EXHIBIT 10.20
LOAN AND SECURITY AGREEMENT
by and among
L.S. HOLDING, INC.
L.S. HOLDING (FLORIDA), INC.
L.S. WHOLESALE, INC.
as Borrowers
and
LITTLE SWITZERLAND, INC.
as Guarantor
CONGRESS FINANCIAL CORPORATION (FLORIDA)
as Lender
Dated: March 22, 2002
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................................1
SECTION 2. CREDIT FACILITIES...........................................................21
2.1 Loans.......................................................................21
2.2 Letter of Credit Accommodations.............................................23
2.4 Joint and Several Liability.................................................26
SECTION 3. INTEREST AND FEES...........................................................27
3.1 Interest....................................................................27
3.2 Fees........................................................................29
3.3 Changes in Laws and Increased Costs of Loans................................29
SECTION 4. CONDITIONS PRECEDENT........................................................31
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations...31
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.......34
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST...................................35
SECTION 6. COLLECTION AND ADMINISTRATION...............................................42
6.1 Borrowers' Loan Accounts....................................................42
6.2 Statements..................................................................42
6.3 Collection of Accounts......................................................42
6.4 Payments....................................................................44
6.5 Authorization to Make Loans.................................................45
6.6 Use of Proceeds.............................................................45
6.7 Appointment of Parent for Requesting Loans and Receipts of Loans and
Statements..................................................................45
SECTION 7. COLLATERAL REPORTING AND COVENANTS..........................................46
7.1 Collateral Reporting........................................................46
7.2 Accounts Covenants..........................................................47
7.3 Inventory Covenants.........................................................48
7.4 Equipment and Real Property Covenants.......................................49
7.5 Power of Attorney...........................................................49
7.6 Right to Cure...............................................................50
7.7 Access to Premises..........................................................51
SECTION 8. REPRESENTATIONS AND WARRANTIES..............................................51
(i)
8.1 Corporate Existence, Power and Authority....................................51
8.3 Financial Statements; No Material Adverse Change............................52
8.4 Priority of Liens; Title to Properties......................................52
8.5 Tax Returns.................................................................53
8.6 Litigation..................................................................53
8.7 Compliance with Other Agreements and Applicable Laws........................53
8.8 Environmental Compliance....................................................54
8.9 Employee Benefits...........................................................54
8.10 Bank Accounts...............................................................55
8.11 Intellectual Property.......................................................55
8.12 Subsidiaries; Affiliates; Capitalization; Solvency..........................56
8.13 Labor Disputes..............................................................57
8.14 Restrictions on Subsidiaries................................................57
8.15 Material Contracts..........................................................57
8.16 Intentionally Deleted.......................................................57
8.17 Accuracy and Completeness of Information....................................57
8.18 Survival of Warranties; Cumulative..........................................58
8.19 Interrelated Businesses.....................................................58
8.20 Credit Card Agreements......................................................58
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......................................59
9.4 Payment of Taxes and Claims.................................................61
9.5 Insurance...................................................................61
9.6 Financial Statements and Other Information..................................62
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.....................63
9.8 Encumbrances................................................................68
9.9 Indebtedness................................................................70
9.10 Loans, Investments, Etc.....................................................75
9.11 Dividends and Redemptions...................................................83
9.12 Transactions with Affiliates................................................84
9.13 Compliance with ERISA.......................................................85
9.14 End of Fiscal Years; Fiscal Quarters........................................85
9.16 Limitation of Restrictions Affecting Subsidiaries...........................85
9.18 License Agreements..........................................................86
9.19 After Acquired Real Property................................................87
9.20 Credit Card Agreements......................................................87
9.21 Costs and Expenses..........................................................88
9.22 Further Assurances..........................................................89
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..............................................89
(ii)
10.1 Events of Default...........................................................89
10.2 Remedies....................................................................92
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW................95
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.......95
11.2 Waiver of Notices...........................................................96
11.3 Amendments and Waivers......................................................96
11.4 Waiver of Counterclaims.....................................................97
11.5 Indemnification.............................................................97
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS............................................97
12.1 Term........................................................................97
12.2 Interpretative Provisions...................................................99
12.3 Notices....................................................................100
12.4 Partial Invalidity.........................................................101
12.5 Confidentiality............................................................101
12.6 Successors.................................................................102
12.7 Entire Agreement...........................................................103
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Compliance Certificate
Exhibit B Information Certificate
Schedule 1.6 Almod Agreements
Schedule 1.37 Existing Lenders
Schedule 1.38 Existing Letters of Credit
Schedule 1.50 Intercompany Security Agreements
Schedule 1.73 Permitted Holders
Schedule 1.92 Xxxxxxx Agreements
Schedule 6.3 Retail Store Deposit Accounts
Schedule 8.20 Credit Card Agreements
(i)
LOAN AND SECURITY AGREEMENT
This
Loan and Security Agreement dated March 22, 2002 is entered into by
and among Congress Financial Corporation (
Florida), a
Florida corporation
("Lender") and L.S. Holding, Inc., a United States Virgin Islands corporation
("LS Holding"), L.S. Holding (
Florida), Inc., a
Florida corporation ("LS
Florida"), and L.S. Wholesale, Inc., a Massachusetts corporation ("Wholesale",
and together with Holding, and L.S.
Florida, each individually a "Borrower" and
collectively, "Borrowers") and Little Switzerland, Inc., a Delaware corporation
("Parent").
W I T N E S S E T H:
WHEREAS, Borrowers and Guarantor have requested that Lender enter into
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to agree to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all present
and future rights of such Borrower and Guarantor to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the
Reference Bank actually holds or has made any such deposits or loans. The
Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any
change in the Reserve Percentage.
1.3 "Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds ten (10%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds ten
(10%) percent or more of the equity interests 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.
1.4 "Alaska Consigned Inventory" shall mean, Inventory of Wholesale which
is sold on consignment to LS Alaska which Inventory otherwise satisfies the
criteria with respect to Eligible Inventory and with respect to which Lender has
received (a) a Collateral Access Agreement from LS Alaska and (b) UCC financing
statements between LS Alaska, as consignee and Wholesale, as consignor, in form
and substance reasonably satisfactory to Lender, which are duly assigned to
Lender and (c) a written notice to any secured lender to LS Alaska of the first
priority security interest in such Inventory of Lender.
1.5 "Almod" shall mean Almod Diamonds, Ltd., a New York corporation and
its successors and assigns.
1.6 "Almod Agreements" shall mean, collectively, (a) the documents and
instruments referred to on Schedule 1.6 hereof (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced) and (b) all agreements, documents, mortgages and instruments executed
and/or delivered in connection with any of the foregoing.
1.7 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.8 "Borrowers" shall mean, collectively, US Borrowers, LS Holding and any
other Subsidiary of Parent that at any time after the date hereof becomes a
Borrower hereunder (including their respective successors and assigns), each
sometimes being referred to herein individually as a "Borrower".
1.9 "Borrowing Base" shall mean, at any time,
(a) as to the US Borrowers, the amount equal to:
2
(i) the sum of (A) the lesser of (1) sixty-five (65%) percent
multiplied by Value of the Eligible Inventory (other than Alaska Consigned
Inventory) of the US Borrowers or (2) eighty-five (85%) percent of the Net
Recovery Percentage of the Inventory (other than Alaska Consigned Inventory) of
US Borrowers multiplied by the Value of the Eligible Inventory (other than
Alaska Consigned Inventory) of US Borrowers, PLUS (B) until December 31, 2002,
the lesser of (1) fifty (50%) percent multiplied by Value of Alaska Consigned
Inventory or (2) eighty-five (85%) percent of the Net Recovery Percentage of
Alaska Consigned Inventory multiplied by the Value of Alaska Consigned
Inventory,
MINUS
(ii) Reserves attributable to US Borrowers; and
(b) as to LS Holding, the amount equal to:
(i) the lesser of (A) sixty-five (65%) percent multiplied by
Value of the Eligible Inventory of LS Holding or (B) eighty-five (85%) percent
of the Net Recovery Percentage of the Inventory of LS Holding multiplied by the
Value of the Eligible Inventory of LS Holding,
MINUS
(ii) Reserves attributable to LS Holding.
1.10 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of North Carolina, and a day on
which Lender is open for the transaction of business, except that (i) 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 and (ii) if a determination of a Business Day shall
relate to LS Holding, the term "Business Day" shall also exclude any day on
which commercial banks are authorized or required to close under the laws of the
United States Virgin Islands.
1.11 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.12 "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).
3
1.13 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America 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 one hundred
eighty (180) days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $250,000,000; (c) commercial paper (including variable rate
demand notes) with a maturity of two hundred (270) days or less issued by a
corporation (except an Affiliate of any Borrower or Guarantor) organized under
the laws of any State of the United States of America or the District of
Columbia and rated at least A-1 (or the equivalent thereof) by Standard & Poor's
Ratings Service, a division of The XxXxxx-Xxxx Companies, Inc. or at least P-1
(or the equivalent thereof) by Xxxxx'x Investors Service, Inc., or any successor
of either of them; (d) repurchase obligations with a term of not more than
thirty (30) days for underlying securities of the types described in clause (a)
above entered into with any financial institution having combined capital and
surplus and undivided profits of not less than $250,000,000; (e) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or issued by any governmental agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within ninety (90)
days or less from the date of acquisition; PROVIDED, THAT, the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.
1.14 "Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act except as permitted in Section 9.7 hereof); (b) the
liquidation or dissolution of any Borrower or Guarantor or the adoption of a
plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor; (c) the acquisition by
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), except for one or more Permitted Holders, of beneficial ownership,
directly or indirectly, of thirty-five (35%) percent of the voting power of the
total outstanding Voting Stock of any Borrower or Guarantor or the Board of
Directors of any Borrower or Guarantor; (d) during any period of two (2)
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of Parent (together with any new directors whose
nomination for election by the stockholders of Parent, was approved by a vote of
at least a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Parent then still in office; or (e) the
failure of Parent to own directly or indirectly one hundred (100%) percent of
the voting power of the total outstanding Voting Stock of any Borrower or any of
the Foreign Subsidiaries (except for World Gift).
4
1.15 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.16 "Collateral" shall mean, collectively, the US Collateral and the USVI
Collateral.
1.17 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance reasonably satisfactory to Lender, from any lessor of
premises to any Borrower or Guarantor, or any other person to whom any
Collateral is consigned or who has custody, control or possession of any such
Collateral or is otherwise the owner or operator of any premises on which any of
such Collateral is located, pursuant to which such lessor, consignee or other
person, INTER ALIA, acknowledges the first priority security interest of Lender
in such Collateral, agrees to waive any and all claims such lessor, consignee or
other person may, at any time, have against such Collateral, whether for
processing, storage or otherwise, and agrees to permit Lender access to, and the
right to remain on, the premises of such lessor, consignee or other person so as
to exercise Lender'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 Lender and agrees to follow
all instructions of Lender with respect thereto.
1.18 "Credit Card Acknowledgments" shall mean, with respect to each
Borrower, individually and collectively, the agreements by Credit Card Issuers
or Credit Card Processors who are parties to Credit Card Agreements in favor of
Lender acknowledging Lender's first priority security interest in the monies due
and to become due to such Borrower (including, without limitation, credits and
reserves) under the Credit Card Agreements of such Borrower (other than fees and
expenses due to any such Credit Card Issuer or Credit Card Processor), and
agreeing to transfer all such amounts to the Blocked Accounts of such Borrower,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.19 "Credit Card Agreements" shall mean, with respect to each Borrower,
all agreements (other than Credit Card Acknowledgments) now or hereafter entered
into by such 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, but not limited to, the
agreements set forth on Schedule 8.20 hereto.
1.20 "Credit Card Issuer" shall mean any person (other than any Borrower)
who issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards issued through MasterCard International, Inc., VISA, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Xxxxx Xxxxxxx and
other non-bank credit or debit cards, including, without limitation, credit or
debit cards issued by or through American Express Travel Related Services
Company, Inc. and Novus Services, Inc.
5
1.21 "Credit Card Processor" shall mean, with respect to each Borrower, any
servicing or processing agent or any factor or financial intermediary who
facilitates, services, processes or manages the credit authorization, billing
transfer and/or payment procedures with respect to any of such Borrower's sales
transactions involving credit card or debit card purchases by customers using
credit cards or debit cards issued by any Credit Card Issuer.
1.22 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1 and 2.2 hereof.
1.23 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.24 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Lender, by and among
Lender, a Borrower or Guarantor with a deposit account at any bank and the bank
at which such deposit account is at any time maintained which provides that such
bank will comply with instructions originated by Lender directing disposition of
the funds in the deposit account without further consent by such Borrower or
Guarantor and such other terms and conditions as Lender 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 Lender,
that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the bank will wire, or otherwise transfer, in
immediately available funds, on a daily basis to the Lender Payment Account all
funds received or deposited into the Blocked Accounts.
1.25 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower located in the United States or the United States Virgin Islands
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower, which are acceptable to Lender based on the criteria
set forth below. In general, Eligible Inventory shall not include (a)
work-in-process or raw materials; (b) components which are not part of finished
goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e)
supplies used or consumed in such Borrower's business; (f) Inventory at premises
other than those owned and controlled by any Borrower, EXCEPT any Inventory
which would otherwise be deemed Eligible Inventory at locations in the United
States or the United States Virgin Islands that is not located at premises owned
and operated by any Borrower may nevertheless be considered Eligible Inventory:
(i) as to retail stores or other locations which are leased by a Borrower, if
Lender shall have received a Collateral Access Agreement from the owner and
lessor of such location, duly authorized, executed and delivered by such owner
and lessor, or if Lender shall not have received such Collateral Access
Agreement (or Lender shall determine to accept a Collateral Access Agreement
that does not include all required provisions or provisions in the form
otherwise required by Lender), Lender may, at its option, nevertheless consider
Inventory at such location to be Eligible Inventory, to the extent Lender shall
have established a Reserve in respect of amounts due or to become due to the
owner and operator of such location (without limiting any other rights and
remedies of Lender under this Agreement or under the other Financing Agreements
with respect to the establishment of Reserves or otherwise) and after giving
effect to such Reserves, there is
6
Excess Availability; PROVIDED, THAT, (1) each Borrower shall use commercially
reasonable efforts to obtain the Collateral Access Agreement from the lessor,
owner and operator with respect to each of such locations and (2) the Reserves
established pursuant to this Section shall not exceed, at any time, the
aggregate of all amounts payable to such lessors, owners and operators for three
(3) months, PROVIDED, THAT, such limitation on the amount of the Reserves
pursuant to this Section shall only apply so long as: (aa) no Event of Default
shall exist or have occurred and be continuing, (bb) neither any Borrower nor
Lender shall have received notice of any default or event of default under the
lease with respect to such location and (cc) Lender shall have received
evidence, in form and substance reasonably satisfactory to Lender, that each
Borrower has not granted to the owner and lessor a security interest in or lien
upon any assets of any Borrower (provided, that, to the extent that subsequent
to the establishment of any such Reserve, such Borrower delivers a Collateral
Access Agreement with respect to such location, such Reserve shall be released),
and (ii) as to locations owned and/or operated by a third person (including LS
Alaska until such time as it becomes a direct Subsidiary or Parent), (A) if
Lender shall have received a Collateral Access Agreement from such owner and
operator with respect to such location, duly authorized, executed and delivered
by such owner and operator or if Lender shall not have received such Collateral
Access Agreement (or Lender shall determine to accept a Collateral Access
Agreement that does not include all required provisions or provisions in the
form otherwise required by Lender), Lender may, at its option, nevertheless
consider Inventory at such location to be Eligible Inventory to the extent
Lender shall have established such Reserves in respect of amounts at any time
payable by such Borrower to the owner and operator thereof as Lender shall, in
good faith, determine, and (B) in addition, if required by Lender, if Lender
shall have received: (1) UCC financing statements between the owner and
operator, as consignee or bailee and such Borrower, as consignor or xxxxxx, in
form and substance reasonably satisfactory to Lender, which are duly assigned to
Lender and (2) a written notice to any secured lender to the owner and operator
of the first priority security interest in such Inventory of Lender; (g)
Inventory subject to a security interest or lien in favor of any Person other
than Lender except those permitted in this Agreement (but without limiting the
right of Lender to establish any Reserves with respect to amounts secured by
such security interest or lien in favor of any Person even if permitted herein);
(h) xxxx and hold goods; (i) unserviceable or obsolete Inventory; (j) returned
Inventory that is not held for resale; (k) Inventory to be returned to vendors,
(l) Inventory subject to deposits made by customers for sales of Inventory which
have not been delivered, (m) Inventory which is not subject to the first
priority, valid and perfected security interest of Lender; (n) returned, damaged
and/or defective Inventory; (o) Inventory purchased or sold on consignment,
other than Alaska Consigned Inventory and (p) Inventory located outside the
United States of America and its territories. The criteria for Eligible
Inventory set forth above may only be changed and any new criteria for Eligible
Inventory may only be established by Lender 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 Lender 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 Lender. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
7
1.26 "Eligible Transferee" shall mean (a) any Affiliate of Lender; (b) any
other commercial bank or financial institution having combined capital and
surplus and undivided profits of not less than $250,000,000 or (c) "accredited
investor" (as defined in Regulation D under the Securities Act of 1933, as
amended) approved by Lender, and except as otherwise provided in Section 12.6
hereof, as to any such accredited investor, as approved by Parent, such approval
of Parent not to be unreasonably withheld, conditioned or delayed and such
approval to be deemed given by Parent if no objection from Parent is received
within seven (7) Business Days after notice of such proposed assignment has been
provided by Lender, PROVIDED, THAT, neither any Borrower, any Guarantor nor any
Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee.
1.27 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), written authorizations, final
judicial or administrative decisions, injunctions or agreements between any
Borrower, Guarantor or Subsidiary thereof and any Governmental Authority to the
extent binding on such Person, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.28 "Equipment" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's now owned and hereafter acquired equipment, wherever
located, including machinery, data processing and computer equipment (whether
owned or licensed and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.29 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
8
1.30 "ERISA Affiliate" shall mean any person required to be aggregated with
any Borrower, any Guarantor or any of its or their respective Subsidiaries under
Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.31 "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; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which any Borrower, Guarantor or any of its or
their respective Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which any Borrower, Guarantor or
any of its or their respective Subsidiaries could otherwise be liable; (f) a
complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer Plan is in reorganization; (g)
the filing of a notice of intent to terminate, the treatment of a Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which 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, Guarantor or
any ERISA Affiliate in excess of $500,000 and (j) any other event or condition
with respect to a Plan including any Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably be
expected to result in liability of any Borrower in excess of $500,000.
1.32 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower or Parent on behalf of such
Borrower and approved by Lender) on or about 9:00 a.m. (New York time) two (2)
Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to such Borrower in accordance with this Agreement,
with a maturity of comparable duration to the Interest Period selected by or on
behalf of a Borrower.
