etc. No Borrower shall, and shall not permit any of its Subsidiaries to,
directly or indirectly,
(a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it;
(b) sell, assign, lease, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for
(i) sales of Inventory in the ordinary
course of business,
(ii) the sale or other disposition of
Equipment (including worn-out or obsolete Equipment or Equipment no longer used
or useful in the business of Borrower) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $500,000 for all such Equipment disposed of by all Borrowers in any
Fiscal Year of Borrowers, and
(iii) the issuance of Capital Stock of a
Borrower consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of a Borrower for the benefit of
its employees, directors and consultants, provided, that, in no event shall any
Borrower be required to issue, or shall any Borrower issue,
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Capital Stock pursuant to such stock plans or 401(k) plans which would result
in a Change of Control or other Event of Default,
(iv) sales or other dispositions by a
Borrower of assets in connection with the closing or sale of a retail store
location of a Borrower in the ordinary course of a Borrower's business, which
assets consist of leasehold interests in the premises of such store, the
Equipment and fixtures located at such premises and the books and records
relating exclusively and directly to the operations of such store; provided,
that, as to each and all such closures of retail stores, (A) on the date of,
and after giving effect to, any such retail store closure, Borrowers shall not
have closed retail store locations accounting for more than $2,000,000 of
Consolidated EBITDA in the immediately preceding twelve (12) fiscal month
period, and (B) Agent shall have received not less than ten (10) Business Days
prior written notice of such closure; and provided further that, as to each and
all such sales of retail stores (V) on the date of, and after giving effect to,
any such retail store sale in any calendar year, Borrowers shall not have sold
retail store locations accounting for more than five percent (5%) of all sales
of all Borrowers in the immediately preceding twelve (12) fiscal month period,
(W) Agent shall have received not less than ten (10) Business Days prior
written notice of such sale, which notice shall set forth in reasonable detail
satisfactory to Agent the parties to such sale, the assets to be sold or
otherwise disposed of, the purchase price and the manner of payment thereof and
such other information with respect thereto as Agent may request, (X) as of the
date of such sale or other disposition and after giving effect thereto, no
Default or Event of Default shall exist or have occurred, (Y) such sale shall
be on commercially reasonable prices and terms in a bona fide arm's length
transaction, and (Z) any and all net proceeds payable or delivered to any
Borrower in respect of such sale or other disposition shall be paid or
deposited into the Agent Payment Account or, as and when required by SECTION
2.3(d) hereof, paid or delivered to Agent as a prepayment on the Term Loan, and
(v) the sale or transfer of Capital
Stock of Parent in connection with Parent's initial public offering or any
subsequent public offering of Capital Stock of Parent;
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8. Encumbrances. No Borrower shall, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien of any nature whatsoever on any of its assets or properties, including the
Collateral, except:
(a) Liens of Agent for itself and the benefit
of Lenders;
(b) Liens securing the payment of taxes,
assessments or other governmental charges or levies either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrowers or their
Subsidiaries, as the case may be and with respect to which adequate reserves
have been set aside on its books;
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(c) non-consensual statutory Liens (other than
liens securing the payment of taxes) arising in the ordinary course of a
Borrower's or its Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such Liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower or its Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of Real Property which do not
interfere in any material respect with the use of such Real Property or ordinary
conduct of the business of a Borrower or its Subsidiaries as presently conducted
thereon or materially impair the value of the Real Property which may be subject
thereto;
(e) purchase money security interests in
Equipment (including Capital Leases) and purchase money mortgages on Real
Property to secure Indebtedness permitted under SECTION 9.9(b) hereof;
(f) pledges and deposits of cash by a Borrower
after the date hereof in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
benefits consistent with the current practices of such Borrower as of the date
hereof;
(g) pledges and deposits of cash by a Borrower
after the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower as of the date hereof;
provided, that, in connection with any performance bonds issued by a surety or
other person, the issuer of such bond shall have waived in writing any rights in
or to, or other interest in, any of the Collateral in an agreement, in form and
substance satisfactory to Agent;
(h) Liens arising from (i) operating leases and
the precautionary UCC financing statement filings in respect thereof and (ii)
equipment or other materials which are not owned by a Borrower located on the
premises of such Borrower (but not in connection with, or as part of, the
financing thereof) from time to time in the ordinary course of business and
consistent with current practices of such Borrower and the precautionary UCC
financing statement filings in respect thereof;
(i) judgments and other similar liens arising in
connection with court proceedings that do not constitute an Event of Default,
provided, that, (i) such Liens are being contested in good faith and by
appropriate proceedings diligently pursued, (ii) adequate reserves or other
appropriate provision, if any, as are required by GAAP have been made therefor,
(iii) a stay of enforcement of any such liens is in effect and (iv) Agent may
establish a Reserve with respect thereto; and
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(j) the security interests and liens set forth
on SCHEDULE 8.4 to the Information Certificate.
9.9. Indebtedness. No Borrower shall, nor shall it permit any of
its Subsidiaries to, incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, any Indebtedness, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly), the
Indebtedness, performance, obligations or dividends of any other Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital
Leases) arising after the date hereof to the extent secured by purchase money
security interests in Equipment (including Capital Leases) and purchase money
mortgages on Real Property not to exceed $2,500,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of any Borrower or any Subsidiary other than the Equipment or Real
Property so acquired, and the Indebtedness secured thereby does not exceed the
cost of the Equipment or Real Property so acquired, as the case may be;
(c) guarantees by a Borrower of the Obligations of the
other Borrowers in favor of Agent for the benefit of Lenders;
(d) the Indebtedness of a Borrower to any other Borrower
arising after the date hereof pursuant to loans by such Borrower permitted under
SECTION 9.10(g) hereof;
(e) unsecured Indebtedness of a Borrower arising after
the date hereof to any third Person (but not to any other Borrower ), provided,
that, each of the following conditions is satisfied as determined by Agent and
the Term Lender: (i) such Indebtedness shall be on terms and conditions
acceptable to Agent and the Term Lender and shall be subject and subordinate in
right of payment to the right of Agent, the Term Lender and the other Lenders to
receive the prior indefeasible payment and satisfaction in full payment of all
of the Obligations pursuant to the terms of an intercreditor agreement between
Agent and such third party, in form and substance satisfactory to Agent, (ii)
Agent shall have received not less than ten (10) days prior written notice of
the intention of such Borrower to incur such Indebtedness, which notice shall
set forth in reasonable detail satisfactory to Agent the amount of such
Indebtedness, the Person or Persons to whom such Indebtedness will be owed, the
interest rate, the schedule of repayments and maturity date with respect thereto
and such other information as Agent may request with respect thereto, (iii)
Agent shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such Indebtedness,
(iv) except as Agent and the Term Lender may otherwise agree in writing, all of
the proceeds of the loans or other accommodations giving rise to such
Indebtedness shall be paid to Agent for application to the Obligations in such
order and manner as Agent and Term Lender may determine, (v) as of the date of
incurring such Indebtedness and after giving effect thereto, no Default or Event
of Default shall exist or have occurred, (vi) such Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto, except, that, Borrower
may, after prior written notice to
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Agent, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness (except pursuant to regularly scheduled payments permitted herein),
or set aside or otherwise deposit or invest any sums for such purpose, and (vii)
such Borrower shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by such Borrower or on its behalf promptly
after the receipt thereof, or sent by such Borrower or on its behalf
concurrently with the sending thereof, as the case may be;
(f) the Indebtedness set forth on SCHEDULE 9.9 to the
Information Certificate; provided, that, (i) a Borrower may only make payments
of principal and interest in respect of such Indebtedness in accordance with the
terms of the Subordination Agreement, (ii) such Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto as in effect on the date
hereof except, that, such Borrower may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iii)
such Borrower shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by such Borrower or on its behalf, promptly
after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10. Loans, Investments, Etc. No Borrower shall, nor shall it
permit any of its Subsidiaries to, directly or indirectly, make any loans or
advance money or property to any Person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the Capital Stock (other than
the purchase of Capital Stock of Parent in connection with Parent's initial
public offering) or Indebtedness or all or a substantial part of the assets or
property of any Person, or form or acquire any Subsidiaries, or agree to do any
of the foregoing, except:
(a) the endorsement of instruments for
collection or deposit in the ordinary course of business;
(b) investments in cash or Cash Equivalents,
provided, that, (i) no Loans are then outstanding and (ii) the terms and
conditions of SECTION 5.2 hereof shall have been satisfied with respect to the
deposit account, investment account or other account in which such cash or Cash
Equivalents are held;
(c) the existing equity investments of a
Borrower as of the date hereof in its Subsidiaries, provided, that, no Borrower
shall have any further obligations or liabilities to make any capital
contributions or other additional investments or other payments to or in or for
the benefit of any of such Subsidiaries;
(d) loans and advances by a Borrower to
employees of such Borrower (i) not to exceed the principal amount of $250,000 in
the aggregate at any time
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outstanding for all Borrowers and their Subsidiaries: (A) reasonably and
necessary work-related travel or other ordinary business expenses to be incurred
by such employee in connection with their work for such Borrower and (B)
reasonable and necessary relocation expenses of such employees (including home
mortgage financing for relocated employees); and (ii) not to exceed the
principal amount of $1,000,000 in the aggregate at any time outstanding for all
Borrowers and their Subsidiaries to permit such employees to purchase Capital
Stock in such Borrower so long as no Default or Event of Default shall exist or
have occurred and be continuing;
(e) stock or obligations issued to a Borrower by
any Person (or the representative of such Person) in respect of Indebtedness of
such Person owing to such Borrower in connection with the insolvency,
bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; provided, that, the original of any
such stock or instrument evidencing such obligations shall be promptly delivered
to Agent, upon Agent's request, together with such stock power, assignment or
endorsement by such Borrower as Agent may request;
(f) obligations of account debtors to a Borrower
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower; provided, that, promptly upon the
receipt of the original of any such promissory note by such Borrower, such
promissory note shall be endorsed to the order of Agent by such Borrower and
promptly delivered to Agent as so endorsed;
(g) the loans and advances set forth on SCHEDULE
9.10 to the Information Certificate; provided, that, as to such loans and
advances, (i) no Borrower shall, directly or indirectly, amend, modify, alter or
change the terms of such loans and advances or any agreement, document or
instrument related thereto and (ii) each Borrower shall furnish to Agent all
notices or demands in connection with such loans and advances either received by
such Borrower or on its behalf, promptly after the receipt thereof, or sent by
such Borrower or on its behalf, concurrently with the sending thereof, as the
case may be.
9.11. Dividends and Redemptions. No Borrower shall, directly or
indirectly, declare or pay any dividends on account of any shares of class of
any Capital Stock of such Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
(or set aside or otherwise deposit or invest any sums for such purpose) other
than the purchase of Capital Stock of Parent in connection with Parent's initial
public offering, for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that:
(a) a Borrower may declare and pay such
dividends or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of Capital Stock for consideration in the form of shares of common
stock (so long as after giving effect thereto no Change of Control or other
Default or Event of Default shall exist or occur);
(b) a Borrower may pay dividends to the extent
permitted in SECTION 9.12 below;
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(c) a Borrower may repurchase Capital Stock
consisting of common stock held by employees pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of such plan, provided, that, as to
any such repurchase, each of the following conditions is satisfied: (i) as of
the date of the payment for such repurchase and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing, (ii)
such repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower is a party or by
which sch Borrower or its or their property are bound, and (iv) the aggregate
amount of all payments for such repurchases in any calendar year shall not
exceed $250,000.