1.33 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.34 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
9
1.35 "Excess Availability" shall mean the sum of:
(a) as to the US Borrowers, the amount, as determined, in good faith,
by Lender, calculated at any date, equal to: (i) the lesser of: (A) the
Borrowing Base with respect to all US Borrowers (without regard to any Reserves)
and (B) the Revolving Loan Limit, MINUS (ii) the sum of: (A) the amount of all
then outstanding and unpaid Obligations (other than outstanding USVI
Obligations), plus (B) the amount of the Reserves attributable to US Borrowers
(exclusive of Reserves in respect of Letter of Credit Accommodations and the
Mortgage), plus (C) the aggregate amount of all then outstanding and unpaid
trade payables and other obligations of US 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 such Borrower(s) in good
faith), plus (D) without duplication, the amount of checks issued by US
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 US Borrowers in good faith), but not
yet sent; and
(b) as to LS Holding, the amount, as determined, in good faith, by
Lender, calculated at any date, equal to: (i) the lesser of: (A) the Borrowing
Base with respect to LS Holding (without regard to any Reserves) and (B) the
Revolving Loan Limit, MINUS (ii) the sum of: (A) the amount of all then
outstanding and unpaid USVI Obligations (other than the Term Loan), plus (B) the
amount of the Reserves attributable to LS Holding (exclusive of Reserves in
respect of Letter of Credit Accommodations), plus (C) the aggregate amount of
all then outstanding and unpaid trade payables and other obligations of LS
Holding 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
LS Holding in good faith), plus (D) without duplication, the amount of checks
issued by LS Holding 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 LS Holding in good faith), but
not yet sent.
1.36 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.37 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.37 hereto (and including JPMorgan Chase Bank as successor by merger
to The Chase Manhattan Bank) and their respective predecessors, successors and
assigns.
1.38 "Existing Letters of Credit" shall mean, collectively, the letters of
credit issued for the account of a Borrower or Guarantor or for which such
Borrower or Guarantor is otherwise liable listed on 1.38 hereto, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.39 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now
10
or at any time hereafter executed and/or delivered by any Borrower or Obligor in
connection with this Agreement.
1.40 "Foreign Subsidiary" shall mean any direct or indirect subsidiary of
Parent organized in a jurisdiction other than the United States of America, a
state thereof, or the District of Columbia.
1.41 "Foreign Subsidiary Agreements" shall mean the agreements, to be
delivered by each Foreign Subsidiary (other than LS Holding) and LS Alaska to
Lender, in accordance with Section 4.1(p) in form and substance satisfactory to
Lender.
1.42 "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 Section 9.17 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
Lender prior to the date hereof.
1.43 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.44 "Guarantor" shall mean Little Switzerland, Inc., a Delaware
corporation, together with its successors and assigns.
1.45 "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, friable
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 regulated under any Environmental Law
(including any that are or become classified as hazardous or toxic under any
Environmental Law).
1.46 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed
11
by such Person in the ordinary course of business of such Person in connection
with obtaining goods, materials or services that is not overdue by more than
ninety (90) days, unless the trade payable is being contested in good faith);
(c) all obligations as lessee under leases which have been, or should be, in
accordance with GAAP recorded as Capital Leases; (d) any contractual obligation,
contingent or otherwise, of such Person to pay or be liable for the payment of
any indebtedness described in this definition of another Person, including,
without limitation, any such indebtedness, directly or indirectly guaranteed, or
any agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances, drafts or
similar documents or instruments issued for such Person's account; (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time, PROVIDED, THAT, for purposes hereof, indebtedness
referred to in this clause (g) is non-recourse to such Person, the amount of
such indebtedness shall not be deemed to exceed the lesser of (i) the principal
amount of such indebtedness or (ii) the net book value of the asset securing
such indebtedness; (h) all obligations, liabilities and indebtedness of such
Person (marked to market) arising under swap agreements, cap agreements and
collar agreements and other agreements or arrangements designed to protect such
person against fluctuations in interest rates or currency or commodity values;
and (i) all obligations owed by such Person under License Agreements with
respect to non-refundable, advance or minimum guarantee royalty payments.
1.47 "Information Certificate" shall mean the Information Certificates of
Borrowers and Guarantors constituting Exhibit B hereto containing material
information with respect to Borrowers and Guarantor, their respective businesses
and assets provided by or on behalf of Borrowers and Guarantor to Lender in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.48 "Intercompany Loan Documents" shall mean the Intercompany Notes, the
Intercompany Security Agreements and other agreements, documents and instruments
at any time executed and/or delivered by LS Holding or LS Alaska in connection
therewith, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.49 "Intercompany Notes" shall mean, collectively, the following (as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced): (a) the promissory note, dated of even date
herewith, issued by LS Holding payable to Wholesale; (b) the promissory note,
dated of even date herewith, issued by LS Holding payable to
Florida; (c) the
promissory note, dated of even date herewith, issued by LS Holding payable to
12
Parent; (d) the promissory note, dated of even date herewith, issued by LS
Alaska payable to Wholesale; (e) the promissory note, dated of even date
herewith, issued by LS Alaska payable to
Florida; and (f) the promissory note,
dated of even date herewith, issued by LS Alaska payable to Parent.
1.50 "Intercompany Security Agreements" shall mean, collectively, the
agreements set forth on Schedule 1.50 hereto, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.51 "Intellectual Property" shall mean, as to each Borrower and Guarantor,
such Borrower's and Guarantor's now owned and hereafter arising or acquired:
patents, patent rights, patent applications, copyrights, works which are the
subject matter of copyrights, copyright registrations, trademarks, trade names,
trade styles, trademark and service xxxx applications, and licenses and rights
to use any of the foregoing; all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing; all rights to
xxx for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
1.52 "Intercreditor Agreement" shall mean the Intercreditor and
Subordination Agreement, dated on or about the date hereof, by and between
Lender and Xxxxxxx, as acknowledged and agreed to by Borrowers and Guarantor, as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.53 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as any Borrower (or
Parent on behalf of such Borrower) may elect, the exact duration to be
determined in accordance with the customary practice in the applicable
Eurodollar Rate market; PROVIDED, THAT, such Borrower (or Parent on behalf of
such Borrower) may not elect an Interest Period which will end after the last
day of the then-current term of this Agreement.
1.54 "Interest Rate" shall mean,
(a) Subject to clause (b) of this definition below:
(i) as to Prime Rate Loans, a rate equal to three-quarters (3/4%)
percent per annum in excess of the Prime Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the Eurodollar Rate applicable for the Interest
Period selected by a Borrower, or by Parent on behalf of such Borrower, as in
effect three (3) Business Days after the date of receipt by Lender of the
13
request of or on behalf of such Borrower for such Eurodollar Rate Loans in
accordance with the terms hereof, whether such rate is higher or lower than any
rate previously quoted to any Borrower or Guarantor).
(b) Notwithstanding anything to the contrary contained in clause (a)
of this definition, the Interest Rate shall mean the rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and the rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at
Lender's option, without notice, (i) either (A) for the period on and after the
date of termination hereof until such time as all Obligations are paid and
satisfied in full in immediately available funds, or (B) 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 Lender and (ii) on the
Loans at any time outstanding in excess of the Borrowing Base or the Maximum
Credit (whether or not such excess(es) arise or are made with or without
Lender's knowledge or consent and whether made before or after an Event of
Default) following demand therefor by Lender in accordance with Section 2.1(e)
hereof.
1.55 "Inventory" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's now owned and hereafter existing or acquired goods,
wherever located, which (a) are leased by such Borrower or Guarantor as lessor;
(b) are held by such Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
1.56 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Lender, by and among
Lender, any Borrower or Guarantor (as the case may be) and any securities
intermediary, commodity intermediary or other person who has custody, control or
possession of any investment property of such Borrower or Guarantor
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Lender, that it will comply with entitlement orders originated by Lender with
respect to such investment property, or other instructions of Lender, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Lender, in each case, without the further consent of such Borrower
or Guarantor and including such other terms and conditions as Lender may
require.
1.57 "Lender Payment Account" shall mean account no. 5000000030334, ABA
No.000000000 of Lender at First Union National Bank, Charlotte, North Carolina
or such other account of Lender as Lender may from time to time designate to
Parent as the Lender Payment Account for purposes of this Agreement and the
other Financing Agreements.
1.58 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of any Borrower or
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by any Borrower or
14
Obligor of its obligations to such issuer; sometimes being referred to herein
individually as "Letter of Credit Accommodation".
1.59 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.60 "Loans" shall mean the Revolving Loans and the Term Loan.
1.61 "LS Alaska" shall mean LS Holding (USA), Inc., an Alaska corporation,
and its successors and assigns.
1.62 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operations of Borrowers and
their respective Subsidiaries (taken as a whole), or (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 Lender upon the Collateral; (d) the Collateral
or its value; (e) the ability of any Borrower to repay the Obligations or of any
Borrower to perform its obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; or (f) the ability of Lender
to enforce the Obligations or realize upon the Collateral or otherwise with
respect to the rights and remedies of Lender under this Agreement or any of the
other Financing Agreements.
1.63 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower or
Guarantor involving monetary liability of or to any Person in an amount in
excess of $250,000 in any fiscal year, (b) any Credit Card Agreement and (c) any
other contract or other agreement (other than the Financing Agreements), whether
written or oral, to which any Borrower or Guarantor is a party as to which the
breach, nonperformance, cancellation or failure to renew by any party thereto
would have a Material Adverse Effect.
1.64 "Maximum Credit" shall mean the amount of $12,000,000.
1.65 "Mortgage" shall mean the First Priority Leasehold Mortgage, dated of
even date herewith, by Wholesale in favor of Lender with respect to its
leasehold interest in the Real Property and related assets of such US Borrower
located at 000-X, Xxxxx Xxx, Xx Xxxxxx, Virgin Islands (as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced).
1.66 "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,
Guarantor or any ERISA Affiliate.
1.67 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is an amount equal to the amount of the
recovery in respect of the Inventory of a Borrower at such time on a "net
orderly liquidation value" basis as set forth in the most recent acceptable
appraisal of Inventory received by Lender in accordance with Section 7.3,
15
net of operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the original cost of the Inventory subject to such
appraisal.
1.68 "Net Worth" shall mean as to any Person, at any time, in accordance
with GAAP (except as otherwise specifically set forth below), on a consolidated
basis for such Person and its Subsidiaries (if any), the amount equal to the
difference between: (a) the aggregate net book value of all assets of such
Person and its Subsidiaries, calculating the book value of inventory for this
purpose on a first-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (b) the
aggregate amount of the Indebtedness and other liabilities of such Person and
its Subsidiaries (including tax and other proper accruals).
1.69 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Lender and/or
any of its Affiliates, including, the USVI Obligations, principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, arising under this Agreement or any of
the other Financing Agreements, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower
under the United States Bankruptcy Code or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or other
similar statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, or secured or unsecured.
1.70 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantor), other than Borrowers; provided, however, that none of
the Foreign Subsidiaries shall be Obligors prior to the occurrence of an Event
of Default, so long as becoming an Obligor would result in tax liability to
Parent or such Foreign Subsidiary as a direct result of becoming an Obligor.
1.71 "Parent" shall mean Little Switzerland, Inc., a Delaware corporation,
and its successors and assigns.
1.72 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of Lender in any of the Loans and Letter
of Credit Accommodations in conformity with the provisions of Section 12.6 of
this Agreement governing participations.
1.73 "Permitted Holders" shall mean the Persons listed on Schedule 1.73
hereto and their respective successors and assigns.
16
1.74 "Permitted Acquisition" shall mean any transaction which is permitted
pursuant to the terms and conditions set forth in Section 9.7(a)(iii), 9.10(g)
and 9.10(h).
1.75 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.76 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
1.77 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.78 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.79 "Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, county or
local, and whether foreign or domestic, that are paid or payable by any Person
in respect of any period in accordance with GAAP.
1.80 "Real Property" shall mean all now owned and hereafter acquired real
property of each Borrower and Guarantor, 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.
1.81 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower and Guarantor: (a) all Accounts;
(b) all interest, fees, late charges, penalties, collection fees and other
amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account; or (e)
all other accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to any Borrower or Guarantor,
whether from the sale and lease of goods or other property, licensing of any
property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by any Borrower or Guarantor or
to or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated
with any Accounts, Inventory or general intangibles of any Borrower or
17
Guarantor (including, without limitation, choses in action, causes of action,
tax refunds, tax refund claims, any funds which may become payable to any
Borrower or Guarantor in connection with the termination of any Plan or other
employee benefit plan and any other amounts payable to any Borrower or Guarantor
from any Plan or other employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).
1.82 "Records" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).
1.83 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
1.84 "Renewal Date" shall the meaning set forth in Section 13.1 hereof.
1.85 "Reserves" shall mean as of any date of determination, such amounts as
Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to any US Borrower under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, 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
or business of any Borrower or Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof, (d) to reflect amounts
owing by Borrowers to Credit Card Issuers or Credit Card Processors in
connection with the Credit Card Agreements, including without limitation,
chargebacks, (e) on the date hereof, Lender shall establish a Reserve in the
amount of $300,000, which Reserve shall be released, once Lender has received
evidence satisfactory to Lender that the Mortgage is of record in the real
estate records of the appropriate jurisdiction and a title insurance policy with
respect to such Mortgage has been issued to Lender in accordance with the terms
of this Agreement, or (f) in respect of any state of facts which Lender
determines in good faith constitutes a Default or an Event of Default. Without
limiting the generality of the foregoing, Reserves may be established to reflect
(i) amounts due or to become due in respect of sales, use and/or withholding
taxes; (ii) inventory shrinkage to the extent not otherwise reserved for in
determining Eligible Inventory,
18
(iii) the aggregate amount of deposits, if any, received by Borrowers from its
customers for unfilled orders of merchandise, (iv) any rental payments, service
charges or other amounts due or to become due to lessors of real or personal
property or other Persons 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, subject to the applicable limitations set forth in the definition of
Eligible Inventory, (v) to reflect the value, if any, of "aged Inventory" of
Borrowers, the amount of such reserve to be equal to the difference, if any,
between the aggregate dollar amount of "aged Inventory" as reflected in Schedule
E-3 of the written appraisal of Hilco Appraisal Services, LLC ("Hilco") dated
January 31, 2002 and the aggregate dollar value of aged Inventory of Borrowers
on any date of determination, or (vi) to reflect against the Borrowing Base of
the US Borrowers, the amount, if any, by which the outstanding amount of the
Loans and Letter of Credit Accommodations to LS Holding exceeds the Borrowing
Base of LS Holding. To the extent Lender 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 Lender, Lender shall not
establish a Reserve for the same purpose. The amount of any Reserve established
by Lender shall have a reasonable relationship to the event, condition or other
matter which is the basis for such reserve as determined by Lender in good
faith.
1.86 "Revolving Loan Limit" shall mean, at any time, the amount equal to
the $12,000,000 less the outstanding principal amount of the Term Loan.
1.87 "Revolving Loans" shall mean the loans now or hereafter made by or on
behalf of Lender for the account of any Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.88 "Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.89 "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
19
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more subsidiaries of such Person.
1.90 "Term Loan" shall mean, the term loan made by Lender to LS Holding as
provided for in Section 2.3 hereof.
1.91 "Tiffany" shall mean Xxxxxxx and Company, a New York corporation and
its successors and assigns.
1.92 "Tiffany Agreements" shall mean, collectively, (a) the documents and
instruments referred to on Schedule 1.92 hereof (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced) and (b) all agreements, documents, mortgages and instruments executed
and/or delivered in connection with any of the foregoing.
1.93 "Tiffany Stock Sale Proceeds" shall mean, all proceeds received from
Tiffany by Parent as a result of the issuance of its Capital Stock to Tiffany
pursuant to the terms and conditions of the Stockholders Agreement dated as of
May 1, 2001, by and among Parent, Tiffany, Jewelcor Management, Inc. and Xxxxxxx
Xxxxxxxx, as such agreement may be amended, supplemented or otherwise modified,
from time to time.
1.94 "UCC" shall mean the Uniform Commercial Code as in effect in the State
of Florida, and any successor statute, as in effect from time to time (except
that terms used herein which are defined in the Uniform Commercial Code as in
effect in the State of Florida on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as Lender may otherwise determine).
1.95 "US Borrowers" shall mean collectively together with their respective
successors and assigns: (a) LS Wholesale, Inc., a Massachusetts corporation; (b)
LS Holding (Florida), Inc., a Florida corporation; and (c) and any other
Subsidiary of Parent, formed under the laws of the United States of America, or
any state thereof, that at any time after the date hereof becomes a Borrower
hereunder (including their respective successors and assigns), each sometimes
being referred to herein individually as a "US Borrower".
1.96 "US Collateral" shall have the meaning set forth in Section 5.1(a)
hereof.
1.97 "USVI Collateral" shall have the meaning set forth in Section 5.1(b)
hereof.
1.98 "USVI Obligations" shall mean the Loans and Letter of Credit
Accommodations to LS Holding and all other obligations, liabilities and
Indebtedness of every kind, nature and description owing by LS Holding to Lender
and/or any of its Affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under this Agreement or any of the other
Financing Agreements, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of this Agreement or
after the commencement of any case with respect
20
to LS Holding under the United States Bankruptcy Code or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or other similar statute of any jurisdiction now or hereafter in effect
(whether at law or in equity)(including the payment of interest and other
amounts which would accrue and become due but for the commencement of such case,
whether or not such amounts are allowed or allowable in whole or in part in such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, or secured or
unsecured.
1.99 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, PROVIDED, THAT, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write- downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Lender prior to the
date hereof, if any.
1.100 "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.
1.101 "Weighted Average Life to Maturity" shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
1.102 "World Gift" shall mean World Gift Imports (Barbados) Ltd., a
Barbados corporation, and its successors and assigns.
SECTION 2. CREDIT FACILITIES
2.1 LOANS.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make revolving loans to each US Borrower from time to time in
amounts requested by such US Borrower (or Parent on behalf of such US Borrower)
up to the aggregate amount outstanding to all US Borrowers at any time equal to
the Borrowing Base of the US Borrowers at such time.
21
(b) Subject to and upon the terms and conditions contained herein,
Lender agrees to make revolving loans to LS Holding from time to time in amounts
requested by LS Holding (or Parent on behalf of LS Holding) up to the amount
outstanding at any time equal to the Borrowing Base of LS Holding at such time
LESS the outstanding principal amount of the Term Loan.
(c) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Parent, reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Lender determines in good faith
that: (i) the number of days of the turnover of the Inventory for any period has
adversely changed in any material respect or (ii) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased in any material
respect, including any decrease attributable to a change in the nature, quality
or mix of the Inventory; PROVIDED, THAT, to the extent Lender reduces the
advance rates used to determine the Borrowing Base at any time in effect, as a
result of a change in the nature, quality or mix of the Inventory as set forth
in clause (ii) hereof, but not as a consequence of its review of the most recent
appraisal received by Lender, Borrowers may request that an appraisal be
conducted (in accordance with Section 7.3 hereof) and, to the extent that the
results of such appraisal reflect no such decrease or less of a decrease than
that previously attributed by Lender to such a change, then the advance rates,
to the extent actually reduced based on such decrease, shall be increased,
accordingly. 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 Lender in good faith. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Inventory or in establishing Reserves. To the extent Lender 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
Lender, Lender shall not establish a Reserve or otherwise revise the lending
formulas for the same purpose.
(d) Except in Lender's discretion, or as otherwise provided herein,
(i) the aggregate amount of the Loans and the Letter of Credit Accommodations
outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate
principal amount of the Revolving Loans and Letter of Credit Accommodations
outstanding at any time to all Borrowers shall not exceed the Revolving Loan
Limit, (iii) the aggregate principal amount of the Loans and Letter of Credit
Accommodations outstanding at any time to LS Holding shall not exceed the
Borrowing Base of LS Holding, and (iv) the aggregate principal amount of
Revolving Loans based on Alaska Consigned Inventory outstanding at any time
shall not exceed $2,000,000.
(e) In the event that the aggregate amount of the outstanding Letter
of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations
set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of
Credit Accommodations exceed the Maximum Credit, or the aggregate principal
amount of the Revolving Loans and Letter of Credit Accommodations outstanding at
any time to all Borrowers exceeds the Revolving Loan Limit, or the aggregate
principal amount of the Loans and Letter of Credit Accommodations outstanding at
any time to LS Holding exceeds the Borrowing Base of LS Holding, or such event
shall not limit,
22
waive or otherwise affect any rights of Lender in such circumstances or on any
future occasions and the applicable Borrower(s) shall, within three (3) Business
Days after written demand by Lender, which may be made at any time or from time
to time, immediately repay to Lender the entire amount of any such excess(es)
for which payment is demanded.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to and upon the terms and conditions contained herein, at
the request of a Borrower (or Parent on behalf of such Borrower), Lender agrees,
to provide or arrange for Letter of Credit Accommodations for the account of
such Borrower containing terms and conditions acceptable to Lender and the
issuer thereof. Any payments made by or on behalf of Lender to any issuer
thereof and/or related parties in connection with the Letter of Credit
Accommodations provided to or for the benefit of a Borrower shall constitute
additional Loans to such Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, the applicable
Borrower(s) shall pay to Lender, a letter of credit fee at a rate equal to two
(2%) percent per annum, on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that such Borrower
shall pay to Lender such letter of credit fee, at a rate equal to four (4%)
percent per annum on such daily outstanding balance for: (i) the period from and
after the date of termination or non-renewal hereof until Lender has received
full and final payment of all Obligations (notwithstanding entry of a judgment
against any Borrower) and (ii) the period from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrowers to pay such fee shall survive the
termination of this Agreement.
(c) The Borrower requesting such Letter of Credit Accommodation (or
Parent on behalf of such Borrower) shall give Lender two (2) Business Days'
prior written notice of such Borrower's request for the issuance of a Letter of
Credit Accommodation. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit Accommodation requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day), the purpose for which such Letter of Credit Accommodation is to
be issued, and the beneficiary of the requested Letter of Credit Accommodation.
The Borrower requesting the Letter of Credit Accommodation (or Parent on behalf
of such Borrower) shall attach to such notice the proposed form of the Letter of
Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions
23
precedent have been satisfied in a manner satisfactory to Lender: (i) the
Borrower requesting such Letter of Credit Accommodation (or Parent on behalf of
such Borrower) shall have delivered to the proposed issuer of such Letter of
Credit Accommodation at such times and in such manner as such proposed issuer
may require, an application, in form and substance satisfactory to such proposed
issuer and Lender, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Lender and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation; and
(iii) the Excess Availability of the Borrower requesting such Letter of Credit
Accommodation, prior to giving effect to any Reserves with respect to such
Letter of Credit Accommodations, on the date of the proposed issuance of any
Letter of Credit Accommodations, shall be equal to or greater than: (A) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory and the documents of title with respect thereto are consigned
to the issuer, the sum of (1) thirty-five (35%) percent multiplied by the Value
of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts
which Lender estimates must be paid in connection with such Inventory upon
arrival and for delivery to one of such Borrower's locations for Eligible
Inventory within the United States of America or the United States Virgin
Islands and (B) if the proposed Letter of Credit Accommodation is for any other
purpose or the documents of title are not consigned to the issuer in connection
with a Letter of Credit Accommodation for the purpose of purchasing Inventory,
an amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$3,000,000.
(f) US Borrowers and Guarantor shall indemnify and hold Lender
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses which Lender may suffer or incur in connection with any
Letter of Credit Accommodations provided for the account of such US Borrower,
and LS Holding, US Borrowers and Guarantor shall indemnify, jointly severally,
and hold Lender harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Lender may suffer or incur in connection
with any Letter of Credit Accommodations provided for the account of LS Holding
and any documents, drafts or acceptances relating thereto, including any losses,
claims, damages, liabilities, costs and expenses due to any action taken by any
issuer or correspondent with respect to any Letter of Credit
24
Accommodation, except for such losses, claims, damages, liabilities, costs or
expenses that are a direct result of the gross negligence or wilful misconduct
of Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction. Each Borrower and Guarantor assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed such Borrower's agent. Each Borrower and Guarantor assumes all
risks for, and agrees to pay, all foreign, Federal, State and local taxes,
duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder as provided
for herein. Each Borrower and Guarantor hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by any Borrower, Guarantor, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation,
except for the gross negligence or wilful misconduct of Lender as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(f) shall survive the payment of Obligations
and the termination of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers and Guarantor shall, at Lender's request,
instruct all suppliers, carriers, forwarders, customs brokers, warehouses or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Lender holds a security interest to deliver them to Lender and/or subject
to Lender's order, and if they shall come into such Borrower's or Guarantor's
possession, to deliver them, upon Lender's request, to Lender in their original
form. Borrower and Guarantor shall also, at Lender's request, designate Lender
as the consignee on all bills of lading and other negotiable and non-negotiable
documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes and
directs any issuer of a Letter of Credit Accommodation to name such Borrower or
Guarantor as the account party therein and to deliver to Lender all instruments,
documents and other writings and property received by issuer pursuant to the
Letter of Credit Accommodations and to accept and rely upon Lender's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit Accommodations or the applications therefor. Nothing
contained herein shall be deemed or construed to grant any Borrower or Guarantor
any right or authority to pledge the credit of Lender in any manner. Lender
shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers and Guarantor shall be bound by any reasonable interpretation made in
good faith by Lender, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of any Borrower or Guarantor. Lender shall
have the sole and exclusive right and authority to, and Borrowers and Guarantor
shall not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non- compliance of
documents, (B) give any instructions as to acceptance or rejection of any
documents or goods or (C) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders, and (ii) at all times
(provided that if no Event of Default has
25
occurred, Lender shall not exercise any of the following unless agreed to by or
on behalf of any Borrower), (A) grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or documents,
and (B) agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in any Borrower's name or in any Guarantor's
name.
(i) Any rights, remedies, duties or obligations granted or undertaken
by any Borrower or Guarantor to any issuer or correspondent in any application
for any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been granted or undertaken by such Borrower or Guarantor to
Lender. Any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement by Lender in favor of any issuer or correspondent to the extent
relating to any Letter of Credit Accommodation, shall be deemed to have been
undertaken by Borrowers and Guarantor to Lender and to apply in all respects to
Borrowers and Guarantor.
2.3 TERM LOAN. (a) Subject to and upon the terms and conditions contained
herein, Lender is making a Term Loan to LS Holding in the original principal
amount of $4,000,000. The Term Loan is (a) evidenced by a Term Promissory Note
in such original principal amount of $4,000,000 duly executed and delivered by
LS Holding to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, such Term
Promissory Note, and the other Financing Agreements, and (c) secured by all of
the Collateral. The principal amount of the Term Loans shall be repaid on the
third anniversary of the date of this Agreement or if this Agreement is renewed
pursuant to Section 12.1 hereof, the then effective Renewal Date (or earlier as
provided herein). Amounts repaid in respect o the Term Loan may be reborrowed as
Revolving Loans by LS Holding in accordance with the terms of this Agreement.
(b) In the event that at any time the sum of (i) the outstanding principal
amount of the Term Loan, plus (ii) the aggregate principal amount of the
Revolving Loans and Letter of Credit Accommodations outstanding at any time to
LS Holding exceed the Borrowing Base of LS Holding, Borrowers shall, upon demand
by Lender, which may be made at any time or from time to time, immediately repay
to Lender the entire amount of any such excess(es) for which payment is
demanded.
2.4 JOINT AND SEVERAL LIABILITY. (a) US Borrowers shall be liable for all
amounts due to Lender under this Agreement, regardless of which Borrower
actually receives the Loans or other extensions of credit hereunder or the
amount of such Loans received or the manner in which Lender accounts for such
Loans, Letter of Credit Accommodations or other extensions of credit on its
books and records. The Obligations with respect to Loans and Letter of Credit
Accommodations or other extensions of credit made to a Borrower, and the
Obligations arising as a result of the joint and several liability of a US
Borrower hereunder, with respect to Loans and Letter of Credit Accommodations or
other extensions of credit made to the other Borrowers
26
hereunder, shall be separate and distinct obligations, but all such other
Obligations shall be primary obligations of all US Borrowers. The Obligations
arising as a result of the joint and several liability of a US Borrower
hereunder with respect to Loans, Letter of Credit Accommodations or other
extensions of credit made to the other US Borrowers hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (a) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (b) the absence of any
attempt to collect the Obligations from the other Borrowers, any Obligor or any
other security therefor, or the absence of any other action to enforce the same,
(c) the waiver, consent, extension, forbearance or granting of any indulgence by
Lender with respect to any provisions of any instrument evidencing the
Obligations of the other Borrowers, or any part thereof, or any other agreement
now or hereafter executed by the other Borrowers and delivered to Lender, (d)
the failure by Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights and maintain its security or collateral
for the Obligations of the other Borrowers, (e) the election of Lender in any
proceeding instituted under the Bankruptcy Code, of the application of Section
1111(b)(2) of the Bankruptcy Code, (f) the disallowance of all or any portion of
the claim(s) of Lender for the repayment of the Obligations of the other
Borrowers under Section 502 of the Bankruptcy Code, or (g) any other
circumstances which might constitute a legal or equitable discharge or defense
of an Obligor or of the other Borrowers, other than the wilful misconduct or
gross negligence of Lender or Lenders as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. With respect to the
Obligations arising as a result of the joint and several liability of a US
Borrower hereunder with respect to Loans, Letter of Credit Accommodations or
other extensions of credit made to the other Borrowers hereunder, each US
Borrower waives, until the Obligations shall have been paid in full in
immediately available funds and this Agreement shall have been terminated, any
right to enforce any right of subrogation or any remedy which Lender now has or
may hereafter have against Borrowers, any endorser or any guarantor of all or
any part of the Obligations, and any benefit of, and any right to participate
in, any security or collateral given to Lender. Upon any Event of Default and
for so long as the same is continuing, Lender may proceed directly and at once,
without notice, against any US Borrower to collect and recover the full amount,
or any portion of the Obligations, without first proceeding against the other
Borrowers or any other Person, or against any security or collateral for the
Obligations. Each US Borrower consents and agrees that Lender shall be under no
obligation to marshal any assets in favor of US Borrower(s) or against or in
payment of any or all of the Obligations.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the obligations and liabilities of LS Holding under this Agreement
and the other Financing Agreements shall be several and not joint and several,
and it shall not be liable for, or be required to execute a guarantee of, nor be
deemed a guarantor of, the Obligations of any US Borrower nor shall any of its
assets secure the Obligations of any other Borrower or Obligor.
SECTION 3. INTEREST AND FEES
3.1 INTEREST.
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(a) Borrowers shall pay to Lender, interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination hereof
shall be payable on demand.
(b) Each Borrower (or Parent on behalf of such Borrower) may from
time to time request Eurodollar Rate Loans or may request that Prime Rate Loans
be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from a Borrower (or
Parent on behalf of such Borrower) shall specify the amount of the Eurodollar
Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar
Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject
to the limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from a
Borrower (or Parent on behalf of such Borrower), such Eurodollar Rate Loans
shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or
such Eurodollar Rate Loans shall continue, as the case may be, PROVIDED, THAT,
(i) no Default or Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) such Borrower (or Parent on behalf of such
Borrower) shall have complied with such customary procedures as are established
by Lender and specified by Lender to Parent from time to time for requests by
Borrowers for Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods
may be in effect at any one time, (v) the aggregate amount of the Eurodollar
Rate Loans must be in an amount not less than $1,000,000 or an integral multiple
of $500,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans in the aggregate at any time requested by Borrowers shall not exceed the
amount equal to ninety (90%) percent of the lowest principal amount of the Loans
which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Lender in good faith (but with no
obligation of Lender to make such Loans), and (vii) Lender shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to Lender and
can be readily determined as of the date of the request for such Eurodollar Rate
Loan by Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate
Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to
the contrary contained herein, Lender and Reference Bank shall not be required
to purchase United States Dollar deposits in the London interbank market or
other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but
the provisions hereof shall be deemed to apply as if Lender and Reference Bank
had purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved in accordance with the terms of this Agreement a
request to continue such Eurodollar Rate Loan at least three (3) Business Days
prior to such last day in accordance with the terms hereof. Any Eurodollar Rate
Loans shall, at Lender's option, upon notice by Lender to Parent, be
subsequently converted to Prime Rate Loans on the date of termination of this
Agreement in accordance with Section 12.1 hereof. Borrowers shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account of
any US Borrower for any amounts owed by a US Borrower and charge the loan
account of LS Holding for any amounts owed by LS Holding) any amounts
28
required to compensate any Lender, the Reference Bank or any Participant for any
loss (including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender, monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on 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 Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 FEES.
(a) Borrowers shall pay to Lender as a closing fee the amount of
$90,000, which shall be fully earned and payable as of the date hereof.
(b) Borrowers shall pay to Lender monthly an unused line fee at a
rate equal to three-eighths of one (3/8%) percent per annum calculated upon the
amount by which $10,000,000 exceeds the average daily principal balance of the
outstanding Loans and Letter of Credit Accommodations during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
(c) Borrowers shall pay to Lender a servicing fee in an amount equal
to $2,000 in respect of Lender's services for each month (or part thereof) while
this Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be fully earned as of and payable
in advance on the date hereof and on the first day of each month hereafter.
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 Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or Lender complies with any request or directive
regarding capital
29
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, and in the case of any event set forth in this clause
(iii), such adoption, change or compliance has or would have the direct or
indirect effect of reducing the rate of return on Lender's capital as a
consequence of its obligations hereunder to a level below that which 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 Lender, in good faith, 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 Lender of funding or maintaining the
Loans or the Letter of Credit Accommodations, then Borrowers and Guarantor shall
from time to time upon demand by Lender pay to Lender additional amounts
sufficient to indemnify Lender 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 Parent by Lender and shall be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i) Lender
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantor) that, by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period, (ii) Lender determines that the
Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to Lender of making or maintaining
Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in
the principal amounts of the Eurodollar Rate Loans to which such Interest Period
is to be applicable are not generally available in the London interbank market,
Lender shall give telecopy or telephonic notice thereof to Parent as soon as
practicable thereafter, and will also give prompt written notice to Borrower
when such conditions no longer exist. If such notice is given (A) any Eurodollar
Rate Loans requested to be made on the first day of such Interest Period shall
be made as Prime Rate Loans, (B) any Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Rate Loans
shall be converted to or continued as Prime Rate Loans and (C) each outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Prime Rate Loans. Until such notice has been
withdrawn by Lender, no further Eurodollar Rate Loans shall be made or continued
as such, nor shall any Borrower (or Parent on behalf of any Borrower) have the
right to convert Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Agreement, (i) Lender shall promptly give written notice of
such circumstances to Parent (which notice shall be promptly withdrawn whenever
such circumstances no longer exist), (ii) the commitment of 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 Lender to make or maintain
Eurodollar Rate Loans, Lender shall then have a commitment only to make a Prime
Rate Loan when a Eurodollar Rate Loan is requested and (iii) Loans then
30
outstanding as Eurodollar Rate Loans, if any, shall be converted automatically
to Prime Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto,
Borrowers and Guarantor shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 3.3(d) below.
(d) Borrowers and Guarantor shall indemnify Lender and hold Lender
harmless from any loss or expense which Lender may sustain or incur as a
consequence of (i) default by any Borrower in making a borrowing of, conversion
into or extension of Eurodollar Rate Loans after such Borrower (or Parent on
behalf of such Borrower) has given a notice requesting the same in accordance
with the provisions of this Agreement, (ii) default by any Borrower in making
any prepayment of a Eurodollar Rate Loan after such Borrower (or Parent on
behalf of such Borrower) has given a notice thereof in accordance with the
provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar
Rate Loans on a day which is not the last day of an Interest Period with respect
thereto. With respect to Eurodollar Rate Loans, such indemnification may include
an amount equal to the excess, if any, of (A) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
extended, for the period from the date of such prepayment or of such failure to
borrow, convert or extend to the last day of the applicable Interest Period (or,
in the case of a failure to borrow, convert or extend, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Rate Loans provided for herein OVER (B) the
amount of interest (as reasonably determined by such Lender) which would have
accrued to Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank Eurodollar market. This
covenant shall survive the termination or non-renewal of this Agreement and the
payment of the Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by the Existing
Lenders of their respective financing arrangements with Borrowers and Guarantor
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of each Borrower and Guarantor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or Guarantor, as debtor; and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by any Borrower or
Guarantor in favor of it or any of them, in form acceptable for recording with
the appropriate Governmental Authority;
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(b) all requisite corporate action and proceedings of Borrowers and
Guarantor in connection with this Agreement and the other Financing Agreements
shall be reasonably satisfactory in form and substance to Lender, and Lender
shall have received all information and copies of all documents, including
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or Governmental
Authority (and including a copy of the certificate of incorporation (or
equivalent document) of each Borrower and Guarantor certified by the Secretary
of State (or equivalent Governmental Authority) which shall set forth the same
complete corporate name of such Borrower or Guarantor as is set forth herein and
such document as shall set forth the organizational identification number of
each Borrower or Guarantor, if one is issued in its jurisdiction of
incorporation);
(c) no material adverse change shall have occurred in the assets or
business of Borrowers since the date of Lender'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
Borrower or Obligor to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards of
Inventory through the date of closing and test counts of the Inventory in a
manner reasonably satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender, not
more than three (3) Business Days prior to the date hereof;
(e) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements;
(f) Lender shall have received, in form and substance satisfactory to
Lender, the collateral assignment by each US Borrower and Guarantor to Lender of
all right, title and interest of each such Borrower and Guarantor under or
pursuant to the Intercompany Loan Documents and granting Lender such other
rights with respect thereto as Lender may require, duly authorized, executed and
delivered by each such US Borrower and Guarantor and acknowledged and agreed to
by LS Holding and LS Alaska (including as to each any waiver of defenses as
against Lender as assignee of each such US Borrower and Guarantor);
(g) the Excess Availability of Borrowers as determined, in good
faith, by Lender, as of the date hereof, shall be not less than $4,000,000 after
giving effect to the initial Loans made
32
or to be made and Letter of Credit Accommodations issued or to be issued in
connection with the initial transactions hereunder;
(h) Lender shall have received, in form and substance reasonably
satisfactory to Lender, Deposit Account Control Agreements by and among Lender,
each Borrower and Guarantor, as the case may be and each bank where such
Borrower (or Guarantor) has a deposit account, in each case, duly authorized,
executed and delivered by such bank and Borrower or Guarantor, as the case may
be (or Lender shall be the bank's customer with respect to such deposit account
as Lender may specify);
(i) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(j) Lender shall have received Credit Card Acknowledgments in each
case, duly authorized, executed and delivered by the Credit Card Issuers and
Credit Card Processors;
(k) Lender shall have received and reviewed lien and judgement search
results for the jurisdiction of incorporation of each Borrower and Guarantor,
the jurisdiction of the chief executive office of each Borrower and Guarantor
and all jurisdictions in which assets of Borrower and Guarantor are located,
which search results shall be in form and substance satisfactory to Lender;
(l) Lender shall have received, in form and substance satisfactory to
Lender, the Intercreditor Agreement by and among Lender and Xxxxxxx, as
acknowledged and agreed to by Borrowers and Guarantor, providing for, among
other things, such parties' relative rights and priorities with respect to the
assets and properties of Borrowers and Guarantor and the subordination in right
of payment of the Indebtedness owing by Borrowers and Guarantor to Xxxxxxx to
the right of Lender to receive the prior and final payment and satisfaction in
full of all of the Obligations and related matters, duly authorized, executed
and delivered by Xxxxxxx, Borrowers and Guarantor;
(m) Lender shall have received, in form and substance reasonably
satisfactory to Lender, a valid and effective title insurance policy in the
amount of $2,000,000, issued by a company and agent acceptable to Lender: (i)
insuring the priority, amount and sufficiency of the Mortgage, (ii) insuring
against matters that would be disclosed by surveys and (iii) containing any
legally available endorsements, assurances or affirmative coverage requested by
Lender for protection of its interests;
(n) Lender shall have received originals of the shares of the stock
certificates (to the extent such certificates exist in certificated form)
representing (i) all of the issued and outstanding shares of the Capital Stock
of each Borrower (other than LS Holding) and owned by any Borrower or Guarantor,
and (ii) sixty-five (65%) percent of all of the issued and outstanding shares of
the Capital Stock of each Foreign Subsidiary owned by any Borrower or Guarantor
(other than World Gift, Little Switzerland Limited and Little Switzerland (St.