9.12. Transactions with Affiliates. No Borrower shall, directly or
indirectly:
(a) purchase, acquire or lease any property
from, or sell, transfer or lease any property to, any officer, director or other
Affiliate of a Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's business (as the case may be) and
upon fair and reasonable terms no less favorable to such Borrower than such
Borrower would obtain in a comparable arm's length transaction with an
unaffiliated person; or
(b) make any payments (whether by dividend, loan
or otherwise) of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or any other Affiliate of a Borrower, except (i) reasonable
compensation to officers, employees and directors for services rendered to such
Borrower in the ordinary course of business; (ii) purchase of Capital Stock of
Parent in connection with Parent's initial public offering so long as no Default
or Event of Default exists after or would result from giving effect to such
payment; (iii) on the Closing Date, up to $5,700,000 to the holders of Preferred
Equity Capital, Series C in payment of accrued and unpaid interest on the
Preferred Equity Capital, Series C, so long as (A) Excess Availability is at
least $5,000,000 at the time of and after giving effect to the payment of all
accrued and unpaid interest on the Senior Subordinated Notes, the payment in
full of all Indebtedness to the Existing Lenders and such accrual payment on the
Preferred Equity Capital, Series C, and (B) no Default or Event of Default
exists after or would result from giving effect to such payment; (iv) after the
Closing Date, payment to the holders of Preferred Equity Capital, Series C, in
payment of accrued and unpaid interest on the Preferred Equity Capital, Series
C, so long as each of the Preferred C Accrued Interest Payment Conditions is
met; and (v) after the Closing Date, regularly scheduled payments of interest
accruing on the Preferred Equity Capital, Series C after the Closing Date so
long as (1) immediately after giving effect to such payment, Excess Availability
will be at least $3,500,000, and (2) no Default or Event of Default exists after
or would result from giving effect to such payments. For purposes of this
Section, "Preferred C Accrued Interest Payment Conditions" shall mean the
following, each of which shall be satisfied: (1) during the eight (8)
consecutive weeks period immediately preceding the date of such payment Excess
Availability averaged at least $5,000,000, (2) for the weekly reporting period
immediately preceding such payment Excess Availability was not less than
$5,000,000, (3) at the time of and after giving effect to such payment Excess
Availability will be not less than $5,000,000, (4) Borrowers shall have
delivered to Agent at least ten (10) days prior to the payment date, and Agent
shall have reviewed and found acceptable, Borrowers' forecasted
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Consolidated balance sheets and profit and loss and cash flow statements, all
prepared on a consistent basis with Borrowers' historical financial statements,
together with appropriate supporting details and a statement of underlying
assumptions, that show Excess Availability at all times during the immediately
succeeding twelve (12) fiscal month period projected to be not less than the
Excess Availability that was projected by Borrowers in such forecasted
Consolidated financial statements delivered to Agent dated May 3, 2002, and (5)
no Default or Event of Default exists after or would result from giving effect
to such payment.
9.13. Compliance with ERISA. Each Borrower shall, and shall cause
each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal and State law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; (c) not terminate any of such
Plans so as to incur any material liability to the Pension Benefit Guaranty
Corporation; (d) not allow or suffer to exist any prohibited transaction
involving any of such Plans or any trust created thereunder which would subject
such Borrower or such ERISA Affiliate to a material tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (f) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (g) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any material liability to the Pension Benefit Guaranty
Corporation.
9.14. End of Fiscal Years; Fiscal Quarters. Each Borrower shall, for
financial reporting purposes, cause its, and each of its Subsidiaries' (a)
fiscal years to end on the Saturday closest to January 31 of each year and (b)
fiscal quarters to end in April, July, October, and January (on a 4/5/4 basis)
of each year.
9.15. Change in Business. No Borrower shall engage in any business
other than the business of such Borrower on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which such
Borrower is engaged on the date hereof.
9.16. Limitation of Restrictions Affecting Subsidiaries. No Borrower
shall, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of such Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower;
(b) make loans or advances to such Borrower or any Subsidiary of such Borrower,
(c) transfer any of its properties or assets to such Borrower or any Subsidiary
of such Borrower; or (d) create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, other than encumbrances and restrictions arising under (i) Applicable
Law, (ii) this Agreement, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of such Borrower or any
Subsidiary of such Borrower, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
any Subsidiary of Borrower, (v) any agreement relating to permitted Indebtedness
incurred by a Subsidiary of such Borrower prior to the date on which such
Subsidiary was acquired by such Borrower and outstanding on
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such acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.
9.17. Consolidated Senior Debt/EBITDA Ratio. Borrowers shall
maintain a Consolidated Senior Debt/EBITDA Ratio of not more than the ratio set
forth below for the period applicable thereto:
Period Ratio
------ -----
Second fiscal quarter of Fiscal Year 2002 1.29 to 1.0
Third fiscal quarter of Fiscal Year 2002 1.43 to 1.0
Fourth fiscal quarter of Fiscal Year 2002 1.00 to 1.0
First fiscal quarter of Fiscal Year 2003 1.00 to 1.0
Second fiscal quarter of Fiscal Year 2003 1.65 to 1.0
Third fiscal quarter of Fiscal Year 2003 1.80 to 1.0
Fourth fiscal quarter of Fiscal Year 2003 1.00 to 1.0
First fiscal quarter of Fiscal Year 2004 1.00 to 1.0
Second fiscal quarter of Fiscal Year 2004 1.11 to 1.0
Third fiscal quarter of Fiscal Year 2004 1.23 to 1.0
Fourth fiscal quarter of Fiscal Year 2004 and each fiscal 1.00 to 1.0
quarter thereafter
9.18. [Reserved]
9.19. Consolidated EBITDA Less Capital Expenditures. Borrowers shall
maintain Consolidated EBITDA less Capital Expenditures of at least the amounts
set forth below for the period applicable thereto:
Period Amount
------ ------
Second fiscal quarter of Fiscal Year 2002 $20,660,000
Third fiscal quarter of Fiscal Year 2002 $18,947,000
Fourth fiscal quarter of Fiscal Year 2002 $20,304,000
First fiscal quarter of Fiscal Year 2003 $20,299,000
Second fiscal quarter of Fiscal Year 2003 $18,157,000
Third fiscal quarter of Fiscal Year 2003 $17,229,000
Fourth fiscal quarter of Fiscal Year 2003 $21,080,000
First fiscal quarter of Fiscal Year 2004 $21,070,000
Second fiscal quarter of Fiscal Year 2004 $20,980,000
Third fiscal quarter of Fiscal Year 2004 $21,457,000
Fourth fiscal quarter of Fiscal Year 2004 and each fiscal $26,653,000
quarter thereafter
9.20. Credit Card Agreements. Each Borrower shall (a) observe and
perform all material terms, covenants, conditions and provisions of the Credit
Card Agreements to be observed and performed by it at the times set forth
therein; (b) not do, permit, suffer or refrain
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from doing anything, as a result of which there could be a default under or
breach of any of the terms of any of the Credit Card Agreements and (c) at all
times maintain in full force and effect the Credit Card Agreements and not
terminate, cancel, surrender, modify, amend, waive or release any of the Credit
Card Agreements, or consent to or permit to occur any of the foregoing; except,
that, (i) a Borrower may terminate or cancel any of the Credit Card Agreements
in the ordinary course of the business of a Borrower; provided, that, such
Borrower shall give Agent not less than fifteen (15) days prior written notice
of its intention to so terminate or cancel any of the Credit Card Agreements;
(d) not enter into any new Credit Card Agreements with any new Credit Card
Issuer unless Agent shall have received not less than thirty (30) days prior
written notice of the intention of such Borrower to enter into such agreement
(together with such other information with respect thereto as Agent may
request); (e) give Agent immediate written notice of any Credit Card Agreement
entered into by such Borrower after the date hereof, together with a true,
correct and complete copy thereof and such other information with respect
thereto as Agent may request; and (f) furnish to Agent, promptly upon the
request of Agent, such information and evidence as Agent may require from time
to time concerning the observance, performance and compliance by such Borrower
or the other party or parties thereto with the terms, covenants or provisions of
the Credit Card Agreements.
9.21. License Agreements.
(a) Each Borrower shall (i) promptly and
faithfully observe and perform all of the material terms, covenants, conditions
and provisions of the material License Agreements to which it is a party to be
observed and performed by it, at the times set forth therein, if any, (ii) not
do, permit, suffer or refrain from doing anything that could reasonably be
expected to result in a default under or breach of any of the terms of any
material License Agreement, (iii) not cancel, surrender, modify, amend, waive or
release any material License Agreement in any material respect or any term,
provision or right of the licensee thereunder in any material respect, or
consent to or permit to occur any of the foregoing; except, that, subject to
SECTION 9.22(b) below, a Borrower may cancel, surrender or release any material
License Agreement in the ordinary course of the business of such Borrower;
provided, that, such Borrower (as the case may be) shall give Agent not less
than thirty (30) days prior written notice of its intention to so cancel,
surrender and release any such material License Agreement, (iv) give Agent
prompt written notice of any material License Agreement entered into by such
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may request,
(v) give Agent prompt written notice of any material breach of any obligation,
or any default, by any party under any material License Agreement, and deliver
to Agent (promptly upon the receipt thereof by such Borrower in the case of a
notice to Borrower and concurrently with the sending thereof in the case of a
notice from such Borrower ) a copy of each notice of default and every other
notice and other communication received or delivered by such Borrower in
connection with any material License Agreement which relates to the right of
such Borrower to continue to use the property subject to such License Agreement,
and (vi) furnish to Agent, promptly upon the request of Agent, such information
and evidence as Agent may reasonably require from time to time concerning the
observance, performance and compliance by such Borrower or the other party or
parties thereto with the material terms, covenants or provisions of any material
License Agreement.
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(b) Each Borrower will either exercise any
option to renew or extend the term of each material License Agreement to which
it is a party in such manner as will cause the term of such material License
Agreement to be effectively renewed or extended for the period provided by such
option and give prompt written notice thereof to Agent or give Agent prior
written notice that such Borrower does not intend to renew or extend the term of
any such material License Agreement or that the term thereof shall otherwise be
expiring, not less than sixty (60) days prior to the date of any such
non-renewal or expiration. In the event of the failure of a Borrower to extend
or renew any material License Agreement to which it is a party, Agent shall
have, and is hereby granted, the irrevocable right and authority, at its option,
to renew or extend the term of such material License Agreement, whether in its
own name and behalf, or in the name and behalf of a designee or nominee of Agent
or in the name and behalf of such Borrower, as Agent shall determine at any time
that an Event of Default shall exist or have occurred and be continuing. Agent
may, but shall not be required to, perform any or all of such obligations of any
Borrower under any of the License Agreements, including, but not limited to, the
payment of any or all sums due from such Borrower thereunder. Any sums so paid
by Agent shall constitute part of the Obligations.
9.22. After Acquired Real Property.
(a) If any Borrower hereafter acquires any Real
Property (other than a leasehold interest), fixtures or any other property that
is of the kind or nature described in the Mortgage and such Real Property,
fixtures or other property at any one location has a fair market value in an
amount equal to or greater than $250,000 (or if a Default or Event of Default
exists, then regardless of the fair market value of such assets), without
limiting any other rights of Agent or any Lender, or duties or obligations of
any Borrower, promptly upon Agent's request, such Borrower shall execute and
deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may
determine, in form and substance substantially similar to the Mortgage and as to
any provisions relating to specific state laws satisfactory to Agent and in form
appropriate for recording in the real estate records of the jurisdiction in
which such Real Property or other property is located granting to Agent a first
and only Lien and mortgage on in such Real Property, fixtures or other property
(except as such Borrower would otherwise be permitted to incur hereunder or
under the Mortgage or as otherwise consented to in writing by Agent) and such
other agreements, documents and instruments as Agent may require in connection
therewith.
(b) If any Borrower hereafter acquires any
leasehold interest in any Real Property (other than a retail store or a
warehouse not owned by an Affiliate of a Borrower) or fixtures and such Real
Property or fixtures at any one location has a fair market value in an amount
equal to or greater than $250,000 (or if a Default or Event of Default exists,
then regardless of the fair market value of such assets), without limiting any
other rights of Agent or any Lender, or duties or obligations of any Borrower,
promptly upon Agent's request, such Borrower shall execute and deliver to Agent,
and shall use its best efforts to obtain all necessary consents of any other
Person with respect to, a leasehold mortgage, deed of trust or deed to secure
debt, or collateral assignment of leasehold interest, as Agent may determine, in
form and substance substantially similar to the Mortgage and as to any
provisions relating to specific state laws satisfactory to Agent and in form
appropriate for recording in the real estate records of the jurisdiction in
which such Real Property or other property is located granting to
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Agent a first and only Lien and mortgage on in such leasehold interest (except
as such Borrower would otherwise be permitted to incur hereunder or under the
Mortgage or as otherwise consented to in writing by Agent) and such other
agreements, documents and instruments as Agent may require in connection
therewith.
9.23. Costs and Expenses. Borrowers jointly and severally shall pay
to Agent and Lenders on demand all costs, expenses, filing fees and taxes paid
or payable in connection with the preparation, negotiation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent's customary charges and fees with respect thereto;
(c) costs and expenses of preserving and protecting the Collateral; (d) costs
and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the Liens of Agent, selling or otherwise realizing upon
the Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent or any Lender arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (e) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Agent and Lenders during the course of periodic field
examinations of the Collateral and any Borrower's operations, plus a per diem
charge at the rate of $750 per person per day for Agent's examiners in the field
and office; and (f) the fees and disbursements of counsel (including legal
assistants) to Agent and Lenders in connection with any of the foregoing.