Kitts and Nevis), in each case together with stock powers duly executed in blank
with respect thereto;
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(o) Lender shall have received, in form and substance satisfactory to
Lender, a letter agreement from each Foreign Subsidiary (other than LS Holding)
and LS Alaska agreeing, among other things, not to (i) grant a security interest
or lien in any of its assets in favor of any Person other than Lender, and (ii)
incur any Indebtedness or trade payables in each case, beyond such limits as
agreed to by Lender and such Foreign Subsidiaries;
(p) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance reasonably satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee;
(q) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers and Guarantor with respect
to the Financing Agreements, the Intercompany Loan Documents and such other
matters as Lender may request; and
(r) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance reasonably satisfactory to Lender.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is an additional condition precedent to Lenders making the
Loans and/or providing Letter of Credit Accommodations to Borrowers, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date), and except for such changes
therein expressly permitted or expressly contemplated by this Agreement or the
other Financing Agreements;
(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 providing the Letter of Credit
Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
has a reasonable likelihood of having a Material Adverse Effect; and
(c) no 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 or providing each
such Letter of Credit Accommodation and after giving effect thereto.
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SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 GRANT OF SECURITY INTEREST. (a) To secure payment and performance of
all Obligations, each US Borrower and Guarantor hereby grants to Lender, a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Lender, as security, all personal and real property and
fixtures, and interests in property and fixtures, of each US Borrower and
Guarantor, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Lender, collectively, the "US
Collateral"):
(i) all Accounts;
(ii) all general intangibles, including, without limitation,
all Intellectual Property;
(iii) all goods, including, without limitation, Inventory and
Equipment;
(iv) all Real Property and fixtures;
(v) all chattel paper, including, without limitation, all
tangible and electronic chattel paper;
(vi) all instruments, including, without limitation, all
promissory notes;
(vii) all documents;
(viii) all deposit accounts;
(ix) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(x) all supporting obligations and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other US Collateral, including (A) rights and
remedies under or relating to guaranties, contracts of suretyship, letters of
credit and credit and other insurance related to the US Collateral, (B) rights
of stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (C) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Receivables or other US Collateral, including
returned, repossessed and reclaimed goods, and (D) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
(xi) all (A) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (B) monies, credit balances,
deposits and other property of any US Borrower or Guarantor now or hereafter
held or received by or in transit to Lender or its Affiliates or at any
35
other depository or other institution from or for the account of any US Borrower
or Guarantor, whether for safekeeping, pledge, custody, transmission, collection
or otherwise;
(xii) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(xiii) to the extent not otherwise described above, all
Receivables;
(xiv) all Records; and
(xv) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other US Collateral.
(b) To secure payment and performance of all USVI Obligations, LS
Holding hereby grants to Lender, a continuing security interest in, a lien upon,
and a right of set off against, and hereby assigns to Lender, as security, all
personal and real property and fixtures, and interests in property and fixtures,
of LS Holding, 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 Lender, collectively, the "USVI
Collateral"):
(i) all Accounts;
(ii) all general intangibles, including, without limitation,
all Intellectual Property;
(iii) all goods, including, without limitation, Inventory and
Equipment;
(iv) all Real Property and fixtures;
(v) all chattel paper, including, without limitation, all
tangible and electronic chattel paper;
(vi) all instruments, including, without limitation, all
promissory notes;
(vii) all documents;
(viii) all deposit accounts;
(ix) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(x) all supporting obligations and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other USVI
36
Collateral, including rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the USVI Collateral, (A) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (B) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Receivables or other USVI Collateral, including returned, repossessed and
reclaimed goods, and (C) deposits by and property of account debtors or other
persons securing the obligations of account debtors;
(xi) all (A) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (B) monies, credit balances,
deposits and other property of LS Holding now or hereafter held or received by
or in transit to Lender or its Affiliates or at any other depository or other
institution from or for the account of LS Holding, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;
(xii) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(xiii) to the extent not otherwise described above, all
Receivables;
(xiv) all Records; and
(xv) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other USVI Collateral.
(c) Notwithstanding anything to the contrary set forth in Sections
5.1(a) and 5.1(b) above, the types or items of Collateral described in such
Sections shall not include: any rights or interests in any contract, lease,
permit, license, charter or license agreement covering real or personal
property, as such, if under the terms of such contract, lease, permit, license,
charter or license agreement, or applicable law with respect thereto, the valid
grant of a security interest or lien therein to Lender is prohibited and such
prohibition has not been or is not waived or the consent of the other party to
such contract, lease, permit, license, charter or license agreement has not been
or is not otherwise obtained or under applicable law such prohibition cannot be
waived; PROVIDED, THAT, the foregoing exclusion shall in no way be construed (i)
to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or
9-408 of the UCC or other applicable law or (ii) so as to limit, impair or
otherwise affect Lender unconditional continuing security interests in and liens
upon any rights or interests of any Borrower or Guarantor in or to monies due or
to become due under any such contract, lease, permit, license, charter or
license agreement (including any Receivables).
5.2 PERFECTION OF SECURITY INTERESTS.
(a) Each Borrower and Guarantor irrevocably and unconditionally
authorizes Lender (or its agent) to file at any time and from time to time such
financing statements with
37
respect to the Collateral naming Lender or its designee as the secured party and
such Borrower or Guarantor as debtor, as Lender may require, and including any
other information with respect to such Borrower or Guarantor or otherwise
required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Lender may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming
Lender or its designee as secured party and such Borrower or Guarantor, as the
case may be, as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Lender prior to
the date hereof and ratifies and confirms the authorization of Lender to file
such financing statements (and amendments, if any). Each Borrower and Guarantor
hereby authorizes Lender to adopt on behalf of such Borrower and Guarantor any
symbol required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming Lender or its
designee as the secured party and any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral. In no event
shall any Borrower or Guarantor at any time file, or permit or cause to be
filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Lender or its designee as secured party and such Borrower or Guarantor as
debtor.
(b) Each Borrower and Guarantor does not have any chattel paper
(whether tangible or electronic) or instruments as of the date hereof, except as
set forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantor shall promptly notify Lender
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Lender, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Lender may from time to time specify, in each case except
as Lender may otherwise agree. At Lender's option, each Borrower and Guarantor
shall, or Lender may at any time on behalf of any Borrower or Guarantor, cause
the original of any such instrument or chattel paper to be conspicuously marked
in a form and manner acceptable to Lender with the following legend referring to
chattel paper or instruments as applicable: "This [chattel paper][instrument] is
subject to the security interest of Congress Financial Corporation and any sale,
transfer, assignment or encumbrance of this [chattel paper][instrument] violates
the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any time
hold or acquire an interest in any electronic chattel paper or any "transferable
record" (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction),
38
such Borrower or Guarantor shall promptly notify Lender thereof in writing.
Promptly upon Lender's request, such Borrower or Guarantor shall take, or cause
to be taken, such actions as Lender may reasonably request to give Lender
control of such electronic chattel paper under Section 9-105 of the UCC and
control of such transferable record under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction.
(d) Each Borrower and Guarantor does not have any deposit accounts as
of the date hereof, except as set forth in the Information Certificate.
Borrowers and Guarantor shall not, directly or indirectly, after the date hereof
open, establish or maintain any deposit account unless each of the following
conditions is satisfied: (i) Lender shall have received not less than five (5)
Business Days prior written notice of the intention of any Borrower or Guarantor
to open or establish such account which notice shall specify in reasonable
detail and specificity acceptable to Lender the name of the account, the owner
of the account, the name and address of the bank at which such account is to be
opened or established, the individual at such bank with whom such Borrower or
Guarantor is dealing and the purpose of the account, (ii) the bank where such
account is opened or maintained shall be reasonably acceptable to Lender, and
(iii) on or before the opening of such deposit account, such Borrower or
Guarantor shall as Lender may specify either (A) deliver to Lender a Deposit
Account Control Agreement with respect to such deposit account duly authorized,
executed and delivered by such Borrower or Guarantor and the bank at which such
deposit account is opened and maintained or (B) arrange for Lender to become the
customer of the bank with respect to the deposit account on terms and conditions
reasonably acceptable to Lender. 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 any
Borrower's or Guarantor's salaried employees.
(e) No Borrower or Guarantor owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that any Borrower or Guarantor shall be entitled
to or shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower or Guarantor shall promptly endorse, assign and
deliver the same to Lender, as collateral security for its respective
Obligations accompanied by such instruments of transfer or assignment duly
executed in blank as Lender may from time to time specify; PROVIDED, THAT, prior
to the occurrence and continuance of an Event of Default, any Borrower or
Guarantor shall not pledge more than 65% of their voting stock in any Foreign
Subsidiary unless, and until as a result of a change in law, Borrowers and/or
Guarantor, as the case may be, shall not have any material tax liability
pursuant to any applicable statute in any applicable jurisdiction, as a direct
result of pledging more than 65% of the voting stock in any Foreign Subsidiary.
If any securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Lender thereof and shall as Lender may specify, either (A) cause the
39
issuer to agree to comply with instructions from Lender as to such securities,
without further consent of any Borrower or Guarantor or such nominee, or (B)
arrange for Lender to become the registered owner of the securities; provided,
that, prior to the occurrence and continuance of an Event of Default, with
respect to uncertificated securities of any Foreign Subsidiary, such Borrower or
Guarantor, as the case may be, shall not be required to pledge more than 65% of
their voting stock in any Foreign Subsidiary unless, and until as a result of a
change in law, or in the financial condition of Parent and its Subsidiaries,
Borrowers and/or Guarantor, as the case may be, shall not have any material tax
liability pursuant to any applicable statute in any applicable jurisdiction, as
a direct result of pledging more than 65% of the voting stock in any Foreign
Subsidiary.
(ii) Borrowers and Guarantor shall not, directly or indirectly,
after the date hereof open, establish or maintain any investment account,
securities account, commodity account or any other similar account (other than a
deposit account) with any securities intermediary or commodity intermediary
unless each of the following conditions is satisfied: (A) Lender shall have
received not less than five (5) Business Days prior written notice of the
intention of Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity acceptable to Lender
the name of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom such
Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be reasonably acceptable to Lender,
and (C) on or before the opening of such investment account, securities account
or other similar account with a securities intermediary or commodity
intermediary, such Borrower or Guarantor shall as Lender may specify either (1)
execute and deliver, and cause to be executed and delivered to Lender, an
Investment Property Control Agreement with respect thereto duly authorized,
executed and delivered by such Borrower or Guarantor and such securities
intermediary or commodity intermediary or (2) arrange for Lender to become the
entitlement holder with respect to such investment property on terms and
conditions acceptable to Lender.
(f) Borrowers and Guarantor are not the beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker's acceptance
or similar instrument as of the date hereof, except as set forth in the
Information Certificate. In the event that any Borrower or Guarantor shall be
entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Lender thereof in writing. Such Borrower or Guarantor shall immediately,
as Lender may specify, either (i) deliver, or cause to be delivered to Lender,
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 reasonably satisfactory to Lender,
consenting to the assignment of the proceeds of the letter of credit to Lender
by such Borrower or Guarantor and agreeing to make all payments thereon directly
to Lender or as Lender may otherwise direct or (ii) cause Lender to become, at
40
Borrowers' expense, the transferee beneficiary of the letter of credit, banker's
acceptance or similar instrument (as the case may be).
(g) Borrowers and Guarantor do not have any commercial tort claims as
of the date hereof, except as set forth in the Information Certificate. In the
event that any Borrower or Guarantor shall at any time after the date hereof
have any commercial tort claims, such Borrower or Guarantor shall promptly
notify Lender thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such commercial tort claim and (ii) include
the express grant by such Borrower or Guarantor to Lender of a security interest
in such commercial tort claim (and the proceeds thereof). In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower or Guarantor to Lender shall be deemed to constitute such grant
to Lender. 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 Lender provided in Section 5.2(a)
hereof or otherwise arising by the execution by such Borrower or Guarantor of
this Agreement or any of the other Financing Agreements, Lender is hereby
irrevocably authorized from time to time and at any time to file such financing
statements naming Lender or its designee as secured party and such Borrower or
Guarantor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower and
Guarantor shall promptly upon Lender's request, execute and deliver, or cause to
be executed and delivered, to Lender such other agreements, documents and
instruments as Lender may reasonably require in connection with such commercial
tort claim.
(h) Borrowers and Guarantor do not have any goods, documents of title
or other Collateral in the custody, control or possession of a third party as of
the date hereof, except as set forth in the Information Certificate and except
for goods located in the United States in transit to a location of a Borrower or
Guarantor permitted herein in the ordinary course of business of such Borrower
or Guarantor in the possession of the carrier transporting such goods or the
United States Virgin Islands or goods located in a bank safety deposit box owned
by such Borrower or Guarantor. In the event that any goods, documents of title
or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Information
Certificate or such carriers, Borrowers and Guarantor shall promptly notify
Lender thereof in writing. Promptly upon Lender's request, Borrowers and
Guarantor shall deliver to Lender a Collateral Access Agreement duly authorized,
executed and delivered by such person and the Borrower or Guarantor that is the
owner of such Collateral.
(i) Borrowers and Guarantor shall take any other actions reasonably
requested by Lender from time to time to cause the attachment, perfection and
first priority of, and the ability of Lender to enforce, the security interest
of Lender in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that any Borrower's or Guarantor's signature thereon is required
therefor, (ii) causing Lender'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 Lender to enforce, the
security interest of Lender in such Collateral, (iii) complying with any
provision of any statute, regulation
41
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
Lender to enforce, the security interest of Lender 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. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor 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 Lender's customary practices as in effect from time to time.
6.2 STATEMENTS. Lender shall render to Parent each month a statement
setting forth the balance in each of the Borrower's loan account(s) maintained
by Lender for each such 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 Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrowers and
Guarantor and conclusively binding upon Borrowers and Guarantor as an account
stated, except to the extent that Lender receives a written notice from Parent
of any specific exceptions of Parent thereto within thirty (30) days after the
date such statement has been received by Parent. Until such time as Lender shall
have rendered to Parent a written statement as provided above, the balance in
any Borrower's loan account(s) shall be presumptive evidence of the amounts due
and owing to Lender by the applicable Borrower and Guarantor.
6.3 COLLECTION OF ACCOUNTS.
(a) Borrowers shall establish and maintain, at their expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are reasonably acceptable
to Lender into which Borrowers shall promptly deposit and direct their
respective account debtors to directly remit all payments on Receivables and all
payments constituting proceeds of Inventory or other Collateral in the identical
form in which such payments are made, whether by cash, check or other manner.
Each Borrower shall deposit all proceeds from sales of Inventory in every form,
including, without limitation, cash, checks, credit card sales drafts, credit
card sales or charge slips or receipts and other forms of daily store receipts,
from each retail store location of Borrower on each Business Day into the
deposit accounts of Borrower used solely for such purpose and identified to each
retail store location as set forth on Schedule 6.3. All such funds deposited
into the separate deposit accounts shall be sent by wire transfer on a daily
basis and all other proceeds of Collateral shall be sent by wire transfer, to
the Blocked Accounts. Each Borrower shall irrevocably authorize and direct in
writing, in form and substance reasonably satisfactory to Lender, each of the
banks into which proceeds from sales of Inventory from each retail store
42
location of Borrower are at any time deposited as provided above to send all
funds deposited in such account by wire transfer on a daily basis to the Blocked
Accounts. Such authorization and direction shall not be rescinded, revoked or
modified without the prior written consent of Lender. Borrowers shall deliver,
or cause to be delivered to Lender a Depository Account Control Agreement duly
authorized, executed and delivered by each bank where a Blocked Account is
maintained as provided in Section 5.2 hereof or at any time and from time to
time Lender may become the bank's customer with respect to any of the Blocked
Accounts and promptly upon Lender's request, Borrowers shall execute and deliver
such agreements and documents as Lender may reasonably require in connection
therewith. Each Borrower and Guarantor agrees that all payments made to such
Blocked Accounts or other funds received and collected by Lender, whether in
respect of the Receivables, as proceeds of Inventory or other Collateral or
otherwise shall be treated as payments to Lender in respect of such Borrower's
Obligations and therefore shall constitute the property of Lender to the extent
of the then outstanding Obligations of such Borrower.
(b) For purposes of calculating the amount of the Loans available to
each Borrower, such payments will be applied (conditional upon final collection)
to the Obligations (as provided in Section 6.4 below) on the Business Day of
receipt by Lender of immediately available funds in the Lender Payment Account
provided such payments and notice thereof are received in accordance with
Lender's usual and customary practices as in effect from time to time and within
sufficient time to credit such Borrower's loan account on such day, and if not,
then on the next Business Day. For the 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 Lender in the Lender Payment
Account provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit such Borrower's loan account on such
day, and if not, then on the next Business Day.
(c) Each Borrower and Guarantor and their respective shareholders,
directors, employees, agents, Subsidiaries or other Affiliates shall, acting as
trustee for Lender, receive, as the property of Lender, any monies, checks,
credit card sales drafts, credit card sales or charge slips or receipts, all
forms of store receipts, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral which come into their possession or
under their control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall the same be
commingled with any Borrower's or Guarantor's own funds PROVIDED, THAT, if at
any time the Excess Availability, shall be less than $500,000, Borrowers and
Guarantor shall promptly upon Lender's request cause the portion thereof
representing sales and/or use taxes payable in connection with such sales or
otherwise to be deposited into a separate bank account or accounts established
for such purpose. Borrowers agree to reimburse Lender on demand for any amounts
owed or paid to any bank at which a Blocked Account is established or any other
bank or person involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such bank or person.
Borrowers agree to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account or any
43
other deposit account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligations of
Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 PAYMENTS.
(a) All Obligations shall be payable to the Lender Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender shall apply payments received or collected from any Borrower or
Guarantor or for the account of any Borrower or Guarantor (including the
monetary proceeds of collections or of realization upon any Collateral) as
follows: FIRST, to pay any fees, indemnities or expense reimbursements then due
to Lender from any Borrower or Guarantor; SECOND, to pay interest due in respect
of any Loans; THIRD, to pay principal due in respect of the Loans; FOURTH, to
pay or prepay any other Obligations whether or not then due, in such order and
manner as Lender determines. Notwithstanding anything to the contrary contained
in this Agreement, (i) unless so directed by Parent, or unless a Default or an
Event of Default shall exist or have occurred and be continuing, Lender shall
not apply any payments which it receives to any Eurodollar Rate Loans, except
(A) on the expiration date of the Interest Period applicable to any such
Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime
Rate Loans and (ii) to the extent any Borrower uses any proceeds of the Loans or
Letter of Credit Accommodations to acquire rights in or the use of any
Collateral or to repay any Indebtedness used to acquire rights in or the use of
any Collateral, payments in respect of the Obligations shall be deemed applied
first to the Obligations arising from Loans and Letter of Credit Accommodations
that were not used for such purposes and second to the Obligations arising from
Loans and Letter of Credit Accommodations the proceeds of which were used to
acquire rights in or the use of any Collateral in the chronological order in
which such Borrower acquired such rights in or the use of such Collateral.
(b) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower.
Borrowers and Guarantor shall make all payments to Lender on the Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrowers and Guarantor shall be liable to pay
to Lender, and do hereby indemnify and hold Lender 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
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.
44
(c) Notwithstanding anything to the contrary set forth in this
Section 6.4 to the contrary, Lender shall apply payments received or collected
from LS Holding or for the account of LS Holding (including the monetary
proceeds of collections or of realization upon any USVI Collateral) only to the
USVI Obligations.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Parent or any
Borrower or other authorized person or, at the discretion of Lender, if such
Loans are necessary to satisfy any Obligations. All requests for Loans or Letter
of Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests received
after 11:00 a.m. Miami, Florida time on any day shall be deemed to have been
made as of the opening of business on the immediately following Business Day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, any Borrower or Guarantor when deposited to the credit of any
Borrower or Guarantor or otherwise disbursed or established in accordance with
the instructions of any Borrower or Guarantor or in accordance with the terms
and conditions of this Agreement.
6.6 USE OF PROCEEDS. Borrowers shall use the initial proceeds of the Loans
provided by Lender to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided to or for the benefit of any Borrower pursuant to
the provisions hereof shall be used by such Borrower only for general operating,
working capital and other proper corporate purposes of such Borrower not
otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
6.7 APPOINTMENT OF PARENT FOR REQUESTING LOANS AND RECEIPTS OF LOANS AND
STATEMENTS.
(a) Each Borrower hereby irrevocably appoints and constitutes Parent
as its agent to request and receive Loans and Letter of Credit Accommodations
pursuant to this Agreement and the other Financing Agreements from Lender in the
name or on behalf of such Borrower. Lender may disburse the Loans to such bank
account of Parent or a Borrower or otherwise make such Loans to a Borrower and
provide such Letter of Credit Accommodations to a Borrower as Parent may
designate or direct, without notice to any other Borrower or Obligor.
Notwithstanding anything to the contrary contained herein, Lender may at any
time and from time to time require that Loans to or for the account of any
Borrower be disbursed directly to an operating account of such Borrower.
45
(b) Parent hereby accepts the appointment by Borrowers to act as the
agent of Borrowers pursuant to this Section 6.7. Parent shall ensure that the
disbursement of any Loans to each Borrower requested by or paid to or for the
account of Parent, or the issuance of any Letter of Credit Accommodations for a
Borrower hereunder, shall be paid to or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably appoints and
constitutes Parent as its agent to receive statements on account and all other
notices from Lender with respect to the Obligations or otherwise under or in
connection with this Agreement and the other Financing Agreements.
(d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by Parent
shall be deemed for all purposes to have been made by such Borrower or
Guarantor, as the case may be, and shall be binding upon and enforceable against
such Borrower or Guarantor to the same extent as if made directly by such
Borrower of Guarantor.
(e) No purported termination of the appointment of Parent as agent as
aforesaid shall be effective, except after ten (10) days' prior written notice
to Lender.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING.
(a) Borrowers shall provide Lender with the following documents in a
form satisfactory to Lender:
(i) on a weekly basis or more frequently as Lender may, in
good faith, request, (A) perpetual inventory reports (including "aged Inventory"
and including the amounts of Inventory and the value thereof at, any leased
locations and at premises of warehouses, processors or other third parties), (B)
reports of sales of Inventory, indicating gross sales, returns, allowances and
net sales, and (C) reports of aggregate Inventory purchases (including, to the
extent then available, all costs related thereto, such as freight, duty and
taxes);
(ii) as soon as possible after the end of each month (but in
any event within ten (10) Business Days after the end thereof), on a monthly
basis or more frequently as Lender may request, (A) 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), such agings to be subject to final
adjustment received by Lender no later than thirty (30) days after the end of
each month and (B) a certificate from the chief financial officer of Parent
representing that Borrowers have made payment of sales and use taxes during such
month or, at Lender's reasonable request, other evidence of such payment;
46
(iii) as soon as available, but in any event not later than five
(5) days after receipt by Borrowers and/or Parent, the monthly bank statements
of Foreign Subsidiaries; and
(iv) upon Lender'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, (C) copies
of purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by any Borrower or Guarantor and (D) reports by retail store locations
of sales and operating profits for each such retail store location;
(v) such other reports as to the Collateral as Lender shall
request from time to time.
(b) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower and Guarantor hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Lender and to follow Lender's instructions
with respect to further services at any time that an Event of Default exists or
has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.
(a) Borrowers shall notify Lender promptly of any material delay in
any Borrower's performance of any of its material obligations to any Credit Card
Issuer or Credit Card Processor or the assertion of any material claims,
offsets, defenses or counterclaims by any Credit Card Issuer or Credit Card
Processor, or any material disputes with account debtors, or any settlement,
adjustment or compromise thereof, (i) all material adverse information known to
any Borrower or Guarantor 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, without
Lender's consent, which consent shall not be unreasonably withheld, except in
the ordinary course of a Borrower's or Guarantor's business in accordance with
current practices and policies in effect on the date hereof and except as set
forth in the schedules delivered to Lender pursuant to Section 7.1(a) above. So
long as no Event of Default exists or has occurred and is continuing, Borrowers
and Guarantor 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,
Lender shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors,
Credit Card Issuer or Credit Card Processor, or grant any credits, discounts or
allowances.
(b) At any time upon the occurrence and during the continuance of an
Event of Default, Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
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(c) Each Borrower shall notify Lender promptly of: (i) any notice of
a material default by such Borrower under any of the Credit Card Agreements or
of any default which has a reasonable likelihood of resulting in the Credit Card
Issuer or Credit Card Processor ceasing to make payments or suspending payments
to such Borrower, (ii) any notice from any Credit Card Issuer or Credit Card
Processor that such person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to such Borrower from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements, and (iii) the failure of such Borrower to comply with any
material terms of the Credit Card Agreements or any terms thereof which has a
reasonable likelihood of resulting in the Credit Card Issuer or Credit Card
Processor ceasing or suspending payments to such Borrower.
7.3 INVENTORY COVENANTS. With respect to the Inventory: (a) each Borrower
and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantor shall conduct a physical count of the Inventory at
least once each year but at any time or times as Lender may request on or after
an Event of Default, and promptly following such physical inventory shall supply
Lender with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrowers and
Guarantor shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to such
Borrower or Guarantor which is in transit to the locations set forth or
permitted herein; (d) upon Lender's request, Borrowers shall, at their expense,
no more than two (2) times in any twelve (12) month period, but at any
additional time or times as Lender may request at Lender's expense, or at any
time or times as Lender may request at Borrowers' expense on or after an Event
of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology reasonably
acceptable to Lender and by an appraiser acceptable to Lender (Lender agrees
that so long as Hilco is on its approved appraiser list, Lender shall select
Hilco to conduct any such appraisals and to the extent, Hilco is not on such
list or is otherwise unavailable to conduct such appraisal, to the extent Xxxxxx
Xxxxxxxx is on Lender's approved list Lender shall endeavor to use Xxxxxx
Xxxxxxxx to conduct such appraisal), addressed to Lender and upon which Lenders
is expressly permitted to rely; (e) after the occurrence and during the
continuance of an Event of Default, Borrowers shall, at their expense, conduct
through RGIS Inventory Specialists, Inc. or another inventory counting service
reasonably acceptable to Lender, a physical count of the Inventory in form,
scope and methodology acceptable to Lender, the results of which shall be
reported directly by such inventory counting service to Lender (with a copy to
Parent) and Borrowers shall promptly deliver confirmation in a form reasonably
satisfactory to Lender that appropriate adjustments have been made to the
inventory records of Borrowers to reconcile the inventory count to Borrowers'
inventory records; (f) Borrowers and Guarantor shall produce, use, store and
maintain the Inventory, with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity in all material
respects with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938,
48
as amended and all rules, regulations and orders related thereto); (g) Borrowers
and Guarantor assume all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (h) each
Borrower and Guarantor shall not sell Inventory to any customer on approval, or
any other basis which entitles the customer to return or may obligate Borrowers
or Guarantor to repurchase such Inventory except for the right of return given
to retail customers of Borrowers and Guarantor in the ordinary course of the
business of Borrowers and Guarantor in accordance with the return policy of
Borrowers and Guarantor (in effect on the date hereof); (i) Borrowers and
Guarantor shall keep the Inventory in good and marketable condition; and (j)
Borrowers shall not, without prior written notice to Lender or the specific
identification of such Inventory in a report with respect thereto provided to
Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on
consignment or approval.
7.4 EQUIPMENT AND REAL PROPERTY COVENANTS. With respect to Real Property
subject to the Mortgage, upon Lender's request, Borrowers and Guarantors shall,
at their expense, at any time or times as Lender may request on or after and
during the continuance of an Event of Default, deliver or cause to be delivered
to Lender written appraisals as to the Real Property subject to the Mortgage, in
form, scope and methodology reasonably acceptable to Lender and by an appraiser
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely. With respect to Equipment and Real Property (a) Borrowers and
Guarantors shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (b) Borrowers and
Guarantors shall use the Equipment and Real Property with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity in all material respects with all applicable laws; (c) Borrowers and
Guarantors shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment repaired
or maintained in the ordinary course of its business or to move Equipment
directly from one location set forth or permitted herein to another such
location and except for the movement of motor vehicles used by or for the
benefit of such Borrower or Guarantor in the ordinary course of business; and
(d) each Borrower and Guarantor assumes all responsibility and liability arising
from the use of the Equipment and Real Property.
7.5 POWER OF ATTORNEY. Each Borrower and Guarantor hereby irrevocably
designates and appoints Lender (and all persons designated by Lender) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Lender, in such Borrower's, Guarantor's or Lender's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Lender, in good faith, deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Receivable, (vii)
prepare, file and sign such Borrower's or Guarantor's name on any proof of claim
in bankruptcy or other similar document against an account debtor or other
obligor in respect of any Receivables or other Collateral, (viii) notify the
post office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Lender, and open and dispose of all mail
addressed to such Borrower or Guarantor and handle and store all mail
49
relating to the Collateral; (ix) sign such Borrower's or Guarantor's name on any
verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof; and (x) do all acts and
things which are necessary, in Lender's good faith determination, to fulfill
such Borrower's or Guarantor's obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any manner of
any item of payment in respect of Receivables or constituting Collateral or
otherwise received in or for deposit in the Blocked Accounts or otherwise
received by Lender, (ii) have access to any lockbox or postal box into which
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral are sent or received, (iii) endorse such Borrower's
or Guarantor's name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Lender and deposit the same in
Lender's account for application to the Obligations in accordance with the terms
of this Agreement, (iv) endorse such Borrower's or Guarantor's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Receivable or any goods pertaining thereto or any other
Collateral, including any warehouse or other receipts, or bills of lading and
other negotiable or non-negotiable documents, and (v) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs or foreign export control authorities in such Borrower's or Guarantor's
name, Lender's name or the name of Lender's designee, and to sign and deliver to
customs officials powers of attorney in such Borrower's or Guarantor's name for
such purpose, and to complete in such Borrower's or Guarantor's or Lender's
name, any order, sale or transaction, obtain the necessary documents in
connection therewith and collect the proceeds thereof. Each Borrower and each
Guarantor hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or wilful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 RIGHT TO CURE. Lender may, at its option, upon notice to Parent, (a)
cure any material default by any Borrower or Guarantor under any material
agreement with a third party that adversely affects the Collateral, its value or
the ability of Lender to collect, sell or otherwise dispose of the Collateral or
the rights and remedies of Lender therein or the ability of any Borrower or
Guarantor to perform its obligations hereunder or under any of the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against any
Borrower or Guarantor, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge any Borrower's account
therefor, such amounts to be repayable by Borrowers on demand. Lender shall be
under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of any Borrower
or Guarantor. Any payment made or other action taken by Lender under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.
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7.7 ACCESS TO PREMISES. From time to time as requested by Lender, at the
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of each Borrower's and Guarantor's premises during normal business
hours and after notice to Parent, or at any time and without notice to Parent if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of each Borrower's
and Guarantor's books and records, including the Records, provided, that, prior
to the occurrence and continuance of an Event of Default, Borrowers shall not be
required to pay for more than three (3) inspections, verifications or audits
during any twelve (12) month period, and (b) each Borrower and Guarantor shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may reasonably request, and (c) Lender or Lender's designee
may use during normal business hours such of any Borrower's and Guarantor's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Receivables and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Lender the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and providing Letter of Credit Accommodations to Borrowers:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY. Each Borrower and Guarantor
is a corporation duly organized and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified as a foreign corporation and
in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower's or
Guarantor's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each
Borrower's and Guarantor's corporate powers, (b) have been duly authorized, (c)
are not in contravention of law or the terms of any Borrower's or Guarantor's
certificate of incorporation, by-laws, or other organizational documentation, or
any material indenture, agreement or undertaking to which any Borrower or
Guarantor is a party or by which any Borrower or Guarantor or its property are
bound and (d) will not result in the creation or imposition of, or require or
give rise to any obligation to grant, any lien, security interest, charge or
other encumbrance upon any property of any Borrower or Guarantor (other than in
favor of Lender). This Agreement and the other Financing Agreements to which any
Borrower or Guarantor is a party constitute legal, valid and binding obligations
of such Borrower and Guarantor enforceable in accordance with their respective
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (ii) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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8.2 NAME; STATE OF ORGANIZATION; CHIEF EXECUTIVE OFFICE; COLLATERAL
LOCATIONS.
(a) The exact legal name of each Borrower and Guarantor is as set
forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the past five years, been
known by or used any other corporate or fictitious name or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property or assets out of the ordinary course
of business, except as set forth in the Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type and
organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each Borrower
and Guarantor and each Borrower's and Guarantor's Records concerning Accounts
are located only at the addresses identified as such in Schedule 8.2 to the
Information Certificate and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to
the Information Certificate, subject to the rights of any Borrower or Guarantor
to establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by a
Borrower or Guarantor and sets forth the owners and/or operators thereof.
8.3 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Lender have been prepared
in accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present in all material respects the financial
condition and the results of operation of such Borrower and Guarantor as at the
dates and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrowers and Guarantors to Lender prior to
the date of this Agreement, there has been no act, condition or event which has
had or is reasonably likely to have a Material Adverse Effect since the date of
the most recent audited financial statements of any Borrower or Guarantor
furnished by any Borrower or Guarantor to Lender prior to the date of this
Agreement.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate and the other liens permitted under Section 9.8
hereof. Each Borrower and Guarantor has good and marketable fee simple title to
or valid leasehold interests in all of its Real Property and good, valid and
merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are
52
specifically listed on Schedule 8.4 to the Information Certificate or permitted
under Section 9.8 hereof.
8.5 TAX RETURNS. Each Borrower and Guarantor and their respective
Subsidiaries has filed, or caused to be filed, in a timely manner all material
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 and Guarantor and their
respective Subsidiaries has paid or caused to be paid all taxes due and payable
or claimed due and payable in any assessment received by it, all sales and/or
use taxes applicable to the conduct of its business, except taxes the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower, Guarantor, or Subsidiary 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. Each Borrower, Guarantor and Subsidiary has timely
remitted to the appropriate tax authority all presently due sales and/or use
taxes applicable to its business required to be collected under the laws of the
United States and each possession or territory thereof, and each State or
political subdivision thereof or any other jurisdiction, including any State in
which such Borrower, Guarantor or Subsidiary owns any Inventory or owns or
leases any other property, except such taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower, Guarantor or Subsidiary and with respect to which
adequate reserves have been set aside on its books.
8.6 LITIGATION. As of the date hereof, except as set forth on Schedule 8.6
to the Information Certificate, (a) there is no investigation by any
Governmental Authority pending, or to the best of any Borrower's or Guarantor's
knowledge threatened, against or affecting any Borrower, Guarantor or
Subsidiary, its or their assets or business and (b) there is no action, suit,
proceeding or claim by any Person pending, or to the best of any Borrower's or
Guarantor's knowledge threatened, against any Borrower, Guarantor or Subsidiary
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, Guarantor or Subsidiary has or could reasonably be
expected to have a Material Adverse Effect.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.
(a) Borrowers and Guarantors are not 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 where such default or violation would
have a Material Adverse Effect. Borrowers and Guarantors are in compliance with
the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority relating to their respective businesses, 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.