9.24. Collateral Access Agreements. Borrowers shall use their best
efforts to obtain Collateral Access Agreements for each leased location of a
Borrower prior to the Closing Date but in any event on a best efforts basis,
within ninety (90) days after the Closing Date.
9.25. Survey and Title Insurance Endorsements. Within thirty (30)
days after the Closing Date, Borrowers shall deliver to Agent an as-built ALTA
survey, in form and substance satisfactory to Agent and Term Lender in all
respects, with respect to each parcel of Real Property subject to the Mortgage,
which survey shall indicate the following: (i) an accurate metes and bounds or
lot, block and parcel description of such property; (ii) the correct location of
all buildings, structures and other improvements on such property, including all
streets, easements, rights of way and utility lines; (iii) the location of
ingress and egress from such property, and the location of any set-back or other
building lines affecting such property; and (iv) a certification by a registered
land surveyor in form and substance acceptable to Agent, certifying to the
accuracy and completeness of such survey and to such other matters relating to
such Real Property and survey as Agent shall require, and (b) within sixty (60)
days after the Closing Date, Borrowers shall deliver to Agent in form and
substance satisfactory to Agent and Term Lender in all respects, such
endorsements to the mortgagee policy of title insurance issued
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to Agent with respect to the Mortgage and such other documents as Agent shall
request to remove any survey exception, to conform the legal description of the
Mortgage to such survey, to confirm the zoning of such property and to address
such other matters customarily addressed in mortgagee policies of title
insurance as Agent may request.
9.26. Executive Employment Agreements. Within thirty (30) days after
the Closing Date, Borrowers shall deliver to Agent copies of duly executed
employment agreements with each of Xxxx Xxxxxxxx, Xxxxxxxx X. Xxxxxxxx and
Xxxxxx X. Xxxxxxxx evidencing the extension of the term of each such employment
agreement to at least June 30, 2005.
9.27. Further Assurances. At the request of Agent at any time and
from time to time, each Borrower shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and Liens and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Agent may at any time and from time to time request a
certificate from an officer of Borrowers representing that all conditions
precedent to the making of Loans contained herein are satisfied. In the event of
such request by Agent, Agent and Lenders may, at Agent's option, cease to make
any further Loans until Agent has received such certificate and, in addition,
Agent has determined that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1. Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) any Obligor fails to pay any of the
Obligations when due (whether due at stated maturity, on demand, upon
acceleration or otherwise);
(b) any Obligor shall fail or neglect to
perform, keep or observe any covenant contained in Sections 6, 7.1, 7.2, 7.3,
7.7, 8.8, 8.9, 9.1 THROUGH 9.26 hereof on the date that such Obligor is required
to perform, keep or observe such covenant;
(c) any Obligor shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement or in any of
the other Financing Agreements (other than a covenant which is dealt with
specifically elsewhere in Section 10.1 hereof) and the breach of such other
covenant is not cured to Agent's and Lenders' satisfaction within 10 days after
the sooner to occur of Borrower Agent's receipt of notice of such breach from
Agent or the date on which such failure or neglect first becomes known to any
Senior Officer; provided, however, that such notice and opportunity to cure
shall not apply in the case of any failure to perform, keep or observe any
covenant which is not capable of being cured at all or within such 10-day period
or which is a willful and knowing breach by any Obligor;
(d) any representation, warranty or statement of
fact made by any Obligor to Agent in this Agreement, the other Financing
Agreements or any other written
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agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(e) any Obligor revokes or terminates, or
purports to revoke or terminate, or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Agent or any Lender;
(f) any judgment for the payment of money is
rendered against any Obligor in excess of $250,000 in any one case or in excess
of $500,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Obligor or any of the Collateral having a
value in excess of $250,000;
(g) any Obligor (being a natural person or a
general partner of an Obligor which is a partnership) dies or any Obligor, which
is a partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(h) any Obligor makes an assignment for the
benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors in connection with a moratorium
or adjustment of the Indebtedness due to them;
(i) a case or proceeding under the bankruptcy
laws of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against any Obligor or all or any part of
its properties and such petition or application is not dismissed within sixty
(60) days after the date of its filing or any Obligor shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(j) a case or proceeding under the bankruptcy
laws of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by any Obligor or for all or any part of
its property;
(k) any default in respect of any Indebtedness
of any Obligor (other than Indebtedness owing to Agent and Lenders hereunder),
in any case in an amount in excess of $500,000, which default continues for more
than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto, or any default by any Obligor
under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto;
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(l) any material provision hereof or of any of
the other Financing Agreements shall for any reason cease to be valid, binding
and enforceable with respect to any party hereto or thereto (other than Agent)
in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action
or fail to take any action based on the assertion that any provision hereof or
of any of the other Financing Agreements has ceased to be or is otherwise not
valid, binding or enforceable in accordance with its terms, or any security
interest or Lien provided for herein or in any of the other Financing Agreements
shall cease to be a valid and perfected first priority security interest or Lien
in any of the Collateral purported to be subject thereto (except as otherwise
permitted herein or therein);
(m) an ERISA Event shall occur which results in
or could reasonably be expected to result in liability of any Obligor in an
aggregate amount in excess of $200,000;
(n) any Change of Control shall occur;
(o) the indictment by any Governmental
Authority, or as Agent may reasonably and in good faith determine, the
threatened indictment by any Governmental Authority of any Obligor of which any
Obligor or Agent receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Agent, under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against any Obligor,
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of (i) any of the Collateral having a value in
excess of $250,000, or (ii) any other property of any Obligor which is necessary
or material to the conduct of its business;
(p) there shall be a material adverse change in
the business, assets or prospects of any Obligor after the date hereof;
(q) there shall be an event of default under any
of the other Financing Agreements;
(r) there shall be an event of default under any
of the Equity Documents;
(s) there shall be an event of default under any
of the Subordinated Debt Documents;
(t) any Credit Card Issuer or Credit Card
Processor shall send notice to any Borrower that it is ceasing to make or
suspending payments to such Borrower of amounts due or to become due to such
Borrower or shall cease or suspend such payments, or shall send notice to any
Borrower that it is terminating its arrangements with such Borrower or such
arrangements shall terminate as a result of any event of default under such
arrangements, which continues for more than the applicable cure period, if any,
with respect thereto, unless such Borrower shall have entered into arrangements
with another Credit Card Issuer or Credit Card Processor, as the case may be,
within thirty (30) days after the date of any such notice; or
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(u) the Preferred Equity Capital is not redeemed
from proceeds of Parent's initial public offering on or before June 1, 2004, or
the redemption dates of the Preferred Equity Capital are not extended on or
before June 1, 2004 to at least June 30, 2005, or such Preferred Equity Capital
is not converted in accordance with its terms (as in effect on the date hereof)
on or before June 1, 2004.
10.2. Remedies.
(a) At any time an Event of Default exists or
has occurred and is continuing, Agent and Lenders shall have all rights and
remedies provided in this Agreement, the other Financing Agreements, the UCC and
other Applicable Law, all of which rights and remedies may be exercised without
notice to or consent by any Borrower or any other Obligor, except as such notice
or consent is expressly provided for hereunder or required by Applicable Law.
All rights, remedies and powers granted to Agent and Lenders hereunder, under
any of the other Financing Agreements, the UCC or other Applicable Law, are
cumulative, not exclusive and enforceable, in Agent's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall include,
without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or any other Obligor of
this Agreement or any of the other Financing Agreements. Subject to SECTION 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or any other Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time
an Event of Default exists or has occurred and is continuing, Agent may, in its
discretion, and upon the direction of the Required Lenders, shall (i) accelerate
the payment of all Obligations and demand immediate payment thereof to Agent for
itself and the ratable benefit of Lenders, (provided, that, upon the occurrence
of any Event of Default described in SECTIONS 10.1(i) AND 10.1(j), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require any Borrower or any other Obligor, at
Borrowers' expense, to assemble and make available to Agent any part or all of
the Collateral at any place and time designated by Agent, (iv) collect,
foreclose, receive, appropriate, setoff and realize upon any and all Collateral,
(v) remove any or all of the Collateral from any premises on or in which the
same may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (vi) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all Collateral (including
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with the Agent having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Borrower or any other Obligor, which right
or equity of redemption is hereby expressly waived and released by Borrowers and
all other Obligors and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Agent upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Agent. If notice of disposition of Collateral is
required by law, ten (10) days prior
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notice by Agent to Borrower designating the time and place of any public sale or
the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
each Borrower waives any other notice. In the event Agent institutes an action
to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each Borrower waives the posting of any bond which might
otherwise be required. At any time an Event of Default exists or has occurred
and is continuing, upon Agent's request, Borrowers will either, as Agent shall
specify, furnish cash collateral to the issuer to be used to secure and fund
Agent's reimbursement obligations to the issuer in connection with any letter of
credit or furnish cash collateral to Agent for any letter of credit. Such cash
collateral shall be in the amount equal to one hundred five percent (105%) of
the amount of the letter of credit plus the amount of any fees and expenses
payable in connection therewith through the end of the latest expiration date of
such letter of credit.
(c) At any time or times that an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
and upon the direction of the Required Lenders, Agent shall, enforce the rights
of any Borrower or any Obligor against any account debtor, secondary obligor or
other obligor in respect of any of the Accounts or other Receivables. Without
limiting the generality of the foregoing, Agent may, in its discretion, and upon
the direction of the Required Lenders, Agent shall, at such time or times (i)
notify any or all account debtors, secondary obligors or other obligors in
respect thereof that the Receivables have been assigned to Agent and that Agent
has a security interest therein and Agent may direct any or all account debtors,
secondary obligors and other obligors to make payment of Receivables directly to
Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any secondary
obligors or other obligors in respect thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Receivables or such
other obligations, but without any duty to do so, and Agent and Lenders shall
not be liable for any failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests and the interests of Lenders. At any time that an Event of
Default exists or has occurred and is continuing, at Agent's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Agent and are payable directly
and only to Agent and each Borrower shall deliver to Agent such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Agent may require. In the event any
account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, each Borrower shall, upon Agent's request, hold the returned
Inventory in trust for Agent, segregate all returned Inventory from all of its
other property, dispose of the returned Inventory solely according to Agent's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Agent's prior written consent.
(d) Notwithstanding anything to the contrary
contained herein except as the Term Lender shall otherwise agree, Agent shall
demand payment of the Obligations and commence and pursue such other Enforcement
Actions as Agent in good xxxxx xxxxx appropriate within ninety (90) days (except
with respect to Events of Default described in SECTIONS 10.1(I) and 10.1(J),
Agent shall take such Enforcement Actions as it deems appropriate
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under the circumstances promptly upon receipt of notice) after the date of the
receipt by Agent of written notice executed and delivered by the Term Lender of
an Event of Default described in SECTIONS 10.1(a), 10.1(i), 10.1(j), 10.1(n)
10.1(s) or 10.1(b)) (to the extent arising as a result of the failure to comply
with SECTIONS 9.7, 9.8, 9.9, 9.10, 9.11, 9.17 or 9.19 hereof after giving effect
to all applicable cure periods) and requesting that Agent commence Enforcement
Actions, provided, that, (i) such Event of Default has not been waived or cured,
(ii) in the good faith determination of Agent, taking an Enforcement Action is
permitted under the terms of this Agreement and Applicable Law, (iii) taking an
Enforcement Action shall not result in any liability of Agent or Lenders to any
Borrower, any other Obligor or any other Person, (iv) Agent shall be entitled to
all of the benefits of SECTION 12 hereof, and (v) Agent shall not be required to
take an Enforcement Action so long as within the period provided above, Agent
shall, at its option, either (A) appoint Ableco Finance LLC, as an agent of
Agent for purposes of exercising the rights of Agent to take an Enforcement
Action, subject to the terms hereof or (B) resign as Agent and Ableco Finance
LLC shall automatically be deemed to be the successor Agent hereunder for
purposes hereof, except with respect to the provisions of Section 2 hereof and
except in connection with all matters relating to the determination of the
Borrowing Base and each of its components (including, without limitation,
Eligible Inventory, Reserves and receiving reports in respect of Collateral and
conducting field examinations with respect to the Collateral and similar
matters).