53
(b) Borrowers and Guarantors have 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 in full force and effect. There are no
actions, claims or proceedings pending or to the best of any Borrower's or
Guarantor'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, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which violates in any material
respect any applicable Environmental Law or Permit, and the operations of
Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor 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, no Borrower or Guarantor has received any notice that there has
been any investigation by any Governmental Authority or any proceeding,
complaint, order, directive, claim, citation or notice by any Governmental
Authority or any other person nor, to the best of Borrower's knowledge, is any
pending or to the best of any Borrower's or Guarantor's knowledge threatened,
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by any Borrower or Guarantor and any Subsidiary of any
Borrower or Guarantor or the release, spill or discharge, threatened or actual,
of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which adversely
affects or could reasonably be expected to adversely affect in any material
respect any Borrower or Guarantor or its or their business, operations or assets
or any properties at which such Borrower or Guarantor has transported, stored or
disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, of any Hazardous Materials or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials.
(d) Borrowers, Guarantors and their Subsidiaries have all Permits
required to be obtained or filed in connection with the operations of Borrowers
and Guarantors under any Environmental Law and all of such licenses,
certificates, approvals or authorizations and other Permits are valid and in
full force and effect.
8.9 EMPLOYEE BENEFITS.
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(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best of any Borrower's or Guarantor's knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA
Affiliates do not sponsor, maintain or contribute to a Plan subject to the
requirements of Section 412 of the Code or any Multi-employer Plan.
(b) There are no pending, or to the best of any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan. 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) to the extent applicable, 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) each Borrower and Guarantor, and their
ERISA Affiliates, have not incurred and do not reasonably expect to incur, any
liability under Title IV of ERISA with respect to any Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) each Borrower and
Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably
expect to incur, any liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each
Borrower and Guarantor, and their ERISA Affiliates, have not engaged in a
transaction that would be subject to Section 4069 or 4212(c) of ERISA.
8.10 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2(d) hereof.
8.11 INTELLECTUAL PROPERTY. Each Borrower and Guarantor owns or licenses or
otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted. As
of the date hereof, Borrowers and Guarantors do not have any Intellectual
Property registered, or subject to pending applications, in the United States
Patent and Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or in any other
country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. 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 any
Borrower's and Guarantor's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold by
or employed by any Borrower or Guarantor infringes any
55
patent, trademark, servicemark, tradename, copyright, license or other
Intellectual Property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting any Borrower or
Guarantor contesting its right to sell or use any such Intellectual Property.
Schedule 8.11 to the Information Certificate sets forth all of the agreements or
other arrangements of each Borrower and Guarantor pursuant to which such
Borrower or Guarantor has a license or other right to use any trademarks, logos,
designs, representations or other Intellectual Property owned by another person
as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of such Borrower or Guarantor as in effect on
the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by any Borrower or Guarantor after the date
hereof, collectively, the "License Agreements" and individually, a "License
Agreement"). No trademark, servicemark, copyright or other Intellectual Property
at any time used by any Borrower or Guarantor which is owned by another person,
or owned by such Borrower or Guarantor subject to any security interest, lien,
collateral assignment, pledge or other encumbrance in favor of any person other
than Lender, is affixed to any Eligible Inventory, except (a) to the extent
permitted under the term of the license agreements listed on Schedule 8.11 to
the Information Certificate and (b) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower
or Guarantor under applicable law (including the United States Copyright Act of
1976).
8.12 SUBSIDIARIES; AFFILIATES; CAPITALIZATION; SOLVENCY.
(a) Each Borrower and Guarantor does not have any direct or indirect
Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial owner of
all of the issued and outstanding shares of Capital Stock (other than any
nominee shares) of each of the Subsidiaries listed on Schedule 8.12 to the
Information Certificate as being owned by such Borrower or Guarantor and there
are no proxies, irrevocable or otherwise, with respect to such shares and,
except as set forth on Schedule 8.12 to the Information Certificate, 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 and Guarantor are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Lender prior to the date hereof.
(d) Each Borrower and Guarantor is Solvent and will continue to be
Solvent after the creation of the Obligations, the security interests of Lender
and the other transactions contemplated hereunder.
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8.13 LABOR DISPUTES.
(a) Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or Guarantor or, to the best of any Borrower's or
Guarantor's knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Guarantor or, to best of any
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Borrower or Guarantor or, to the best of any Borrower's or Guarantor's
knowledge, threatened against any Borrower or Guarantor, which has or reasonably
could be expected to have a Material Adverse Effect.
8.14 RESTRICTIONS ON SUBSIDIARIES. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of
cash or other assets (i) between any Borrower or Guarantor and any of its or
their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor
or (b) the ability of any Borrower or Guarantor or any of its or their
Subsidiaries to incur Indebtedness or grant security interests to Lender in the
Collateral.
8.15 MATERIAL CONTRACTS. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which any Borrower or Guarantor is a party or is
bound as of the date hereof. Borrowers and Guarantors have delivered or made
available true, correct and complete copies of such Material Contracts to Lender
on or before the date hereof. Borrowers and Guarantors are not in breach or in
default in any material respect of or under any Material Contract and have not
received any notice of the intention of any other party thereto to terminate any
Material Contract.
8.16 INTENTIONALLY DELETED.
8.17 ACCURACY AND COMPLETENESS OF INFORMATION. All information furnished by
or on behalf of any Borrower or Guarantor in writing to 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, taken as a whole, in
light of the circumstances under which they were made. 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 Lender in
writing prior to the date hereof.
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8.18 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 in accordance with
Section 4.2(a) hereof shall be deemed to have been made again to Lender on the
date of each additional borrowing or other credit accommodation hereunder and
shall be conclusively presumed to have been relied on by Lender regardless of
any investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower or Guarantor shall now or
hereafter give, or cause to be given, to Lender.
8.19 INTERRELATED BUSINESSES. Parent is the direct and beneficial owner and
holder of all of the issued and outstanding shares of capital stock of the
Borrowers. Borrowers and Guarantor share an identity of interests such that any
benefit received by each of Borrowers and Guarantor benefits the others. LS
Holding and Parent (or their respective nominees) is the direct and beneficial
owner of all of the issued and outstanding shares of Capital Stock of the
Foreign Subsidiaries except for World Gift (of which it owns 100% of the issued
and outstanding Capital Stock subject to reduction of such amount as set forth
in the Almod Agreements) and LS Holding. Each Borrower and the other
Subsidiaries of Parent (a) render services to or for the benefit of the other
Borrowers and other Subsidiaries, (b) make loans and advances and provide other
financial accommodations to or for the benefit of the other Borrowers and the
other Subsidiaries (including, INTER ALIA, the payment and/or guaranties by
Borrowers and the other Subsidiaries of Indebtedness of the other Borrowers and
the other Subsidiaries), and (c) provide administrative, marketing, payroll and
management services to or for the benefit of the other Borrowers and the other
Subsidiaries. Parent and its Subsidiaries have centralized accounting and legal
services.
8.20 CREDIT CARD AGREEMENTS. Set forth in Schedule 8.20 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 any 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 each
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
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
any Borrower has entered into one of the Credit Card Agreements set forth on
Schedule 8.20 hereto or with whom each Borrower has entered into a Credit Card
Agreement in accordance with Section 9.20 hereof. Each of the Credit Card
Agreements constitutes the legal, valid and binding obligations of such
Borrower, enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and are in full, force and effect. No default or event of
default, or act, condition
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or event which after notice or passage of time or both, would constitute a
default or an event of default under any of the Credit Card Agreements exists or
has occurred. Each Borrower and, to the best of such Borrower's knowledge, the
other parties thereto, have complied in all material respects with all of the
terms and conditions of the Credit Card Agreements to the extent necessary for
such Borrower to be entitled to receive all payments thereunder. Each Borrower
has delivered, or caused to be delivered to Lender, true, correct and complete
copies of all of the Credit Card Agreements.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE.
(a) Each Borrower and Guarantor shall at all times preserve, renew
and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases,
contracts and Permits necessary to carry on the business as presently or
proposed to be conducted, except as permitted in Section 9.7 hereof.
(b) No Borrower or Guarantor shall change its name unless each of the
following conditions is satisfied: (i) Lender shall have received not less than
thirty (30) days prior written notice from Parent of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Lender shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower or Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower or Guarantor as soon as it is available.
(c) No Borrower or Guarantor shall change its chief executive office
or its mailing address or organizational identification number (or if it does
not have one, shall not voluntarily acquire one) unless Lender shall have
received not less than thirty (30) days' prior written notice from Parent of
such proposed change, which notice shall set forth such information with respect
thereto as Lender may require and Lender shall have received such agreements as
Lender may reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 NEW COLLATERAL LOCATIONS. Each Borrower and Guarantor may only open
any new location within the continental United States, Virgin Islands or Puerto
Rico provided such Borrower or Guarantor (a) gives Lender thirty (30) days prior
written notice of the intended opening of any such new location and (b) executes
and delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender 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 and Guarantor shall, and shall cause any Subsidiary
to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, approvals, orders
59
and other Permits applicable to it and duly observe all requirements of any
foreign, Federal, State or local Governmental Authority, including ERISA, the
Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations, orders,
permits and written stipulations relating to environmental pollution and
employee health and safety, including all of the Environmental Laws, where the
failure to so comply would have a Material Adverse Effect.
(b) Borrowers and Guarantors shall give written notice to Lender
promptly upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor'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, claim, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by any Borrower or Guarantor 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 material environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by such Borrower or
Guarantor to Lender. Each Borrower and Guarantor shall take prompt action to
respond to any material non-compliance with any of the Environmental Laws and
shall regularly report to Lender on such response.
(c) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower or Guarantor in order to
avoid any non-compliance, with any Environmental Law, which in any case would
have a Material Adverse Effect, Borrowers shall, at Lender's reasonable request
and Borrowers' expense: (i) cause an independent environmental engineer
reasonably acceptable to Lender to conduct such assessments 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 Lender a report as
to such non-compliance setting forth the results of such assessments, a copy of
the proposed plan for responding to any environmental non-compliance, if any,
described therein, and an estimate of the costs, if any, thereof and (ii)
provide to Lender a supplemental report of such engineer in the event that the
scope of such non-compliance, or such Borrower's or Guarantor's response thereto
or the estimated costs thereof, shall change in any material respect.
(d) Each Borrower and Guarantor shall indemnify and hold harmless
Lender and its 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 Real Property of any Borrower
or Guarantor and the preparation and implementation of any closure, remediation
or other plans required under applicable Environmental Laws. All
representations, warranties, covenants and
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indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 PAYMENT OF TAXES AND CLAIMS. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books. Each Borrower and Guarantor shall be
liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and each Borrower and Guarantor agrees to
indemnify and hold Lender harmless with respect to the foregoing, and to repay
to Lender, on demand the amount thereof, and until paid by such Borrower or
Guarantor such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require any Borrower or
Guarantor to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement.
9.5 INSURANCE. (a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
reasonably satisfactory to Lender as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Lender as
Lender shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for each Borrower and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrowers and Guarantors shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance reasonably satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by any Borrower, Guarantor or any of its
or their Affiliates.
(b) At its option, Lender may apply any insurance proceeds received by
Lender on account of a Borrower at any time to the costs of repairs or
replacement of such Borrower's Collateral and/or to payment of such Borrower's
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for such Borrower's
Obligations, except that, notwithstanding anything to the contrary contained
herein, in the event that any of the Collateral (other than Inventory) shall be
lost or physically
61
damaged or destroyed, upon the written request of Parent, Lender shall release
(or authorize the respective insurer(s) to release) the insurance proceeds
otherwise payable to Lender pursuant to this Section 9.5 in respect of such
Collateral (other than Inventory) to such Borrower as Parent may direct as a
result of such loss, damage or destruction, provided that, in each case, all of
the following conditions are satisfied: (i) no Event of Default shall exist or
have occurred and be continuing, (ii) such proceeds shall be used to repair,
refurbish or replace the Collateral so lost, damaged or destroyed, and (iii) the
insurance carrier shall have waived any right of subrogation against Borrowers
under its policy.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary
to, keep proper books and records in which true and complete entries shall be
made of all dealings or transactions of or in relation to the Collateral and the
business of such Borrower, Guarantor and its Subsidiaries (on a consolidated
basis) in accordance with GAAP. Borrowers and Guarantors shall promptly furnish
to Lender all such financial and other information as Lender shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and to notify the auditors and accountants of
Borrowers and Guarantors that Lender is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers and Guarantors
shall furnish or cause to be furnished to Lender, the following: (i) within
thirty (30) days after the end of each fiscal month (unless such month is also
the end of a fiscal quarter then within forty-five (45) days after the end
thereof), monthly unaudited consolidated financial statements, and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss), all in reasonable detail, fairly presenting in
all material respects the financial position and the results of the operations
of Parent and its Subsidiaries as of the end of and through such fiscal month,
certified to be correct by the chief financial officer of Parent (in his or her
capacity as such and not individually), subject to normal year-end adjustments
and no footnotes and accompanied by a compliance certificate substantially in
the form of Exhibit A hereto, and in the event that Excess Availability shall be
less than $4,000,000, a schedule in a form satisfactory to Lender of the
calculations used in determining, as of the end of such month, whether Borrowers
and Guarantors are in compliance with the covenant set forth in Section 9.17 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 Parent and its Subsidiaries (including in
each case balance sheets and 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 in all material respects
the financial position and the results of the operations of Parent and its
Subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants with respect to
the audited consolidated financial statements, which accountants shall be an
independent accounting firm selected by Borrowers and reasonably acceptable to
Lender, that such audited consolidated financial statements have been prepared
in accordance with GAAP, and present fairly the results of operations and
financial condition of Parent and its Subsidiaries as of the end of and for the
fiscal year then ended.
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(b) Borrowers and Guarantors shall promptly notify Lender 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 or Guarantor's business, properties, assets, goodwill or condition,
financial or otherwise, (ii) any Material Contract being terminated or amended
in any material respect or any new Material Contract entered into (in which
event Borrowers and Guarantors shall provide Lender with a copy (or make
available to Lender a copy) of such Material Contract), (iii) any order,
judgment or decree in excess of $250,000 shall have been entered against any
Borrower or Guarantor any of its or their properties or assets, (iv) any
notification of a material violation of laws or regulations received by any
Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any
Default or Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending or
filing thereof furnish or cause to be furnished to Lender copies of all reports
which any Borrower or Guarantor sends to its stockholders generally and copies
of all reports and registration statements which any Borrower or Guarantor files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(d) Borrowers and Guarantors shall furnish or cause to be furnished
to Lender such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrowers and Guarantors, as Lender may, from
time to time, reasonably request. Lender is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority, to any
Affiliate of Lender or to any assignee or Participant or prospective assignee or
Participant, subject to the confidentiality provisions of Section 12.5 hereof.
Each Borrower and Guarantor hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrowers' expense, copies of
the financial statements of any Borrower and Guarantor and any reports or
management letters prepared by such accountants or auditors on behalf of any
Borrower or Guarantor and to disclose to Lender such information as they may
have regarding the business of any Borrower and Guarantor. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by the party that sent same to Lender in
writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly,
(a) merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it, EXCEPT THAT:
(i) any Foreign Subsidiary of Parent (other than LS
Holding) may, after prior written notice to Lender, merge or consolidate with
any other Foreign Subsidiary;
(ii) any Subsidiary of Parent incorporated in any State of
the United States of America may merge with and into or consolidate with any US
Borrower or Parent,
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PROVIDED, THAT, each of the following conditions is satisfied as determined by
Lender, in good faith: (A) Lender shall have received not less than five (5)
days prior written notice of the intention of the parties to so merge or
consolidate and such information with respect thereto as Lender may request, (B)
as of the effective date of the merger or consolidation and after giving effect
thereto, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred, (C) Lender shall have received true, correct and complete copies
of all agreements, documents and instruments relating to such merger, including,
but not limited to, the certificate or certificates of merger as filed with each
appropriate Secretary of State or other Governmental Authority, (D) the
surviving entity shall immediately upon the effectiveness of the merger
expressly confirm in writing pursuant to an agreement, in form and substance
reasonably satisfactory to Lender, its continuing liability in respect of the
Obligations and Financing Agreements and execute and deliver such other
agreements, documents and instruments as Lender may reasonably request in
connection therewith, and (E) each Obligor shall ratify and confirm that its
guarantees of the Obligations shall apply to the Obligations as assumed by such
surviving entity,
(iii) any US Borrower or Parent may merge with and into or
consolidate with any other corporation, PROVIDED, THAT, each of the following
conditions is satisfied as determined by Lender, in good faith:
(A) Lender shall have received not less than thirty
(30) days' prior written notice of the proposed merger and such information with
respect thereto as Lender may request, including (1) the proposed date of the
merger, (2) the name, address, jurisdiction of incorporation and federal
identification number of the person with whom such US Borrower is merging, (3) a
list and description of the assets to be acquired pursuant to such merger
(including the addresses of the locations thereof and whether such locations are
owned, leased or operated by a third party, and if leased or operated by a third
party, the name and address of the lessor or third party), and (4) the total
consideration to be paid in connection with such merger (and the terms of
payment of such consideration),
(B) as of the date of such merger and after giving
effect thereto, no Event of Default or act, condition or event which with notice
or passage of time or both would constitute an Event of Default, shall exist or
have occurred and be continuing,
(C) promptly upon Lender's request, Parent shall
deliver, or cause to be delivered to Lender, true, correct and complete copies
of all agreements, documents and instruments relating to such merger,
(D) promptly upon Lender's request, Borrowers and
Guarantors shall execute and deliver, or cause to be executed and delivered, to
Lender such agreements, documents and instruments in connection with such merger
as Lender may reasonably request, including, without limitation, UCC financing
statements, Collateral Access Agreements and any amendments or supplements
hereto,
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(E) the assets and properties being acquired by such US
Borrower or Parent pursuant to the merger shall be substantially consistent
with, and related to, the business of Parent and its Subsidiaries as currently
conducted as of the date hereof,
(F) the assets acquired by any US Borrower or Parent
pursuant to such merger shall be free and clear of any security interest,
mortgage, pledge, lien, charge or other encumbrance (other than security
interests and liens permitted under Section 9.8 hereof), and Lender shall have
received evidence reasonably satisfactory to it of the same,
(G) the acquisition by such Person of such assets
pursuant to the merger shall not violate any law or regulation or any order or
decree of any court or Governmental Authority binding on such Person in any
material respect and shall not and will not conflict with or result in the
breach of, or constitute a default in any respect under, any material agreement,
document or instrument to which such Person is a party or may be bound, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property of Borrowers or Guarantors (other than as permitted under
Section 9.8 hereof) or violate any provision of the Certificate of Incorporation
or By-Laws of such Person,
(H) the terms and conditions of the merger shall be
commercially reasonable and shall be negotiated in a BONA FIDE arms' length
transaction with a person other than an Affiliate (Xxxxxxx is not an Affiliate
for purposes of this Section),
(I) such US Borrower or Parent shall not become
obligated with respect to any Indebtedness, nor any of its property become
subject to any security interest, mortgage, pledge, lien, charge, hypothecation
or other encumbrance pursuant to such merger unless US Borrower or Parent could
incur such Indebtedness or create such security interest, mortgage, pledge, lien
or other encumbrance hereunder or under the other Financing Agreements,
(J) Lender shall have received, in form and substance
reasonably satisfactory to Lender, (1) evidence that Lender has first priority
valid and perfected security interests in and liens upon the assets acquired
pursuant to such merger subject to any liens as permitted in Section 9.8 hereof,
(2) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Lender may
reasonably deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the assets acquired pursuant to such
merger, (3) the agreement of the other party to the merger consenting to the
collateral assignment by such US Borrower or Guarantor, of all rights and
remedies and claims for damages of such US Borrower or Guarantor relating to the
Collateral (including, without limitation, any bulk sales indemnification, if
applicable) under the agreements, documents and instruments relating to such
merger and (4) such other agreements, documents and instruments as Lender may
reasonably request in connection therewith,
(K) Lender shall have conducted a field examination
with respect to the Person, its assets and its business with whom such US
Borrower is merging and in no event shall any Inventory acquired by such US
Borrower pursuant to such merger be deemed
65
Eligible Inventory unless the results of such field examination shall be
satisfactory to Lender in all material respects (and the reporting with respect
to such accounts and inventory shall have been incorporated into the accounting
systems of Borrowers in a manner satisfactory to Lender), and then only to the
extent the criteria for Eligible Inventory set forth herein are satisfied with
respect thereto (or as modified by Lender in connection with the Inventory
acquired to reflect the results of Lender's field examination, including any
separate advance percentage with respect to Inventory or any Reserves as Lender
may determine, and upon the request of Lender, the Inventory acquired by such US
Borrower pursuant to such merger shall at all times after such merger be
separately identified and reported to Lender in a manner satisfactory to Lender,
(L) in no event shall the total amount of all cash
payments by Borrower or Parent in connection with such merger, together with all
amounts paid by US Borrower or Parent in respect of purchases of Capital Stock
under Section 9.10(g) hereof or assets of any Person under Section 9.10(h)
hereof, exceed $2,000,000 in any calendar year and $4,000,000 in the aggregate
at any time (provided, that, cash payments which represent Xxxxxxx Stock Sale
Proceeds shall not be included as payments of cash for determining compliance
with this Section),
(M) as of the date of such merger and after giving
effect thereto (including the payment of all costs related to such merger), if
the total amount of all payments by Borrower in connection with such merger, (i)
equal or are less than $500,000, the Excess Availability as of the date of such
merger and after giving effect thereto, shall be not less than $3,500,000, and
(ii) exceed $500,000, the Excess Availability as of the date of such merger and
after giving effect thereto, shall be not less than $5,000,000,
(N) not less than fifteen (15) days prior to the date
of such merger or consolidation, Lender shall have received, in form and
substance reasonably satisfactory to Lender, projected financial statements of
US Borrower or Parent for the remaining portion of the then current year and for
the succeeding years after giving effect to the acquisition (including
forecasted income statements, cash flow statements and balance sheets) prepared
on a quarterly basis as to the current year and the immediately succeeding year,
all in reasonable detail, together with such supporting information as Lender
may reasonably request, which projections shall represent US Borrower or
Parent's reasonable best estimate of the future financial performance of US
Borrower or Parent for the periods set forth therein and shall have been
prepared on the basis of the assumptions set forth therein which US Borrower or
Parent believes are fair and reasonable in light of current and reasonably
foreseeable business conditions (it being understood that such projections do
not constitute a warranty as to the future performance of US Borrower or Parent
and that actual results may vary from such projections),
(O) such US Borrower or Parent shall be the surviving
corporation,
(P) promptly upon Lender's request, such US Borrower or
Guarantor, as the case may be, shall immediately upon the effectiveness of the
merger expressly confirm in writing pursuant to an agreement, in form and
substance reasonably satisfactory to
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Lender, its continuing liability in respect of the Obligations and Financing
Agreements and execute and deliver, or cause to be executed and delivered, such
other agreements, documents and instruments as Lender may reasonably request in
connection therewith (including Collateral Access Agreements),
(Q) any Obligor shall, promptly upon Lender's request,
ratify and confirm, in form and substance reasonably satisfactory to Lender,
that its guarantee of the Obligations shall apply to the Obligations of such US
Borrower as the surviving corporation, and
(R) upon the effective date of the merger, Lender shall
have received a certificate duly executed and delivered by such US Borrower or
Parent in form and substance reasonably satisfactory to Lender, addressing all
of the conditions set forth in this Section 9.7(a)(iii) (as modified to refer to
the applicable merger), together with all schedules thereto, with respect to the
acquisition of such assets and the representations and warranties contained
therein of such US Borrower or Parent shall be true and correct in all material
respects;
(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 any Borrower or Guarantor) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $250,000 for all such Equipment disposed of in any fiscal year of
Borrowers or as Lender may otherwise agree, PROVIDED, THAT, the proceeds of any
such disposition shall be paid or delivered to Lender for application to the
applicable Loans and other applicable Obligations of such Borrower, which may be
reborrowed (or in the case of dispositions of Equipment by Foreign Subsidiaries,
the proceeds shall be used to repay outstanding loans made by Borrowers or
Parent to such Foreign Subsidiaries and then paid by such Persons to Lender) and
(iii) the issuance and sale by Guarantor of Capital Stock of
Guarantor after the date hereof; PROVIDED, THAT, (A) Lender shall have received
not less than ten (10) Business Days' prior written notice of such issuance and
sale by Guarantor, which notice shall specify the parties to whom such shares
are to be sold, the terms of such sale, the total amount which it is anticipated
will be realized from the issuance and sale of such stock and the net cash
proceeds which it is anticipated will be received by such Borrower or Guarantor
from such sale, (B) Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of
such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letter of Credit Accommodations or
the right of any Borrower and Guarantor to amend or modify any of the terms and
conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the
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arrangements of Borrowers and Guarantors with Lender or are more restrictive or
burdensome to any Borrower or Guarantor than the terms of any Capital Stock in
effect on the date hereof, (D) except as Lender may otherwise agree in writing,
all of the cash proceeds of the sale and issuance of such Capital Stock shall be
paid to Lender for application to the Obligations in such order and manner as
Lender may determine or to hold as cash collateral for the Obligations and (E)
as of the date of such issuance and sale and after giving effect thereto, no
Default or Event of Default shall exist or have occurred,
(iv) the issuance of Capital Stock of any Borrower or Guarantor
consisting of common stock pursuant to an employee stock option or grant or
similar equity plan or 401(k) plans of such Borrower or Guarantor for the
benefit of its employees, directors and consultants, PROVIDED, THAT, in no event
shall such Borrower or Guarantor be required to issue, or shall such Borrower or
Guarantor issue, Capital Stock pursuant to such stock plans or 401(k) plans
which would result in a Change of Control or other Event of Default,
(v) the issuance by Parent of additional shares of its Capital
Stock to pay discharge or otherwise satisfy any Indebtedness or other
obligations of Borrowers or Guarantor (so long as giving effect thereto no
Change of Control shall occur),
(vi) the issuance by Parent of additional shares of its Capital
Stock to accomplish the transactions described in Section 9.7(a)(ii) and 9.10(g)
and 9.10(h), so long as after giving effect to any such issuance of Capital
Stock no Change of Control shall occur,
(c) wind up, liquidate or dissolve, EXCEPT THAT, each of Little
Switzerland Limited, an Antigua corporation, Little Switzerland St. Kitts-Nevis,
and other Foreign Subsidiaries, may wind up, liquidate and dissolve, PROVIDED,
THAT, each of the following conditions is satisfied, (i) the winding up,
liquidation and dissolution of such Subsidiary shall not violate any law or any
order or decree of any court or other Governmental Authority in any material
respect and shall not conflict with or result in the breach of, or constitute a
default under, any material indenture, mortgage, deed of trust, or other
agreement or instrument to which any Borrower, Guarantor or such Subsidiary is a
party or may be bound, (ii) such winding up, liquidation or dissolution shall be
done in accordance in all material respects with the requirements of all
applicable laws and regulations, (iii) prior to such winding up, liquidation or
dissolution, such Subsidiary shall have no assets or liabilities, (iv) Agent
shall have received copies of all documents and agreements of such Subsidiary to
be filed with any Governmental Authority or otherwise required to effectuate
such winding up, liquidation or dissolution and (v) no Borrower or Guarantor
shall assume any Indebtedness, obligations or liabilities as a result of such
winding up, liquidation or dissolution, or otherwise become liable in respect of
any obligations or liabilities of such Subsidiary; or
(d) agree to do any of the foregoing.
9.8 ENCUMBRANCES. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien,
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charge or other encumbrance of any nature whatsoever on any of its assets or
properties, including the Collateral, EXCEPT:
(a) the security interests and liens of Lender;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's, Guarantor's
or Subsidiary's business to the extent: (i) such liens secure Indebtedness which
is not overdue or (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,
Guarantor or such 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 such Borrower, Guarantor or such Subsidiary 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 any Borrower or Guarantor after
the date hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of such Borrower or Guarantor as of the
date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; PROVIDED, THAT, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance reasonably satisfactory to Lender;
69
(h) liens arising from (i) operating leases and the precautionary UCC
financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by any Borrower or Guarantor located on the
premises of such Borrower or Guarantor (but not in connection with, or as part
of, the financing thereof) from time to time in the ordinary course of business
and consistent with current practices of such Borrower or Guarantor and the
precautionary UCC financing statement filings in respect thereof;
(i) 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) Lender may establish a
Reserve with respect thereto; and
(j) liens and security interests of Xxxxxxx on the Collateral to
secure the Indebtedness of Borrowers to Xxxxxxx permitted under Section 9.9
hereof, which liens and security interests are, in all respects, subject and
subordinate in priority to the liens and security interests of Lender in the
Collateral pursuant to the Intercreditor Agreement;
(k) liens and security interests of any US Borrower or Parent on the
assets of LS Holding or LS Alaska to secure the Indebtedness of LS Holding or LS
Alaska to any US Borrower or Parent permitted under Section 9.9 hereof, which
liens and security interests, have been assigned to Lender;
(l) setoff or credit balances of any Borrower with Credit Card
Issuers, but not liens on or rights of setoff against any other property or
assets of such Borrower pursuant to the Credit Card Agreements (as in effect on
the date hereof) to secure the obligations of such Borrower to the Credit Card
Issuers as a result of fees and chargebacks;
(m) liens and security interests on property or assets acquired
pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary
(or subsidiary thereof) in existence at the time such Subsidiary is acquired
pursuant to a Permitted Acquisition; PROVIDED that (i) any Indebtedness that is
secured by such Liens is permitted to exist under subsection (j) of Section
9.9(i) hereof, and (ii) such Liens are not incurred in connection with, or in
contemplation or anticipation of, such Permitted Acquisition and do not attach
to any other asset of such Borrower (or any other Subsidiary);
(n) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate; and
(o) the liens and security interests of Almod on all of the assets of
World Gift.
9.9 INDEBTEDNESS. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for
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(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
such Borrower, Guarantor or Subsidiary other than the Equipment or Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Borrower or Guarantor of the Obligations of the
other Borrowers in favor of Lender;
(d) the Indebtedness of any US Borrower or Guarantor to any other US
Borrower or Guarantor arising after the date hereof pursuant to loans by any US
Borrower or Guarantor permitted under Section 9.10(i) hereof;
(e) the Indebtedness of LS Holding or LS Alaska to any US Borrower or
Guarantor arising after the date hereof pursuant to loans by any US Borrower or
Guarantor permitted under Section 9.10(i) hereof;
(f) unsecured Indebtedness of any Borrower or Guarantor arising after
the date hereof to any third person (but not to any other Borrower or
Guarantor), PROVIDED, THAT, each of the following conditions is satisfied as
determined by Lender: (i) such Indebtedness shall be on terms and conditions
reasonably acceptable to Lender and shall be subject and subordinate in right of
payment to the right of Lender 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 Lender and such third party, in form and
substance satisfactory to Lender, (ii) Lender shall have received not less than
ten (10) days prior written notice of the intention of such Borrower or
Guarantor to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Lender 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 Lender may request with respect thereto, (iii) Lender shall have received
true, correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as 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 Lender for
application to the Obligations in such order and manner as Lender may determine
or to hold as cash collateral for the Obligations, (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 and Guarantor shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto,
EXCEPT, THAT, such Borrower or Guarantor may, after prior written
71
notice to Lender, 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) Borrowers and Guarantors shall furnish to Lender all notices
or demands in connection with such Indebtedness either received by any Borrower
or Guarantor or on its behalf promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf concurrently with the sending thereof, as
the case may be;
(g) Indebtedness of Borrowers to Xxxxxxx evidenced by or arising
under the Xxxxxxx Agreements (as in effect on the date hereof), PROVIDED, THAT:
(i) the aggregate principal amount of such Indebtedness
shall not exceed $2,750,000, less the aggregate amount of all repayments,
repurchases or redemptions thereof, whether optional or mandatory, plus interest
thereon at the applicable rates provided in the Xxxxxxx Agreements in effect on
the date hereof,
(ii) as of the date hereof, no default or event of
default, or event which with notice or passage of time or both would constitute
an event of default exists or has occurred under any of the Xxxxxxx Agreements;
(iii) Borrowers shall not, directly or indirectly, make, or
be required to make, any payments in respect of such Indebtedness, EXCEPT, THAT,
Borrowers may make regularly scheduled payments of interest, on an unaccelerated
basis, in respect of such Indebtedness in accordance with the terms of the
Xxxxxxx Agreements as in effect on the date hereof (or as amended in accordance
with paragraph (iv) below);
(iv) Borrowers shall not, directly or indirectly, (A)
amend, modify, alter or change any of the material terms of such Indebtedness or
any of the Xxxxxxx Agreements as in effect on the date hereof, EXCEPT, THAT,
Borrowers may, after prior written notice to Lender, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness other than pursuant to payments thereof, or to reduce the
interest rate or any fees in connection therewith, or to make the provisions
thereof less restrictive or burdensome than the terms or conditions of the
Xxxxxxx Agreements as in effect on the date hereof 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
(v) Borrowers shall furnish to Lender all notices or
demands in connection with such Indebtedness either received by any Borrower or
Guarantor or on its behalf promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf concurrently with the sending thereof, as
the case may be;
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(h) the Indebtedness of World Gift to Almod evidenced by or arising
under the Almod Agreements (as in effect on the date hereof), PROVIDED, THAT:
(i) the aggregate principal amount of such Indebtedness
shall not exceed $2,000,000, less the aggregate amount of all repayments,
repurchases or redemptions thereof, whether optional or mandatory, plus interest
thereon at the applicable rates provided in the Almod Agreements in effect on
the date hereof,
(ii) as of the date hereof, no default or event of
default, or event which with notice or passage of time or both would constitute
an event of default exists or has occurred under any of the Almod Agreements;
(iii) none of Borrowers, Guarantor or any other Subsidiary
of Parent (other than World Gift) shall, directly or indirectly, make, or be
required to make, any payment or incur any obligation or liability (contingent
or otherwise) in connection with any such Indebtedness;
(iv) the occurrence of a default with respect thereto
shall not result in, or permit any holder of any Indebtedness of Parent, any
Borrower or Obligor to declare a default on Indebtedness of Parent, such
Borrower or Obligor or cause the payment thereof to be accelerated or payable
prior to its stated maturity;
(v) Parent shall not, and shall cause each of its
Subsidiaries not to directly or indirectly, (A) amend, modify, alter or change
any of the material terms of such Indebtedness or any of the Almod Agreements as
in effect on the date hereof, EXCEPT, THAT, Borrowers may, after prior written
notice to Lender, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness other than
pursuant to payments thereof, or to reduce the interest rate or any fees in
connection therewith, or to make the provisions thereof less restrictive or
burdensome than the terms or conditions of the Almod Agreements as in effect on
the date hereof 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
(vi) Borrowers shall furnish to Lender all notices or
demands in connection with such Indebtedness either received by any Borrower or
Guarantor or on its behalf promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf concurrently with the sending thereof, as
the case may be;
(i) Indebtedness incurred as a result of a Permitted Acquisition (or
Indebtedness assumed at the time of a Permitted Acquisition of an asset securing
such Indebtedness); PROVIDED that (i) such Indebtedness was not incurred in
connection with, or in anticipation or contemplation of, such Permitted
Acquisition, (ii) at the time of such Permitted Acquisition such Indebtedness
does not exceed 25% of the then total fair market value of the assets of the
Subsidiary acquired, or the asset acquired, as the case may be, (iii) so long
as, before
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and after giving effect to such Permitted Acquisition, no Event of Default then
exists or will result therefrom and (iv) such Indebtedness is not recourse to
any assets of any Borrower or any Subsidiary other than the Subsidiary and
assets so acquired;
(j) additional unsecured Indebtedness of Borrowers and Guarantor
not otherwise permitted hereunder in an amount not to exceed $500,000 in
aggregate principal amount at any time outstanding;
(k) Indebtedness of Borrowers and Guarantor arising after the
date hereof issued in exchange for, or the proceeds of which are used to extend,
refinance, replace or substitute for Indebtedness permitted under Sections
9.9(b), 9.9(f), 9.9(i) and 9.9(k) hereof (the "Refinancing Indebtedness");
PROVIDED, THAT, as to any such Refinancing Indebtedness, each of the following
conditions is satisfied: (i) Lender shall have received not less than ten (10)
Business Days' prior written notice of the intention to incur such Indebtedness,
which notice shall set forth in reasonable detail satisfactory to Lender, the
amount of such Indebtedness, the schedule of repayments and maturity date with
respect thereto and such other information with respect thereto as Lender may
reasonably request, (ii) promptly upon Lender's request, Lender shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, as duly
authorized, executed and delivered by the parties thereto, (iii) the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity and a final maturity
equal to or greater than the Weighted Average Life to Maturity and the final
maturity, respectively, of the Indebtedness being extended, refinanced,
replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in
right of payment no more senior than, and be at least subordinated (if
subordinated) to, the Obligations as the Indebtedness being extended,
refinanced, replaced or substituted for, (v) the Refinancing Indebtedness shall
not include terms and conditions with respect to such Borrower or Guarantor
which are more burdensome or restrictive in any material respect than those
included in the Indebtedness so extended, refinanced, replaced or substituted
for, (vi) such Indebtedness incurred by such Borrower or Guarantor shall be at
rates and with fees or other charges that are commercially reasonable to those
charged to Persons of similar creditworthiness to such Borrower or Guarantor,
(vii) the incurring of such Indebtedness shall not result in an Event of
Default, (viii) the principal amount of such Refinancing Indebtedness shall not
exceed the principal amount of the Indebtedness so extended, refinanced,
replaced or substituted for (plus the amount of refinancing fees and expenses
incurred in connection therewith outstanding on the date of such event), (ix)
the Refinancing Indebtedness shall be secured by substantially the same assets
(or less of such assets) that secure the Indebtedness so extended, refinanced,
replaced or substituted for, PROVIDED, THAT, such security interests with
respect to the Refinancing Indebtedness shall have a priority no more senior
than, and be at least as subordinated, if subordinated (on terms and conditions
substantially similar to the subordination provisions applicable to the
Indebtedness so extended, refinanced, replaced or substituted for or as is
otherwise acceptable to Lender) as the security interest with respect to the
Indebtedness so extended, refinanced, replaced or substituted for, (x) Borrower
and Guarantors may only make payments of principal, interest and fees, if any,
in respect of such Indebtedness to the extent such payments would have been
permitted hereunder in respect of the Indebtedness so extended, refinanced,
replaced or substituted for (and except as otherwise permitted below), (xi)
Borrowers and Guarantor shall not, directly or
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indirectly, (A) amend, modify, alter or change any terms of the agreements with
respect to such Refinancing Indebtedness, EXCEPT THAT such Borrower or Guarantor
may, after prior written notice to Lender, amend, modify, alter or change the
terms thereof to the extent permitted with respect to the Indebtedness so
extended, refinanced, replaced or substituted for, or (B) redeem, retire,
defease, purchase or otherwise acquired such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose (other than with
Refinancing Indebtedness to the extent permitted herein and to the extent
permitted with respect to the Indebtedness so extended, refinanced, replaced or
substituted for), and (xii) Borrowers shall furnish to Lender copies of all
notices or demands in connection with Indebtedness received by Borrowers and
Guarantor or on its behalf promptly after the receipt thereof or sent by any
Borrower or on its behalf concurrently with the sending thereof, as the case may
be;
(l) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; PROVIDED, THAT, (i) Borrowers and Guarantors may only make
regularly scheduled payments of principal and interest in respect of such
Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such Indebtedness as in effect on the date hereof,
(ii) Borrowers and Guarantors shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof EXCEPT,
THAT, Borrowers and Guarantors may, after prior written notice to Lender, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof,
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to payments thereof), or
to reduce the interest rate or any fees in connection therewith, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (iii) Borrowers
and Guarantors shall furnish to Lender all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf, concurrently with the sending thereof, as the case may be.