(e) To the extent that Applicable Law imposes
duties on Agent or any Lender to exercise remedies in a commercially reasonable
manner (which duties cannot be waived under such law), each Borrower
acknowledges and agrees that it is not commercially unreasonable for Agent or
any Lender (i) to fail to incur expenses reasonably deemed significant by Agent
or any Lender to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain consents of any Governmental Authority or other third party for
the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors, secondary
obligors or other persons obligated on Collateral or to remove Liens or
encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as such Borrower, for expressions of interest in acquiring all or
any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower acknowledges that the purpose of this Section is to
provide non-
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exhaustive indications of what actions or omissions by Agent or any Lender would
not be commercially unreasonable in the exercise by Agent or any Lender of
remedies against the Collateral and that other actions or omissions by Agent or
any Lender shall not be deemed commercially unreasonable solely on account of
not being indicated in this Section. Without limitation of the foregoing,
nothing contained in this Section shall be construed to grant any rights to any
Borrower or to impose any duties on Agent or Lenders that would not have been
granted or imposed by this Agreement or by Applicable Law in the absence of this
Section.
(f) For the purpose of enabling Agent to
exercise the rights and remedies hereunder, each Borrower hereby grants to
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable at any time an Event of Default shall exist or have occurred and
for so long as the same is continuing) without payment of royalty or other
compensation to such Borrower, to use or assign to the extent required in
connection with any sale, liquidation or other disposition of the Collateral,
any of the trademarks, service-marks, trade names, business names, trade styles,
designs, logos and other source of business identifiers and other Intellectual
Property and general intangibles now owned or hereafter acquired by such
Borrower, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
(g) Agent may apply the cash proceeds of
Collateral actually received by Agent from any sale, lease, foreclosure or other
disposition of the Collateral to payment of the Obligations, in whole or in part
and in accordance with SECTION 6.11 hereof, whether or not then due. Borrowers
and all other Obligors shall remain liable to Agent and Lenders for the payment
of any deficiency with interest at the highest rate provided for herein and all
costs and expenses of collection or enforcement, including attorneys' fees and
expenses.
(h) Without limiting the foregoing, upon the
occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at
Agent's option, and upon the occurrence of an Event of Default, at the direction
of the Required Lenders, Agent and Lenders shall, without notice, (A) cease
making Loans or reduce the lending formulas or amounts of Loans available to
Borrowers and/or (B) terminate any provision of this Agreement providing for any
future Loans to be made by Agent and Lenders to Borrowers, and (ii) Agent may,
at its option, establish such Reserves as Agent determines without limitation or
restriction, notwithstanding anything to the contrary provided herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW
11.1. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement
of this Agreement and the other Financing Agreements (other than the Mortgage to
the extent provided therein) and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Georgia (without regard
to principles of conflicts of laws).
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(b) Borrowers, Agent and Lenders irrevocably
consent and submit to the non-exclusive jurisdiction of the State of Georgia and
the United States District Court for the Northern District of Georgia (Atlanta
Division), whichever Agent may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent and Lenders shall have the right to bring any
action or proceeding against any Borrower or any other Obligor or its or their
property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or any other Obligor or its or their property).
(c) Each Borrower hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Agent's
option, by service upon Borrower Agent in any other manner provided under the
rules of any such courts. Within thirty (30) days after such service, Borrowers
shall appear in answer to such process, failing which Borrowers shall be deemed
in default and judgment may be entered by Agent against Borrowers for the amount
of the claim and other relief requested.
(d) EACH BORROWER, AGENT AND LENDERS EACH HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS
OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. EACH BORROWER, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT SUCH BORROWER, AGENT OR ANY LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Agent and Lenders shall not have any
liability to any Borrower or any other Obligor (whether in tort, contract,
equity or otherwise) for losses suffered by any Borrower in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Agent and such Lender, that the losses were
the result of acts or omissions
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constituting gross negligence or willful misconduct. In any such litigation,
Agent and Lenders shall be entitled to the benefit of the rebuttable presumption
that it acted in good faith and with the exercise of ordinary care in the
performance by it of the terms of this Agreement. Each Borrower: (i) certifies
that neither Agent, any Lender nor any representative, agent or attorney acting
for or on behalf of Agent or any Lender has represented, expressly or otherwise,
that Agent and Lenders would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Agent and Lenders are relying upon, among other
things, the waivers and certifications set forth in this SECTION 11.1 and
elsewhere herein and therein.
11.2. Waiver of Notices. Each Borrower hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and chattel paper, included in or evidencing
any of the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on any Borrower which Agent or any Lender may elect to
give shall entitle such Borrower to any other or further notice or demand in the
same, similar or other circumstances.
11.3. Amendments and Waivers.
(a) Neither this Agreement nor any other
Financing Agreement nor any terms hereof or thereof may be amended, waived,
discharged or terminated unless such amendment, waiver, discharge or termination
is in writing signed by Agent and the Required Lenders or at Agent's option, by
Agent with the authorization of the Required Lenders, and as to amendments to
any of the Financing Agreements (other than with respect to any provision of
SECTION 12 hereof), by Borrowers; except, that, no such amendment, waiver,
discharge or termination shall:
(i) reduce the interest rate or any
fees or extend the time of payment of interest or any fees or reduce the
principal amount of any Loan, in each case without the consent of each Lender
directly affected thereby,
(ii) increase the Commitment of any
Lender over the amount thereof then in effect or provided hereunder, in each
case without the consent of the Lender directly affected thereby,
(iii) release any Collateral (except as
expressly required hereunder or under any of the other Financing Agreements or
Applicable Law and except as permitted under SECTION 12.11(b) hereof), without
the consent of Agent and all Lenders,
(iv) reduce any percentage specified in
the definition of Required Lenders, without the consent of Agent and all
Lenders,
(v) consent to the assignment or
transfer by any Borrower or any other Obligor of any of their rights and
obligations under this Agreement, without the consent of Agent and all Lenders,
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(vi) amend, modify or waive any terms of
this SECTION 11.3 or SECTION 12.8 hereof, without the consent of Agent and all
Lenders, or
(vii) increase the advance rates
constituting part of the Borrowing Base, without the consent of Agent and all
Lenders.
(viii) without the prior written consent
of Term Lender, no waiver, modification or amendment shall be effective that
would (a) reduce the interest rate or fees applicable to the Term Loan; (b)
extend the final maturity date of the Term Loan; (c) increase the Maximum
Credit, the Revolving Loan Limit or the outstanding principal amount of the Term
Loan; (d) release or subordinate any Liens on any portion of the Collateral
having a value in excess of $100,000 (except to the extent expressly provided in
this Agreement or in any of the other Financing Agreements); (e) amend, modify
or waive any of the financial covenants set forth in SECTIONS 9.17 or 9.19 of
this Agreement (or any definition with respect to financial terms used in such
financial covenants in a manner which has the effect of reducing the amounts
which Borrowers are required to maintain pursuant to such financial covenants);
(f) forgive, compromise or cancel any of the Term Loan; (g) agree to subordinate
the Term Loan in right of payment to any other Indebtedness (or any interest in
respect thereof); (h) reduce or increase the amount of, or postpone the due date
of, any principal repayments in respect of the Term Loan, or interest payments
or fees in respect of the Term Loan; (i) release any Obligor from liability for
any obligation for the payment of money; (j) amend or modify the definitions of
"Eligible Inventory," "Reserves," "Subordinated Debt Reserve" "Interest Rate,"
"Term Loan," "Maximum Credit," "Maximum Revolving Credit," "Revolving Loan
Limit," "Enforcement Action," "Priority Event," "Change of Control," "Eligible
Transferee" or "Excess Availability"; (k) amend, modify or waive any of the
following Sections in any material respect: 2.1, 2.3, 2.6, 3.2(b), 6.4, 6.11,
9.1, 9.7, 9.8, 9.9, 9.10, 9.12(b), 9.11, 9.22, 9.23, 10.1(a), 10.1(b), 10.2,
11.5, 12.11, 13.1, and 13.7(a), or (l) permit the sale of all or substantially
all of the capital stock of any material Subsidiary of any Borrower.
(b) Agent and Lenders shall not, by any act,
delay, omission or otherwise be deemed to have expressly or impliedly waived any
of its or their rights, powers and/or remedies unless such waiver shall be in
writing and signed as provided herein. Any such waiver shall be enforceable only
to the extent specifically set forth therein. A waiver by Agent or any Lender of
any right, power and/or remedy on any one occasion shall not be construed as a
bar to or waiver of any such right, power and/or remedy which Agent or any
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
(c) Notwithstanding anything to the contrary
contained in SECTION 11.3(a) above, in the event that Borrowers request that
this Agreement or any other Financing Agreements be amended or otherwise
modified in a manner which would require the unanimous consent of all of the
Lenders and such amendment or other modification is agreed to by the Required
Lenders, then, with the consent of Borrowers, Agent and the Required Lenders,
Borrowers, Agent and the Required Lenders may amend this Agreement without the
consent of the Lenders that did not agree to such amendment or other
modification (collectively, the "Minority Lenders") to provide for (i) the
termination of the Commitment of each of the Minority Lenders, (ii) the addition
to this Agreement of one or more other Lenders, or an increase in the Commitment
of one or more of the Required Lenders, so that the Commitments, after
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giving effect to such amendment, shall be in the same aggregate amount as the
Commitments immediately before giving effect to such amendment, (iii) if any
Loans are outstanding at the time of such amendment, the making of such
additional Loans by such new Lenders or Required Lenders, as the case may be, as
may be necessary to repay in full the outstanding Loans of the Minority Lenders
immediately before giving effect to such amendment and (iv) the payment of all
interest, fees and other Obligations payable or accrued in favor of the Minority
Lenders and such other modifications to this Agreement as Borrowers and the
Required Lenders may determine to be appropriate.
(d) The consent of Agent shall be required for
any amendment, waiver or consent affecting the rights or duties of Agent
hereunder or under any of the other Financing Agreements, in addition to the
consent of the Lenders otherwise required by this Section.
11.4. Waiver of Counterclaims. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5. Indemnification. Each Borrower shall indemnify, defend and
hold Agent and each Lender, and its officers, directors, agents, employees,
advisors and counsel and their respective Affiliates (each such person being an
"Indemnitee"), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees and expenses) imposed
on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel except that no Borrower shall have any obligation under this SECTION
11.5 to indemnify an Indemnitee with respect to a matter covered hereby
resulting from the gross negligence or wilful misconduct of such Indemnitee as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction (but without limiting the obligations of any Borrower as to any
other Indemnitee). To the extent that the undertaking to indemnify, defend, pay
and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers shall pay the maximum portion which
it is permitted to pay under Applicable Law to Agent and Lenders in satisfaction
of indemnified matters under this Section. To the extent permitted by Applicable
Law, no Borrower shall assert, and each Borrower hereby waives any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any of the other Financing
Agreements or any undertaking or transaction contemplated hereby. All amounts
due under this Section shall be payable upon demand. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
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SECTION 12. THE AGENT
12.1. Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Lender; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any other Obligor or any other
Person to perform any of its obligations hereunder or thereunder; and (c) shall
not be responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until
the assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent.
12.2. Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3. Events of Default.
(a) Agent shall not be deemed to have knowledge
or notice of the occurrence of an Event of Default or other failure of a
condition precedent to the Loans hereunder, unless and until Agent has received
written notice from a Lender, or a Borrower specifying such Event of Default or
any unfulfilled condition precedent, and stating that such notice is a "Notice
of Default or Failure of Condition". In the event that Agent receives such a
Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders. Agent shall (subject to SECTION 12.7) take such action
with respect to any such Event of Default
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or failure of condition precedent as shall be directed by the Required Lenders;
provided, that, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to or by reason of such Event of Default or
failure of condition precedent, as it shall deem advisable in the best interest
of Lenders. Without limiting the foregoing, and notwithstanding the existence or
occurrence and continuance of an Event of Default or any other failure to
satisfy any of the conditions precedent set forth in SECTION 4 of this Agreement
to the contrary, Agent may, but shall have no obligation to, continue to make
Loans for the ratable account and risk of Lenders from time to time if Agent
believes making such Loans is in the best interests of Lenders.
(b) Except with the prior written consent of
Agent, no Lender may assert or exercise any enforcement right or remedy in
respect of the Loans or other Obligations, as against any Borrower or any other
Obligor or any of the Collateral or other property of any Borrower or any other
Obligor.
12.4. Congress in its Individual Capacity. With respect to its
Commitment and the Loans made by it (and any successor acting as Agent), so long
as Congress shall be a Lender hereunder, it shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include Congress in its individual capacity as
Lender hereunder. Congress (and any successor acting as Agent) and its
Affiliates may (without having to account therefor to any Lender) lend money to,
make investments in and generally engage in any kind of business with any
Borrower (and any of its Subsidiaries or Affiliates) as if it were not acting as
Agent, and Congress and its Affiliates may accept fees and other consideration
from any Borrower or any other Obligor and any of its Subsidiaries and
Affiliates for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.
12.5. Indemnification. Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrowers hereunder and without limiting any
obligations of any Borrower hereunder) ratably, in accordance with their Pro
Rata Shares, for any and all claims of any kind and nature whatsoever that may
be imposed on, incurred by or asserted against Agent (including by any Lender)
arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Financing Agreement or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
12.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on Agent or other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of each Borrower and each other Obligor and has made its own
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such
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documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or any of the other Financing Agreements. Agent shall not be required
to keep itself informed as to the performance or observance by any Borrower or
any other Obligor of any term or provision of this Agreement or any of the other
Financing Agreements or any other document referred to or provided for herein or
therein or to inspect the properties or books of Borrower or any Obligor. Agent
will use reasonable efforts to provide Lenders with any information received by
Agent from any Borrower or any other Obligor which is required to be provided to
Lenders hereunder and with a copy of any Notice of Default or Failure of
Condition received by Agent from any Borrower or any Lender; provided, that,
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to Agent's own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
any Borrower or any other Obligor that may come into the possession of Agent.
12.7. Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under SECTION 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8. Additional Loans. Agent shall not make any Revolving Loans to
any Borrower on behalf of Lenders intentionally and with actual knowledge that
such Revolving Loans would cause the aggregate amount of the total outstanding
Revolving Loans to Borrowers to exceed the Borrowing Base, without the prior
consent of all Lenders, except, that, Agent may make such additional Revolving
Loans on behalf of Lenders, intentionally and with actual knowledge that such
Revolving Loans will cause the total outstanding Revolving Loans to Borrowers to
exceed the Borrowing Base, as Agent may deem necessary or advisable in its
discretion, provided, that: (a) the total principal amount of the additional
Revolving Loans or additional letter of credit accommodations to Borrowers which
Agent may make or provide after obtaining such actual knowledge that the
aggregate principal amount of the Revolving Loans equal or exceed the Borrowing
Base shall not exceed, when taken together with the Special Agent Advances
described in SECTION 12.11(a)(i) or (iii), the aggregate amount outstanding at
any time equal to the lesser of (i) an amount equal to ten percent (10%) of the
Cost of Eligible Inventory, or (ii) $3,500,000, and shall not cause the total
principal amount of the Loans to exceed the Maximum Credit or cause the total
principal amount of Revolving Loans to exceed the Revolving Loan Limit and (b)
no such additional Revolving Loans shall be outstanding more than ninety (90)
days after the date such additional Revolving Loan is made or issued (as the
case may be), except as the Required Lenders may otherwise agree. Each Revolving
Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any
such additional Revolving Loans provided that Agent is acting in accordance with
the terms of this SECTION 12.8.
12.9. Concerning the Collateral and the Related Financing
Agreements. Each Lender authorizes and directs Agent to enter into this
Agreement and the other Financing
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Agreements. Each Lender agrees that any action taken by Agent or Required
Lenders in accordance with the terms of this Agreement or the other Financing
Agreements and the exercise by Agent or Required Lenders of their respective
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
12.10. Field Audit, Examination Reports and other Information;
Disclaimer by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report and a weekly report with respect to the Borrowing
Base prepared by Agent (each field audit or examination report and monthly
report with respect to the Borrowing Base being referred to herein as a "Report"
and collectively, "Reports");
(b) expressly agrees and acknowledges that Agent
(A) does not make any representation or warranty as to the accuracy of any
Report, or (B) shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or any other
party performing any audit or examination will inspect only specific information
regarding any Borrower and any other Obligor and will rely significantly upon
Borrowers' and other Obligors' books and records, as well as on representations
of Borrowers' and other Obligors' personnel; and
(d) agrees to keep all Reports confidential and
strictly for its internal use in accordance with the terms of SECTION 13.5
hereof, and not to distribute or use any Report in any other manner.
12.11. Collateral Matters.
(a) Agent may, at its option, from time to time,
at any time on or after an Event of Default and for so long as the same is
continuing or upon any other failure of a condition precedent to the Loans, make
such disbursements and advances ("Special Agent Advances") which Agent, in its
sole discretion, deems necessary or desirable either (i) to preserve or protect
the Collateral or any portion thereof or (ii) to enhance the likelihood or
maximize the amount of repayment by any Borrower or any other Obligor of the
Loans and other Obligations or (iii) to pay any other amount chargeable to any
Borrower or any other Obligor pursuant to the terms of this Agreement or any of
the other Financing Agreements consisting of costs, fees and expenses and
payments to any issuer of letter of credit; provided, that, the Special Agent
Advances described in clauses (i) and (ii) above, together with the aggregate
outstanding principal amount of additional Revolving Loans described in SECTION
12.8, shall not exceed the lesser of (A) an amount equal to ten percent (10%) of
the Cost of Eligible Inventory, or (B) $3,500,000. Special Agent Advances shall
be repayable on demand and be secured by the Collateral. Special Agent Advances
shall not constitute Loans but shall otherwise constitute Obligations hereunder.
Agent shall notify each Lender and Borrower Agent in writing of each such
Special Agent Advance, which notice shall include a description of the purpose
of such Special Agent Advance. Without limitation of its obligations pursuant to
SECTION 6.9, each
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Revolving Lender agrees that it shall make available to Agent, upon Agent's
demand, in immediately available funds, the amount equal to such Lender's Pro
Rata Share of each such Special Agent Advance. If such funds are not made
available to Agent by such Lender, Agent shall be entitled to recover such
funds, on demand from such Lender together with interest thereon for each day
from the date such payment was due until the date such amount is paid to Agent
at the Federal Funds Rate for each day during such period (as published by the
Federal Reserve Bank of New York or at Agent's option based on the arithmetic
mean determined by Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in SECTION 3.1 hereof
applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent,
at its option and in its discretion to release any security interest in,
mortgage or Lien upon, any of the Collateral (i) upon termination of the
Commitments and payment and satisfaction of all of the Obligations and delivery
of cash collateral to the extent required under SECTION 13.1 below, or (ii)
constituting property being sold or disposed of if Borrowers certify to Agent
that the sale or disposition is made in compliance with SECTION 9.7 hereof (and
Agent may rely conclusively on any such certificate, without further inquiry),
or (iii) constituting property in which any Borrower or any other Obligor did
not own an interest at the time the security interest, mortgage or Lien was
granted or at any time thereafter, or (iv) having a value in the aggregate in
any twelve (12) month period of less than $50,000, so long as no Event of
Default exists at the time of such release, or (v) if approved, authorized or
ratified in writing by all of Lenders. Except as provided above, Agent will not
release any security interest in, mortgage or Lien upon, any of the Collateral
without the prior written authorization of all of Lenders. Upon request by Agent
at any time, Lenders will promptly confirm in writing Agent's authority to
release particular types or items of Collateral pursuant to this Section.
(c) Without any manner limiting Agent's
authority to act without any specific or further authorization or consent by the
Required Lenders, each Lender agrees to confirm in writing, upon request by
Agent, the authority to release Collateral conferred upon Agent under this
Section. Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the
security interest, mortgage or Liens granted to Agent upon any Collateral to the
extent set forth above; provided, that, (i) Agent shall not be required to
execute any such document on terms which, in Agent's opinion, would expose Agent
to liability or create any obligations or entail any consequence other than the
release of such security interest, mortgage or Liens without recourse or
warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or Lien upon (or
obligations of any Borrower or any other Obligor in respect of) the Collateral
retained by such Borrower or such other Obligor.
(d) Agent shall have no obligation whatsoever to
any Lender or any other Person to investigate, confirm or assure that the
Collateral exists or is owned by any Borrower or any other Obligor or is cared
for, protected or insured or has been encumbered, or that any particular items
of Collateral meet the eligibility criteria applicable in respect of the Loans
hereunder, or whether any particular reserves are appropriate, or that the Liens
and
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security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its discretion, given Agent's
own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12. Agency for Perfection. Each Lender hereby appoints Agent and
each other Lender as agent and bailee for the purpose of perfecting the security
interests in and Liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent as secured party. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13. Successor Agent. Agent may resign as Agent upon thirty (30)
days' notice to Lenders and Borrower Agent. If Agent resigns under this
Agreement, the Required Lenders shall appoint from among the Lenders a successor
agent for Lenders. If no successor agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with
Lenders and Borrowers, a successor agent from among Lenders. Upon the acceptance
by the Lender so selected of its appointment as successor agent hereunder, such
successor agent shall succeed to all of the rights, powers and duties of the
retiring Agent and the term "Agent" as used herein and in the other Financing
Agreements shall mean such successor agent and the retiring Agent's appointment,
powers and duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this SECTION 12 shall inure to
its benefit as to any actions taken or omitted by it while it was Agent under
this Agreement. If no successor agent has accepted appointment as Agent by the
date which is thirty (30) days after the date of a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1. Term.
(a) This Agreement and the other Financing
Agreements shall become effective as of the date set forth on the first page
hereof and shall continue in full force and effect for a term ending on the date
three (3) years from the date hereof (the "Term"), unless sooner terminated
pursuant to the terms hereof. Borrowers may terminate this Agreement at any time
upon ten (10) days prior written notice to Agent (which notice shall be
irrevocable) and Agent may, at its option, and shall at the direction of
Required Lenders, terminate this
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Agreement at any time on or after an Event of Default; provided, that, in each
case, this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the earlier of: (i) the last day of the Term or (ii) the
effective date of termination of the Financing Agreements, Borrowers shall pay
to Agent all outstanding and unpaid Obligations and shall furnish cash
collateral to Agent (or at Agent's option, a letter of credit issued for the
account of Borrowers and at Borrowers' expense, in form and substance
satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as
beneficiary) in such amounts as Agent determines are reasonably necessary to
secure Agent and Lenders from loss, cost, damage or expense, including
attorneys' fees and expenses, in connection with any contingent Obligations,
including letters of credit, checks or other payments provisionally credited to
the Obligations and/or as to which Agent or any Lender has not yet received
final and indefeasible payment. The amount of such cash collateral (or letter of
credit, as Agent may determine) as to any letter of credit accommodations shall
be in the amount equal to one hundred ten (110%) percent of the amount of the
letter of credit accommodations plus the amount of any fees and expenses payable
in connection therewith through the end of the latest expiration date of such
letter of credit accommodations. Such payments in respect of the Obligations and
cash collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Borrowers for such purpose. Interest shall
be due until and including the next Business Day, if the amounts so paid by
Borrowers to the Agent Payment Account or other bank account designated by Agent
are received in such bank account later than 12:00 noon, Atlanta, Georgia time.
(b) No termination of this Agreement or the
other Financing Agreements shall relieve or discharge any Borrower or any other
Obligor of its respective duties, obligations and covenants under this Agreement
or the other Financing Agreements until all Obligations have been fully and
finally discharged and paid, and Agent's continuing security interest in the
Collateral and the rights and remedies of Agent and Lenders hereunder, under the
other Financing Agreements and Applicable Law, shall remain in effect until all
such Obligations have been fully and finally discharged and paid. Accordingly,
each Borrower waives any rights it may have under the UCC to demand the filing
of termination statements with respect to the Collateral and Agent shall not be
required to send such termination statements to any Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid and satisfied
in full in immediately available funds.
(c) If for any reason this Agreement is
terminated prior to the last day of the Term, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Agent's and each Lender's lost profits
as a result thereof, Borrowers jointly and severally agree to pay to Agent for
itself and the ratable benefit of Revolving Lenders, upon the effective date of
such termination, an early termination fee in the amount equal to (the "Early
Termination Fee"):
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Amount Period
------ ------
(i) 2.0% of Maximum Revolving Credit From the date hereof to and including the
first anniversary of the date hereof
(ii) 1.0% of Maximum Revolving From and after the first anniversary of the
Credit date hereof to and including the second
anniversary of the date hereof
(iii) 0.50% of Maximum Revolving From and after the second anniversary of the
Credit date hereof, to but not including the third
anniversary of the date hereof or if the
term of this Agreement is extended, at any
time prior to the end of the then current
term.
In addition to and not in lieu of the fees set forth above, Borrowers jointly
and severally agree to pay Term Lender the Minimum Return Fee in the amount and
at the time set forth in the Fee Letter. Such Early Termination Fee and Minimum
Return Fee shall be presumed to be the amount of damages sustained by Agent and
Lenders as a result of such early termination and Borrowers agree that they are
reasonable under the circumstances currently existing. In addition, Agent and
Lenders shall be entitled to such Early Termination Fee and Minimum Return Fee
upon the occurrence of any Event of Default described in SECTIONS 10.1(i) AND
10.1(j) hereof, even if Agent and Lenders do not exercise the right to terminate
this Agreement, but elect, at their option, to provide financing to Borrowers
and/or permit the use of cash collateral under the United States Bankruptcy
Code. The Early Termination Fee and Minimum Return Fee provided for in this
SECTION 13.1 shall be deemed included in the Obligations.
Notwithstanding the foregoing, the Early Termination Fee (but not the Minimum
Return Fee) shall be waived if the Obligations are refinanced by Wachovia Bank,
National Association or any of its Affiliates so long as no Event of Default
exists at such time.
13.2. Interpretative Provisions.
(a) All terms used herein which are defined in
Article 1, Article 8 or Article 9 of the UCC shall have the meanings given
therein unless otherwise defined in this Agreement.
(b) All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires.
(c) All references to any Borrower, any Obligor,
Agent and Lenders pursuant to the definitions set forth in the recitals hereto,
or to any other person herein, shall include their respective successors and
assigns.
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(d) The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
(e) The word "including" when used in this
Agreement shall mean "including, without limitation".
(f) An Event of Default shall exist or continue
or be continuing until such Event of Default is waived in accordance with
SECTION 11.3 or is cured in a manner satisfactory to Agent, if such Event of
Default is capable of being cured as determined by Agent.
(g) All references to the term "good faith" used
herein when applicable to Agent or any Lender shall mean, notwithstanding
anything to the contrary contained herein or in the UCC, honesty in fact in the
conduct or transaction concerned. Borrowers shall have the burden of proving any
lack of good faith on the part of Agent or any Lender alleged by Borrowers at
any time.
(h) Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the financial statements of
Borrowers most recently received by Agent prior to the date hereof.
(i) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including", the words "to" and "until" each mean "to but excluding" and the word
"through" means "to and including".
(j) Unless otherwise expressly provided herein,
(i) references herein to any agreement, document or instrument shall be deemed
to include all subsequent amendments, modifications, supplements, extensions,
renewals, restatements or replacements with respect thereto, but only to the
extent the same are not prohibited by the terms hereof or of any other Financing
Agreement, and (ii) references to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation of
this Agreement.
(l) This Agreement and other Financing
Agreements may use several different limitations, tests or measurements to
regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their
terms.
(m) This Agreement and the other Financing
Agreements are the result of negotiations among and have been reviewed by
counsel to Agent and the other
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parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their preparation.
13.3. Notices. All notices, requests and demands hereunder shall be
in writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to Borrowers: Kirkland's Stores, Inc.
000 Xxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to: Kirkland's Stores, Inc.
P. O. Xxx 0000
Xxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and to: Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
18th & Arch Streets
Philadelphia, Pennsylvania 1903
Attention: Xxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
If to Agent: Congress Financial Corporation (Southern)
000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Office Head
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
13.4. Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision
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held to be invalid or unenforceable and the rights and obligations of the
parties shall be construed and enforced only to such extent as shall be
permitted by Applicable Law.
13.5. Confidentiality.
(a) Agent and each Lender shall use all
reasonable efforts to keep confidential, in accordance with its customary
procedures for handling confidential information and safe and sound lending
practices, any non-public information supplied to it by any Borrower pursuant to
this Agreement, provided, that, nothing contained herein shall limit the
disclosure of any such information: (i) to the extent required by statute, rule,
regulation, subpoena or court order, (ii) to bank examiners and other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Agent or such Lender is a party relating to this Agreement, (iv) to any
Lender or any Affiliate of any Lender or to any Participant (or prospective
Lender or Participant) so long as such Lender or Participant (or prospective
Lender or Participant) shall have been instructed to treat such information as
confidential in accordance with this SECTION 13.5, or (v) to counsel for Agent
or any Participant or Lender (or prospective Participant or Lender so long as
clause (iv) of this Section is satisfied as to such Person).
(b) In the event that Agent or any Lender
receives a request or demand to disclose any confidential information pursuant
to any subpoena or court order, Agent or such Lender, as the case may be, agrees
(i) to the extent permitted by Applicable Law or if permitted by Applicable Law,
statute, rule or regulation to the extent Agent determines in good faith that it
will not create any risk of liability to Agent or such Lender, that Agent or
such Lender will promptly notify Borrower Agent of such request so that
Borrowers may seek a protective order or other appropriate relief or remedy and
(ii) if disclosure of such information is required, disclose such information
and, subject to reimbursement by Borrowers of Agent's or such Lender's
reasonable expenses, cooperate with Borrowers in reasonable efforts to obtain an
order or other reliable assurance that confidential treatment will be accorded
to such portion of the disclosed information which Borrowers so designate, to
the extent permitted by Applicable Law or if permitted by Applicable Law, to the
extent Agent or such Lender determines in good faith that it will not create any
risk of liability to Agent or such Lender.
(c) In no event shall this SECTION 13.5 or any
other provision of this Agreement or Applicable Law be deemed: (i) to apply to
or restrict disclosure of information that has been or is made public by any
Borrower or any third party, (ii) to apply to or restrict disclosure of
information that was or becomes available to Agent or any Lender from a Person
other than a Borrower, (iii) require Agent or any Lender to return any materials
furnished by any Borrower to Agent or (iv) prevent Agent from responding to
routine informational requests in accordance with the Code of Ethics for the
Exchange of Credit Information promulgated by The Xxxxxx Xxxxxx Associates or
other applicable industry standards relating to the exchange of credit
information. The obligations of Agent and Lenders under this SECTION 13.5 shall
supersede and replace the obligations of Agent and Lenders under any
confidentiality letter signed prior to the date hereof.
13.6. Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Agent, Lenders, each Borrower, and their
respective successors and assigns,
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except that no Borrower may assign its rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Agent and Lenders. Any such purported
assignment without such express prior written consent shall be void. No Lender
may assign its rights and obligations under this Agreement without the prior
written consent of Agent, except as provided in SECTION 13.7 below. The terms
and provisions of this Agreement and the other Financing Agreements are for the
purpose of defining the relative rights and obligations of Borrowers, Agent and
Lenders with respect to the transactions contemplated hereby and there shall be
no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Financing Agreements.
13.7. Assignments; Participations.
(a) Each Lender may assign all or, if less than
all, a portion equal to at least $5,000,000 in the aggregate for the assigning
Lender (other than an assignment by Term Lender to an Affiliate of Term Lender,
which shall not be subject to such minimum amount), of such rights and
obligations under this Agreement to one or more Eligible Transferees (but not
including for this purpose any assignments in the form of a participation), each
of which assignees shall become a party to this Agreement as a Lender by
execution of an Assignment and Acceptance; provided, that, such transfer or
assignment to an Eligible Transferee that is not a Lender or an Affiliate of a
Lender will not be effective until recorded by Agent on the Register; and
provided, further, that so long as no Event of Default exists, Congress shall
hold not less than sixty-six and two-thirds percent (66 2/3%) of all outstanding
Revolving Loans.
(b) Agent shall maintain a register of the names
and addresses of Lenders, their Commitments and the principal amount of their
Loans (the "Register"). Agent shall also maintain a copy of each Assignment and
Acceptance delivered to and accepted by it and shall modify the Register to give
effect to each Assignment and Acceptance. The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and all
Obligors, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Borrowers and any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance
and recording, from and after the effective date specified in each Assignment
and Acceptance, (i) the assignee thereunder shall be a party hereto and to the
other Financing Agreements and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment
and Acceptance, the assignor and assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, the assigning Lender makes no representation
or warranty and assumes no responsibility with
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respect to any statements, warranties or representations made in or in
connection with this Agreement or any of the other Financing Agreements or the
execution, legality, enforceability, genuineness, sufficiency or value of this
Agreement or any of the other Financing Agreements furnished pursuant hereto,
(ii) the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower, any
other Obligor or any of their Subsidiaries or the performance or observance by
any Borrower or any other Obligor of any of the Obligations; (iii) such assignee
confirms that it has received a copy of this Agreement and the other Financing
Agreements, together with such other documents and information it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (iv) such assignee will, independently and without
reliance upon the assigning Lender, Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning any Borrower or any other
Obligor in the possession of Agent or any Lender from time to time to assignees
and Participants.
(e) Each Lender may sell participations to one
or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement and the other Financing Agreements (including,
without limitation, all or a portion of its Commitments and the Loans owing to
it, without the consent of Agent or the other Lenders); provided, that, (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment hereunder) and the other Financing Agreements shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and Borrowers and Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Financing Agreements,
(iii) the Participant shall not have any rights under this Agreement or any of
the other Financing Agreements (the Participant's rights against such Lender in
respect of such participation to be those set forth in the agreement executed by
such Lender in favor of the Participant relating thereto) and all amounts
payable by Borrowers or any other Obligor hereunder shall be determined as if
such Lender had not sold such participation,
(f) Nothing in this Agreement shall prevent or
prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank
in support of borrowings made by such Lenders from such Federal Reserve Bank,
(g) Each Borrower shall assist Agent or any
Lender permitted to sell assignments or participations under this SECTION 13.7
in whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents for, and the participation of relevant management in meetings
and conference calls
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with, potential Lenders or Participants. Each Borrower shall certify the
correctness, completeness and accuracy, in all material respects, of all
descriptions of each Borrower and its affairs provided, prepared or reviewed by
such Borrower that are contained in any selling materials and all other
information provided by it and included in such materials.
(h) (i) Borrower Agent shall maintain, or cause
to be maintained, a register (the "Term Loan Register") on which it enters the
name of each Lender as the registered owner of the Term Loan held by such
Lender. A Registered Term Loan (and the Registered Term Note, if any, evidencing
the same) may be assigned or sold in whole or in part only by registration of
such assignment or sale on the Term Loan Register (and each Registered Term Note
shall expressly so provide). Any assignment or sale of all or part of such
Registered Term Loan (and the Registered Term Note, if any, evidencing the same)
may be effected only by registration of such assignment or sale on the Term Loan
Register, together with the surrender of the Registered instrument of assignment
or sale duly executed by) the holder of such Registered Term Note, whereupon, at
the request of the designated assignee(s) or transferee(s), one or more new
Registered Term Notes in the same aggregate principal amount shall be issued to
the designated assignee(s) or transferee(s). Prior to the registration of
assignment or sale of any Registered Term Loan (and the Registered Term Note, if
any evidencing the same), Borrowers shall treat the Person in whose name such
Loan (and the Registered Term Note, if any, evidencing the same) is registered
as the owner thereof for the purpose of receiving all payments thereon and for
all other purposes, notwithstanding notice to the contrary.
(ii) In the event that any Lender sells
participations in a Registered Term Loan, such Lender shall maintain a register
on which it enters the name of all participants in such Registered Term Loan
(the "Participant Register"). A Registered Term Loan (and the Registered Term
Note, if any, evidencing the same) may be participated in whole or in part only
by registration of such participation on the Participant Register (and each
Registered Term Note shall expressly so provide). Any participation of such
Registered Term Loan (and the Registered Term Note, if any, evidencing the same)
may be effected only by the registration of such participation on the
Participant Register.
13.8. Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
13.9. Counterparts, Etc. This Agreement or any of the other
Financing Agreements may be executed in any number of counterparts, each of
which shall be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Agreement or
any of the other Financing Agreements by telefacsimile shall have the same force
and effect as the delivery of an original executed counterpart of this Agreement
or any of such other Financing Agreements. Any party delivering an executed
counterpart of any such agreement by telefacsimile shall also deliver an
original
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executed counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
[Signatures will commence on following page]
-100-
IN WITNESS WHEREOF, Agent, Lenders and Borrowers have caused these
presents to be duly executed under seal on the day and year first above written.
BORROWERS:
---------
ATTEST: KIRKLAND'S STORES, INC.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------- ---------------------------------------
XXXXXX X. XXXX, XX, Secretary XXXXXXXX X. XXXXXXXX, Executive Vice
President and Chief Financial Officer
Address:
-------
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
------------- ----------------------
ATTEST: XXXXXXXX'X, INC.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------- ---------------------------------------
XXXXXX X. XXXX, XX, Secretary XXXXXXXX X. XXXXXXXX, Executive Vice
President and Chief Financial Officer
Address:
-------
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
------------- ----------------------
ATTEST: XXXXXXXXX.XXX, INC.
/s/ Xxxxxx X. Xxxx, XX By: /s/ Xxxxxxxx X. Xxxxxxxx
-------------------------------- ---------------------------------------
XXXXXX X. XXXX, XX, Secretary XXXXXXXX X. XXXXXXXX, Executive Vice
President and Chief Financial Officer
Address:
-------
000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
Telecopier No.: 000-000-0000
------------- ----------------------
[Signatures continued on following page]
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AGENT:
-----
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), as Collateral and
Administrative Agent
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Title: Vice President
-----------------------
Address:
-------
000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Office Head
---------
Telecopier No.: (000) 000-0000
--------------
LENDERS:
-------
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), a Lender
Revolving Loan Commitment: $45,000,000/$30,000,000
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Title: Vice President
------------------------
Address:
-------
000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Office Head
Telecopier No.: (000) 000-0000
--------------
ABLECO FINANCE LLC, a Lender
Term Loan Commitment: $15,000,000
By: /s/ Xxxxxx Xxxx
------------------------------------
Title: SVP
------------------------
Address:
-------
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx
Telecopier No.: (000) 000-0000
--------------
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EXHIBIT A
FORM OF ASSIGNMENT AND ACCEPTANCE
A-1
EXHIBIT B
INFORMATION CERTIFICATE
B-1
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
[Letterhead of Parent]
, 200_
------------------
Congress Financial Corporation (Southern)
000 Xxxxxxxx Xxxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxx
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 9.6 of the Loan Agreement
(as defined below) as follows:
1. I am the duly elected Chief Financial Officer of Xxxxxxxx'x,
Inc., a Tennessee corporation ("Parent"). Capitalized terms used herein without
definition shall have the meanings given to such terms in the Loan and Security
Agreement, dated May ____, 2002, by and among Congress Financial Corporation
(Southern), as Agent ("Agent"), and Parent, Xxxxxxxx'x Stores, Inc., a Tennessee
corporation, and xxxxxxxxx.xxx, inc., a Tennessee corporation (collectively,
"Borrowers"), and the parties thereto from time to time as Lenders (as such Loan
and Security Agreement is amended, modified or supplemented, from time to time,
the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have
made, or have caused to be made under my supervision, a review in reasonable
detail of the transactions and the financial condition of Borrowers and each of
their Subsidiaries, during the immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
any Borrower or Obligor has taken, is taking, or proposes to take with respect
to such condition or event.
4. I further certify that, based on the review described in
Section 2 above, no Borrower and no Obligor has at any time during or at the end
of such fiscal month, except as specifically described on Schedule II attached
hereto or as permitted by the Loan Agreement, done any of the following:
(a) Changed its respective corporate name, or
transacted business under any trade name, style, or fictitious name, other than
those previously described to you and set forth in the Financing Agreements.
C-1
(b) Changed the location of its chief executive
office, changed its jurisdiction of incorporation, changed its type of
organization or changed the location of or disposed of any of its properties or
assets (other than pursuant to the sale of Inventory in the ordinary course of
its business or as otherwise permitted by Section 9.7 of the Loan Agreement), or
established any new asset locations, except as previously reported to Agent as
required in the Loan Agreement.
(c) Materially changed the terms upon which it
sells goods (including sales on consignment) or provides services, nor has any
vendor or trade supplier to Borrower or any Obligor during or at the end of such
period materially adversely changed the terms upon which it supplies goods to
Borrower or such Obligor.
(d) Permitted or suffered to exist any security
interest in or liens on any of its properties, whether real or personal, other
than as specifically permitted in the Financing Agreements.
(e) Received any notice of, or obtained
knowledge of any of the following not previously disclosed to Lender: (i) the
occurrence of any event involving the release, spill or discharge of any
Hazardous Material in violation of applicable Environmental Law in a material
respect or (ii) any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any non-compliance with or
violation of any applicable Environmental Law by a Borrower or any Obligor in
any material respect or (B) the release, spill or discharge of any Hazardous
Material in violation of applicable Environmental Law in a material respect or
(C) the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials in violation of
applicable Environmental Laws in a material respect or (D) any other
environmental, health or safety matter, which has a material adverse effect on
Borrower or any Obligor or its business, operations or assets or any properties
at which Borrower or such Obligor transported, stored or disposed of any
Hazardous Materials.
(f) Become aware of, obtained knowledge of, or
received notification of, any breach or violation of any material covenant
contained in any instrument or agreement in respect of Indebtedness for money
borrowed by a Borrower.
5. In the case of financial statements delivered for the last
month of a Fiscal Quarter, attached hereto as Schedule III are the calculations
used in determining, as of the end of such Fiscal Quarter whether Borrower is in
compliance with the covenants set forth in Section 9.17 and SECTION 9.19 of the
Loan Agreement for such Fiscal Quarter.
The foregoing certifications are made and delivered this day of
___________, 20__.
Very truly yours,
By:
-----------------------------------------
Title:
--------------------------------------
C-2
SCHEDULE 1.37
EXISTING LENDERS
Syndicated Loan Funding Trust
Fleet National Bank
Hibernia National Bank
AmSouth Bank
Mitsui Leasing Capital Corporation
Union Planters Bank of Jackson, Mississippi
BancorpSouth Bank
TCW Leveraged Income Trust, II, L.P.
Crescent/Mach I Partners, L.P.
Indosuez Capital Funding IIA, Ltd.
Xxx Xxxxxx Senior Floating Rate Fund
Xxx Xxxxxx Prime Rate Income Trust
SCHEDULE 1.38
EXISTING LETTERS OF CREDIT
None
SCHEDULE 8.10
DEPOSIT ACCOUNTS
WACHOVIA BANK - KIRKLAND'S STORES, INC.
WACHOVIA CONCENTRATION ACCOUNT ACCOUNT NO.
Attn: Xxxxxx Xxxxxx 2000013946382
TN1253
000 0xx Xxxxxx Xxxxx
SUB-ACCOUNTS UNDER WACHOVIA CONCENTRATION ACCOUNT
STORE NO. SUB-ACCOUNT NO.
--------- ---------------
K-102 2000013846395
K-107 2000013946405
K-109 2000013946418
K-110 2000013946421
K-118 2000013946434
K-126 2000013946447
K-128 2000013946450
K-129 2000013946463
K-160 2000013946476
K-214 2000013946489
K-227 2000013946492
K-230 2000013946502
K-231 2000013946515
K-240 2000013946528
K-267 2000013946531
K-282 2000013946557
K-284 2000005974689
K-294 2000013946560
K-295 2000013946573
K-297 2000013946586
K-300 2000013946599
K-308 2000013946609
K-312 2000013946612
K-704 2000013946625
K-705 2000013946638
BP-812 2000013946654
BP-814 2000013946667
BP-816 2000013946670
BP-818 2000013946683
BP-825 2000013946706
BP-826 2000013946696
BP-827 2000001293393
BP-836 2000013946719
BP-837 2000013946722
BANK OF AMERICA - KIRKLAND'S STORES, INC.
BANK OF AMERICA CONCENTRATION ACCOUNT ACCOUNT NO.
Attn: Xxx Xxxxxx 0032745901587
TN1-100-02-25
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
SUB-ACCOUNTS UNDER BANK OF AMERICA CONCENTRATION ACCOUNT
STORE NO. SUB-ACCOUNT NO.
--------- ---------------
K-122 003275901728
K-125 003275904359
K-134 003275901298
K-140 003275901736
K-142 000107520067
K-143 003275901744
K-148 003275901306
K-149 003275901751
K-150 003275901769
K-156 003275901314
K-159 003275901322
K-165 003275901330
K-168 003275901777
K-170 003275901785
K-172 003275901348
K-173 003275901793
K-174 003275901801
K-175 003275901819
K-180 003275901827
K-181 003275901835
K-182 003275901843
K-186 003275901850
K-188 000102139335
K-189 003275901868
K-192 003275901876
K-194 003275901884
K-195 003275901892
K-197 003275901900
K-199 003275901363
K-200 003275901371
K-201 003275901918
K-207 003275901926
K-208 003275901934
K-216 003275901942
K-220 003275901959
K-221 003275901967
K-223 003275901975
K-224 003275901389
K-226 003275901983
K-229 003275901991
K-232 003275902007
K-233 003275902015
K-235 003275901397
K-236 003275901405
K-239 003275902023
K-241 003275901413
K-247 003275902031
K-255 003275902049
K-256 003275901421
K-258 003275901546
K-261 003275902056
K-263 003275902064
K-264 003275902072
K-275 003275902080
K-278 003275902098
K-279 003275901439
K-281 003275902106
K-288 003275902114
K-291 003275902122
K-292 003275902130
K-293 003275901447
K-298 003275902148
K-302 003275901454
K-305 003275901462
K-307 003275901470
K-309 003275902155
K-310 003275901488
K-314 003275902163
K-315 003275902171
K-317 003275902429
K-319 003252639317
K-701 003275902189
K-706 003275901496
K-708 003275901504
K-709 003275902197
K-710 003275901512
K-712 003275901520
BP-801 003252962354
BP-803 003275902205
BP-805 003256566102
BP-808 003275902213
BP-809 003263065312
BP-810 003271385306
BP-815 003275901538
BP-817 000201290840
BP-819 003275902221
BP-820 003275902239
BP-821 003275902247
BP-823 003275901553
BP-824 003275902254
BP-829 003275902270
BP-830 003275902288
BP-831 003275901561
BP-834 003275901579
BP-838 003275901355
BP-891 003271385249
K-905 003275902296
AMSOUTH BANK - KIRKLAND'S STORES, INC.
AMSOUTH CONCENTRATION ACCOUNT ACCOUNT NO.
Attn: Xxx Xxxxx 5325414151
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
SUB-ACCOUNTS UNDER AMSOUTH BANK CONCENTRATION ACCOUNT:
STORE NO. SUB-ACCOUNT NO.:
--------- ----------------
K-103 5325414151
K-104 5325414151
K-111 5325414151
K-114 5325414151
K-115 5325414151
K-116 5325414151
K-117 5325414151
K-120 5325414151
K-127 5325414151
K-130 5325414151
K-141 5325414151
K-146 5325414151
K-151 5325414151
K-152 5325414151
K-154 5325414151
K-158 5325414151
K-161 5325414151
K-164 5325414151
K-176 5325414151
K-183 5325414151
K-193 5325414151
K-198 5325414151
K-202 5325414151
K-203 5325414151
K-204 5325414151
K-218 5325414151
K-243 5325414151
K-248 5325414151
K-260 5325414151
K-276 5325414151
K-277 5325414151
K-280 5325414151
K-285 5325414151
K-296 5325414151
K-299 5325414151
K-303 5325414151
K-311 5325414151
K-318 5325414151
K-320 5325414151
K-508 5325414151
K-702 5325414151
BP-813 5325414151
BP-832 5325414151
BP-833 5325414151
BP-835 5325414151
FLEET NATIONAL BANK - XXXXXXXX'X, INC.
FLEET NATIONAL BANK ACCOUNT ACCOUNT NO.
Attn: 53286051
000 Xxxxxxx Xxxxxx
XX: 01-07-05
Xxxxxx, XX 00000
AMSOUTH BANK - XXXXXXXX'X, INC.
AMSOUTH BANK ACCOUNT ACCOUNT NO.
Attn: Xxx Xxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Checking 0000000000
Accounts Payable 0000606472
Master Payroll 0000602213
ACH 9000058891
OTHER DEPOSIT ACCOUNTS - KIRKLAND'S STORES, INC.
ACCOUNT NAME AND ADDRESS STORE NO. ACCOUNT NO.
Bank One K-123 8800363715
P.O. Box 3399 K-167 8700374510
Xxxxx Xxxxx, XX 00000 K-250 7900541257
0-000-000-0000
Laredo National Bank K-131 0000000000
X.X. Xxx 00
Xxxxxx, XX 00000
0-000-000-0000
PNC Bank K136 3095450867
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Centura K-137 0700128224
X.X. Xxx 000
Xxxxx Xxxxx, XX 00000
0-000-000-0000
FVB-colonial K-139 37390104
X.X. Xxx 00000
Xxxxxxxx, XX 00000-0000
0-000-000-0000
Old National Bank K-144 412002523
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
0-000-000-0000
Central Bank & Trust K-145 10251639
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
0-000-000-0000
Hibernia K-153 882107671
P.O. Box 61540 K-272 6020010922
Xxx Xxxxxxx, XX 00000
0-000-000-0000
Provident Bank K-155 0730201
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
0-000-000-0000
Regions Bank K-157 0000000000
X.X. Xxx 00000
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Fifth Third Bank K-166 74136795
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
0-000-000-0000
Key Bank K-169 428294075
P.O. Box 22114 K-219 6001240237
Xxxxxx, XX 00000-0000
0-000-000-0000
United Nations Bank K-171 043071102
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Compass Bank K-178 0055000686
X.X. Xxx 00000
Xxxxxxxxxx, XX 00000
0-000-000-0000
Bank of Louisiana K-185 0000430269
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
0-000-000-0000
Bank One K-187 000715001293029
0000 X. Xxxxxxxxxx Xxxxxx K-259 000000615426970
Xxxxxxxxxxxx, XX 00000 K-304 000000627456452
0-000-000-0000
Bank of America K-190 002832974754
P.O. Box 31019 BP-822 001740042756
Xxxxx, XX 00000-0000
0-000-000-0000
Bank One K-191 000000975830580
Department 1045 K-196 000000801743061
Xxxxxxxx, XX 00000-0000 K-265 000000620830778
0-000-000-0000
Bank One K-205 1883899732
X.X. Xxx 000000
Xxxxxx, XX 00000-0000
0-000-000-0000
Union Planters Bank K-206 0010006330
X.X. Xxx 00000
Xx. Xxxxx, XX 00000-0000
0-000-000-0000
Bank One K-209 111500282737
Mail Suite 0314 K-711 1115002014837
Xxxxxxx, XX 00000-0000
0-000-000-0000
National City Bank K-210 4330049281
P.O. Box 8043 K-238 5230139858
Xxxxx Xxx, XX 00000-0000 K-290 628771994
0-000-000-0000
First American K-211 16021558702
X.X. Xxx 0000
Xxx Xxxxx Xxxxxxx, XX 00000-0000
0-000-000-0000
Lasalle Bank K-212 5800212283
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
0-000-000-0000
Xxxxxxx Bank K-215 010489077
X.X. Xxx 0000
Xxxxxxxx, XX 00000
0-000-000-0000
Union Federal Savings Bank K-217 0590103016
X.X. Xxx 0000 X-000 0000000000
Xxxxxxxxxxxx, XX 46206-6054
0-000-000-0000
Commerica Bank K-222 1850478809
X.X. Xxx 00000
Xxxxxxx, XX 00000-0000
0-000-000-0000
Fifth Third Bank K-225 72609819
P.O. Box 630900 K-162 71178412
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Xxxxxxxxx Xxxx & Xxxxx Xx. X-000 2206308
000 X Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000-0000
0-000-000-0000
Farmers State Bank K-234 753723
0000 0xx Xxx.
Xxxxxx, XX 00000
0-000-000-0000
First National Bank K-237 4681126
X.X. Xxx 0000
Xxxxx Xxxxx, XX 00000
0-000-000-0000
The Huntington National Bank K-242 01891749126
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
0-000-000-0000
Cornhusker Bank K-244 1005171
X.X. Xxx 00000
Xxxxxxx, XX 00000-00000
0-000-000-0000
Central Progressive Bank K-246 771003498
000 Xxxxx Xxx Xx.
Xxxxxxx, XX 00000
0-000-000-0000
Xxxxxxxxxx Xxxxxxx Xxxxxxx X-000 059513087
0000 Xxxxx Xxx.
Xxxxxxxxxx, XX 00000
000-000-0000
Northwest Savings Bank K-251 244200689
X.X. Xxx 000
Xxxxxx, XX 00000
0-000-000-0000
Regions Bank K-252 4105057159
X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000
0-000-000-0000
Chase Bank of Texas K-253 66308001067
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
0-000-000-0000
Union Planters Bank K-254 3353702141
X.X. Xxx 00000
Xx. Xxxx, XX 00000-0000
0-000-000-0000
Central Bank K-257 0040000127866
X.X. Xxx 000
Xxxxxxxxxxxxx, XX 00000
0-000-000-0000
National City Bank K-262 394959934
P.O. Box 5756 K-268 394975483
Xxxxxxxxx, XX 00000-0000
0-000-000-0000
Firestar Bank K-269 0912082707
Location 0999
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Firestar Bank K-270 0492698907
Location 0999 K-306 0492704861
Xxxxxxxxxx, XX 00000-0000
0-000-000-0000
Key Bank K-271 327190049806
0000 Xxxxxx Xxx.
Xxxxxxxxxxx, XX 00000
0-000-000-0000
Dime Savings Bank K273 00003390218190
X.X. Xxx 000
Xxxxxxxxxx Xxxxxxx, XX 00000
0-000-000-0000
Integra K-274 1003603047
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
0-000-000-0000
Bank One K-283 1890241316
000 Xxxxxxxxxxxx Xxxxx
Xxxxx, XX 00000
0-000-000-0000
BB&T K-286 5271866315
X.X. Xxx 000
Xxxxxx, XX 00000
0-000-000-0000
Bank Champaign K-287 1100181
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
0-000-000-0000
Belmont National Bank K-289 2084392
X.X. Xxx 000
Xx. Xxxxxxxxxxx, XX 00000
0-000-000-0000
Old Kent Bank K-301 7514238265
Xxx Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
0-000-000-0000
TFC National Bank K-703 3862619076
X.X. Xxx 0000
Xxx Xxxxx, XX 00000
0-000-000-0000
Community Bank & Trust K-707 160903
X.X. Xxx 0000
Xxxxxxxx, XX 00000
0-000-000-0000
The Savannah Bank BP-802 0001029637
X.X. Xxx 000
Xxxxxxxx, XX 00000-0000
0-000-000-0000
First Citizens Bank BP-828 001411159208
X.X. Xxx 00000
Xxxxxxx, XX 00000-0000
0-000-000-0000
XXXXX CASH ACCOUNTS -- KIRKLAND'S STORES, INC.
ACCOUNT NAME AND ADDRESS STORE NO. ACCOUNT NO.
AmSouth Bank K-102 00607819
Xxxxxxx Central Office K-104 9000015741
000 X. Xxxxxxx X-000 00000000
Xxxxxxx, XX 00000 K-110 00608092
0-000-000-0000 K-111 9000011797
K-115 00015105
K-116 00015148
K-117 0000000000
K-118 00015504
K-120 4000127
K-122 40000518
K-123 9040000755
K-125 40000771
K-126 40000801
K-127 00605409
K-128 00605743
K-129 00605727
K-130 5900248491
K-131 00606421
K-134 00608297
K-136 00609986
K-139 5900248598
K-140 00611166
K-141 9000610135
K-142 00690066
K-143 00690937
K-144 5900249254
K-145 5900249267
K-148 0000000000
K-149 00691623
K-150 5900249296
K-151 00692670
K-152 00692468
K-153 00692921
K-154 0000000000
K-155 0000000000
K-156 9000075382
K-157 9000057546
K-159 9000058228
K-160 9000058215
K-161 0000000000
K-162 9000058383
K-164 9000058697
K-165 9000110166
K-166 9000110140
K-167 0000000000
K-168 9000111699
K-169 9000058846
K-170 9000111372
K-171 9000058862
K-172 0000000000
K-173 9000111314
K-174 0000000000
K-175 9000111330
K-176 9000111149
K-178 9000109960
K-180 9000106426
K-181 9000106442
K-182 9000106468
K-183 0000000000
K-185 90001112054
K-186 9000067112
K-187 9000067073
K-188 9000067028
K-189 9000067044
K-194 9000065978
K-195 9000065994
K-196 0000000000
K-197 9000066058
K-198 9000066061
K-199 9000066087
K-200 9000066139
K-201 9000066100
K-202 9000066142
K-204 9000066184
K-205 9000075214
K-206 9000075337
K-207 9000075230
K-209 0000000000
K-210 0000000000
K-211 0000000000
K-212 9000075311
K-214 9000075379
K-215 0000000000
K-216 0000000000
K-217 0000000000
K-219 9000104444
K-220 9000067963
K-221 9000067989
K-222 9000068001
K-223 9000068027
K-224 9000068030
K-225 9000068072
K-226 9000068098
K-227 0000000000
K-228 0000000000
K-229 9000068153
K-230 9000068221
K-231 9000068179
K-232 9000068195
K-233 9000068247
K-234 9000068250
K-235 9000068276
K-236 9000068292
K-237 9000068315
K-238 9000068331
K-239 9000068373
K-240 9000068357
K-241 9000068399
K-242 9000068412
K-243 0000000000
K-244 9000068425
K-246 0000000000
K-247 9000102909
K-248 9000102941
K-249 9000102925
K-250 9000102967
K-251 9000102983
K-252 9000103089
K-253 9000103063
K-254 0000000000
K-255 9000103128
K-256 9000103102
K-257 0000000000
K-258 9000103144
K-259 9000103241
K-260 9000103225
K-261 9000103160
K-262 0000000000
K-263 9000103186
K-264 9000103209
K-265 9000103364
K-266 9000102789
K-267 0000000000
K-268 9000102802
K-269 9000102828
K-270 9000103283
K-271 1003637246
K-272 0000000000
K-273 9000103267
K-274 9000102844
K-275 100365822
K-276 1003637220
K-277 1003637369
K-278 1003637301
K-279 1003637385
K-280 1003637262
K0281 1003637408
K-282 1003637576
K-283 1003637482
K-284 1003637327
K-285 1003637343
K-286 1003637424
K-287 1003637534
K-288 1003637440
K-289 1003637466
K-290 0000000000
K-291 1003637602
K-292 1003637660
K-293 0000000000
K-294 1003637550
K-295 1003637589
K-296 1003637615
K-297 1003637673
K-298 1003637628
K-299 1003637644
K-300 1003637631
K-301 1003637657
K-302 1003637754
K-303 1003637767
K-304 1003637770
K-305 1003637783
K-306 1003638119
K-307 1003638122
K-308 1003638135
K-309 1003638148
K-310 1003638151
K-311 5324356271
K-312 5324356204
K-314 5324356212
K-315 5325413112
K-316 5325413201
K-317 5325413228
K-318 5325413716
K-319 5325414216
K-320 Does not have a # listed
K-508 0000000000
K-701 9000103047
K-702 1003621090
K-703 1003653806
K-704 0000000000
K-705 1003637592
K-706 1003637686
K-707 0000000000
K-708 1003637796
K-709 1003638083
K-710 5324356298
K-711 5324356220
K-712 5325413074
BP-801 1003653864
BP-802 1003653880
BP-803 10033653903
BP-805 1003653929
BP-808 1003653945
BP-809 1003653961
BP-810 1003653987
BP-812 1003654009
BP-813 1003654025
BP-814 1003654041
BP-815 1003654067
BP-816 1003654083
BP-817 1003654106
BP-818 1003654122
BP-819 1003654148
BP-820 1003654164
BP-821 1003654180
BP-822 0000000000
BP-823 0000000000
BP-824 0000000000
BP-825 1003654261
BP-826 1003654287
BP-827 1003654300
BP-828 1003654326
BP-830 1003653356
BP-831 1003653372
BP-832 1003653398
BP-833 0000000000
BP-834 0000000000
BP-835 1003653453
BP-836 1003653479
BP-837 1003653495
BP-838 1003653741
BP-891 1003653518
BP-905 1003653592
Bancorp South K103 0161241
0000 Xxxx Xxxxxxx Xxxxxx X-000 0000000
Xxxxxx, XX 00000 K-114 60348281
0-000-000-0000
Union Planters K-146 1210072044
P.O. Box 387 K-158 0000079286
Xxxxxxx, XX 00000 K-190 0000089125
0-000-000-0000 K-191 0000089192
K-192 0000089184
K-193 1210089729
K-203 0000093459
K-208 0000093769
K-218 0000096873
SCHEDULE 8.18
CREDIT CARD AGREEMENTS
1. EFS National Bank Authorization, Settlement and Payment Merchant
Agreement between Kirkland's Stores, Inc. and EFS National Bank dated
August 13, 2000 (relates to VISA and MasterCard services)
2. Merchant Services Agreement with Discover Business Services
3. Terms and Conditions for American Express Card Acceptance