9.10 LOANS, INVESTMENTS, ETC. Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, directly or indirectly, make any loans or
advance money or property to any person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the Capital Stock or
Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, EXCEPT:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, PROVIDED, THAT, (i) no
Loans are then outstanding and (ii) the terms and conditions of Section 5.2
hereof shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are held;
(c) the existing equity investments of each Borrower and Guarantor as
of the
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date hereof in its Subsidiaries, PROVIDED, THAT, no Borrower or Guarantor shall
have any further obligations or liabilities to make any capital contributions or
other additional investments or other payments to or in or for the benefit of
any of such Subsidiaries (exclusive of payments in connection with transactions
permitted in accordance with Section 9.12 hereof), except that the foregoing
shall not be construed to prohibit loans and investments otherwise permitted by
this Agreement;
(d) loans and advances by any Borrower or Guarantor to employees of
such Borrower or Guarantor for: (i) reasonable and necessary work-related travel
or other ordinary business expenses to be incurred by such employee in
connection with their work for such Borrower or Guarantor and (ii) reasonable
and necessary relocation expenses of such employees (including home mortgage
financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by any
Person (or the representative of such Person) in respect of Indebtedness of such
Person owing to such Borrower or Guarantor in connection with the insolvency,
bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; PROVIDED, THAT, the original of any
such stock or instrument evidencing such obligations shall be promptly delivered
to Lender, upon Lender's request, together with such stock power, assignment or
endorsement by such Borrower or Guarantor as Lender may request;
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; PROVIDED, THAT,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Lender by such Borrower or Guarantor and promptly delivered to Lender as so
endorsed;
(g) the purchase by any US Borrower or Parent, as the case may be, of
all or a substantial part of the assets or property of any person (other than
purchases of Capital Stock), PROVIDED, THAT, each of the following conditions is
satisfied as determined by Lender, in good faith:
(i) Lender shall have received not less than thirty (30)
days' prior written notice of the proposed acquisition and such information with
respect thereto as Lender may request, including (A) the proposed date of the
acquisition, (B) a list and description of the assets to be acquired (including
the addresses of the locations thereof and whether such locations are owned,
leased or operated by a third party, and if leased or operated by a third party,
the name and address of the lessor or third party), and (C) the total purchase
price for the assets to be purchased (and the terms of payment of such purchase
price),
(ii) as of the date of such purchase and after giving effect
thereto, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred and be continuing,
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(iii) promptly upon Lender's request, US Borrower or Parent
shall deliver, or cause to be delivered to Lender, true, correct and complete
copies of all agreements, documents and instruments relating to such
acquisition,
(iv) promptly upon Lender's request, US Borrower or Parent
shall execute and deliver, or cause to be executed and delivered, to Lender such
agreements, documents and instruments in connection with such acquisition as
Lender may reasonably request, including, without limitation, UCC financing
statements, Collateral Access Agreements and any amendments or supplements
hereto,
(v) the assets and properties being acquired by US Borrower or
Parent shall be substantially consistent with, and related to, the business of
Parent and its Subsidiaries as currently conducted as of the date hereof,
(vi) the assets acquired by such Borrower or Parent shall be
free and clear of any security interest, mortgage, pledge, lien, charge, or
other encumbrance (other than security interests and liens permitted under
Section 9.8 hereof) and Lender shall have received evidence reasonably
satisfactory to it of the same,
(vii) the acquisition by any US Borrower or Parent of such
assets shall not violate any law or regulation or any order or decree of any
court or Governmental Authority binding on such US Borrower or Parent in any
material respect and shall not and will not conflict with or result in the
breach of, or constitute a default in any material respect under, any agreement,
document or instrument to which US Borrower or Parent is a party or may be
bound, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property of US borrower or Parent other than as
permitted by Section 9.8 hereof, or any Affiliate or violate any provision of
the Certificate of Incorporation or By-Laws of US Borrower or Parent,
(viii) such purchase shall be on commercially reasonable prices
and terms and in a BONA FIDE arms' length transaction with a person other than
an Affiliate (for purposes of this Section Xxxxxxx is not an Affiliate of
Parent),
(ix) any US Borrower or Parent shall not become obligated with
respect to any Indebtedness, nor any of their property become subject to any
security interest, mortgage, pledge, lien, charge, or other encumbrance pursuant
to such acquisition unless US Borrower or Parent, as the case may be, could
incur such Indebtedness or create such security interest, mortgage, pledge,
lien, charge, hypothecation or other encumbrance hereunder or under the other
Financing Agreements other than as permitted in Sections 9.8 and 9.9 hereof, as
the case may be,
(x) Lender shall have received, in form and substance
reasonably satisfactory to Lender, (A) evidence that Lender has first priority
valid and perfected security interests in and liens upon the assets purchased
subject to any security interests and liens as permitted in Section 9.8 hereof,
(B) all Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Lender may
77
reasonably deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the assets purchased, (C) the agreement
of the seller consenting to the collateral assignment by any US Borrower or
Parent, of all rights and remedies and claims for damages of any US Borrower or
Parent relating to the Collateral under the agreements, documents and
instruments relating to such acquisition and (D) such other agreements,
documents and instruments as Lender may reasonably request in connection
therewith,
(xi) Lender shall have conducted a field examination with
respect to the Person, its assets and its business whose assets are being
purchased and in no event shall any Inventory so acquired by any US Borrower
pursuant to such acquisition be deemed Eligible Inventory unless the results of
such field examination shall be satisfactory to Lender in all respects (and the
reporting with respect to such accounts and inventory shall have been
incorporated into the accounting systems of Borrowers in a manner reasonably
satisfactory to Lender), and then only to the extent the criteria for Eligible
Inventory set forth herein are satisfied with respect thereto (or as modified by
Lender in connection with the Inventory acquired to reflect the results of
Lender's field examination, including any separate advance percentage with
respect to such Accounts or Inventory or Reserves as Lender may determine), and
upon the reasonable request of Lender, the Inventory acquired by such US
Borrower pursuant to such acquisition shall at all times after such acquisition
be separately identified and reported to Lender in a manner reasonably
satisfactory to Lender,
(xii) in no event shall the total amount of all cash payments by
US Borrowers and Parent in connection with such acquisitions, together with all
amounts paid by US Borrower in respect of mergers under Section 9.7(a)(iii) and
purchases of Capital Stock under Section 9.10(h), exceed $2,000,000 in any
calendar year and the $4,000,000 in the aggregate at any time (provided, that,
cash payments which represent Xxxxxxx Stock Sale Proceeds shall not be included
as payments of cash for determining compliance with this Section),
(xiii) as of the date of such acquisition and after giving effect
thereto (including the payment of all costs related to such acquisition), if the
total amount of all cash payments by Borrower in connection with such
acquisition, (i) equal or are less than $500,000, the Excess Availability as of
the date of such acquisition and after giving effect thereto, shall be not less
than $3,500,000, and (ii) exceed $500,000, the Excess Availability as of the
date of such acquisition and after giving effect thereto, shall be not less than
$5,000,000,
(xiv) not less than fifteen (15) days prior to the date of such
acquisition, Lender shall have received, in form and substance reasonably
satisfactory to Lender, projected financial statements of US Borrower or Parent,
as the case may be, for the remaining portion of the then current year and for
the succeeding years after giving effect to the acquisition (including
forecasted income statements, cash flow statements and balance sheets) prepared
on a quarterly basis as to the current year and the immediately succeeding year,
all in reasonable detail, together with such supporting information as Lender
may reasonably request, which projections shall represent Borrower's reasonable
best estimate of the future financial performance of any US Borrower or Parent
for the periods set forth therein and shall have been prepared on the basis of
the assumptions set forth therein which any US Borrower or Parent believe are
fair and
78
reasonable in light of current and reasonably foreseeable business conditions
(it being understood that such projections do not constitute a warranty as to
the future performance of any US Borrower or Parent and that actual results may
vary from such projections),
(xv) upon the effective date of the acquisition of such assets
by any US Borrower or Parent, Lender shall have received a certificate duly
executed and delivered by any US Borrower or Parent in form and substance
reasonably satisfactory to Lender, addressing all of the conditions set forth in
this Section 9.10(j) (as modified to refer to the applicable acquisition),
together with all schedules thereto, with respect to the acquisition of such
assets and the representations and warranties contained therein shall be true
and correct in all material respects;
(h) the purchase by US Borrower or Parent, as the case may be, of all
of the Capital Stock of any Person, PROVIDED, THAT, each of the following
conditions is satisfied as determined by Lender:
(i) Lender shall have received not less than thirty (30) days'
prior written notice of the proposed acquisition and such information with
respect thereto as Lender may request, including (A) the proposed date of the
acquisition, (B) the name, address, jurisdiction of incorporation and federal
employer identification number of the person whose Capital Stock is being
purchased, (C) a list and description of the assets of the Person whose Capital
Stock is being purchased (including the addresses of the locations thereof and
whether such locations are owned, leased or operated by a third party, and if
leased or operated by a third party, the name and address of the lessor or third
party), and (D) the total purchase price for the Capital Stock to be purchased
(and the terms of payment of such purchase price),
(ii) as of the date of such purchase and after giving effect
thereto, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default, shall exist or
have occurred and be continuing,
(iii) promptly upon Lender's request, any US Borrower or Parent
shall deliver, or cause to be delivered to Lender, true, correct and complete
copies of all agreements, documents and instruments relating to such
acquisition,
(iv) promptly upon such acquisition, any US Borrower or Parent
shall cause the Person whose Capital Stock is being purchased to execute and
deliver to Lender, in form and substance satisfactory to Lender: (A) an absolute
and unconditional guarantee of payment of all of the Obligations, (B) a general
security agreement granting to Lender specify a first and only security interest
in and lien upon all of the assets and properties of such Person (other than as
permitted under Section 9.8 hereof), (C) related UCC financing statements and
(D) such other agreements, documents and instruments as Lender, may reasonably
require,
(v) promptly upon Lender's request, (A) any US Borrower or
Parent shall execute and deliver to Lender, in form and substance satisfactory
to Lender, a pledge and security agreement granting to Lender a first priority
pledge and security interest in all of the
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issued and outstanding shares of Capital Stock of the Person whose Capital Stock
is being purchased and (B) any US Borrower or Parent shall deliver the original
stock certificates evidencing such shares of Capital Stock, together with stock
powers with respect thereto duly executed in blank,
(vi) promptly upon Lender's request, any US Borrower or Parent
shall execute and deliver, or cause to be executed and delivered, to Lender such
other agreements, documents and instruments in connection with such acquisition
as Lender may reasonably request, including, without limitation, UCC financing
statements, PPSA financing statements, hypothecs, debentures, Collateral Access
Agreements and any amendments or supplements hereto,
(vii) the assets and properties of the Person whose Capital
Stock is being acquired by any US Borrower or Parent shall be substantially
consistent with, and related to, the business of any US Borrower or Parent as
currently conducted as of the date hereof,
(viii) the assets of the Person whose Capital Stock is being
acquired by Borrower (and the Capital Stock) shall be free and clear of any
security interest, mortgage, pledge, lien, charge, hypothec or other encumbrance
and Lender shall have received evidence satisfactory to it of the same (other
than security interests and liens permitted under Section 9.8 hereof),
(ix) the acquisition by any US Borrower or Parent, as the case
may be, of such Capital Stock shall not violate any law or regulation or any
order or decree of any court or Governmental Authority binding on such US
Borrower or Parent in any respect and shall not and will not conflict with or
result in the breach of, or constitute a default in any material respect under,
any material agreement, document or instrument to which US Borrower or Parent,
as the case may be, is a party or may be bound, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property of US
Borrower or Parent, as the case may be, (other than as permitted under Section
9.8 hereof) or any Affiliate or violate any provision of the Certificate of
Incorporation or By-Laws of any US Borrower or Parent;
(ix) such purchase shall be on commercially reasonable prices
and terms and in a BONA FIDE arms' length transaction with a person other than
an Affiliate,
(x) any US Borrower or Parent, as the case may be, shall not
become obligated with respect to any Indebtedness, nor any of their property
become subject to any security interest, mortgage, pledge, lien, charge,
hypothec or other encumbrance pursuant to such acquisition unless any such
Borrower or Parent could incur such Indebtedness or create such security
interest, mortgage, pledge, lien, charge, hypothec or other encumbrance
hereunder or under the other Financing Agreements,
(xi) Lender shall have received, in form and substance
reasonably satisfactory to Lender, (A) evidence that Lender has first priority
valid and perfected security interests in and liens upon the assets of the
Person whose Capital Stock is being acquired subject
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to any security interests and liens as permitted in Section 9.8 hereof, (B) all
Collateral Access Agreements and other consents, waivers, acknowledgments and
other agreements from third persons which Lender may reasonably deem necessary
or desirable in order to permit, protect and perfect its security interests in
and liens upon the assets of the Person whose Capital Stock is being acquired,
(C) the agreement of the seller consenting to the collateral assignment by such
Subsidiary of all rights and remedies and claims for damages of such Subsidiary
relating to the Collateral (including, without limitation, any bulk sales
indemnification) under the agreements, documents and instruments relating to
such acquisition and (D) such other agreements, documents and instruments as
Lender may reasonably request in connection therewith,
(xii) in no event shall the total amount of all cash payments by
US Borrower or Parent, as the case may be, in connection with such acquisitions,
together with all amounts paid by US Borrower or Parent, as the case may be, in
respect of mergers under Section 9.7(a)(iii) or purchases of assets of any
Person under Section 9.10(g), exceed $2,000,000 in any calendar year and
$4,000,000 in the aggregate at any time (provided, that, cash payments which
represent Xxxxxxx Stock Sale Proceeds shall not be included as payments of cash
for determining compliance with this Section),
(xiii) as of the date of such acquisition and after giving effect
thereto (including the payment of all costs related to such acquisition), if the
total amount of all cash payments by Borrower in connection with such
acquisition, (i) equal or are less than $500,000, the Excess Availability as of
the date of such acquisition and after giving effect thereto, shall be not less
than $3,500,000, and (ii) exceed $500,000, the Excess Availability as of the
date of such acquisition and after giving effect thereto, shall be not less than
$5,000,000,
(xiv) not less than fifteen (15) days prior to the date of such
acquisition, Lender shall have received, in form and substance satisfactory to
Lender, projected financial statements of any US Borrower or Parent for the
remaining portion of the then current year and for the succeeding years after
giving effect to the acquisition (including forecasted income statements, cash
flow statements and balance sheets) prepared on a monthly basis as to the
current year and the immediately succeeding year, all in reasonable detail,
together with such supporting information as Lender may reasonably request,
which projections shall represent any US Borrower or Parent's reasonable best
estimate of the future financial performance of any US Borrower or Parent for
the periods set forth therein and shall have been prepared on the basis of the
assumptions set forth therein which Borrower believe are fair and reasonable in
light of current and reasonably foreseeable business conditions (it being
understood that such projections do not constitute a warranty as to the future
performance of Borrower and that actual results may vary from such projections),
(xv) upon the effective date of the acquisition of such Capital
Stock by any US Borrower or Parent, Lender shall have received a certificate
duly executed and delivered by Borrower in form and substance reasonably
satisfactory to Lender, addressing all of the conditions set forth in this
Section 9.10(h) (as modified to refer to the applicable acquisition), together
with all schedules thereto, with respect to the acquisition of such assets and
the representations and warranties contained therein shall be true and correct
in all material respects;
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(i) loans by any Borrower or Guarantor to another Borrower, or LS
Alaska or Guarantor after the date hereof, PROVIDED, THAT,
(i) as to all of such loans, (A) within thirty (30) days after
the end of each fiscal month, Borrowers shall provide to Lender a report in form
and substance satisfactory to Lender of the outstanding amount of such loans as
of the last day of the immediately preceding month and indicating any loans made
and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument is promptly delivered to Lender upon its request to hold as
part of the Collateral, with such endorsement and/or assignment by the payee of
such note or other instrument as Lender may require, (C) as of the date of any
such loan and after giving effect thereto, the Borrower or Guarantor making such
loan shall be Solvent, and (E) as of the date of any such loan and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing, and
(ii) as to loans by Guarantor to a US Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Lender to receive the prior final payment
and satisfaction in full of all of the Obligations on terms and conditions
acceptable to Lender, (B) promptly upon Lender's request, Lender shall have
received a subordination agreement, in form and substance satisfactory to
Lender, providing for the terms of the subordination in right of payment of such
Indebtedness of such US Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by and
such US Borrower, and (C) such US Borrower shall not, directly or indirectly
make, or be required to make, any payments in respect of such Indebtedness prior
to the end of the then current term of this Agreement;
(iii) as to loans by a US Borrower or Guarantor to LS Holding or
LS Alaska, as of the date of any such loan and after giving effect thereto, (A)
the Excess Availability of US Borrowers shall be not less than $2,000,000 and
(B) all right, title and interest of such US Borrower in and to and under the
Intercompany Loan Documents shall have been validly assigned to Lender, (C) the
Indebtedness of LS Holding or LS Alaska, as the case may be to such US Borrower
or Guarantor arising pursuant to such loans shall be evidenced by a single
original Intercompany Note issued by LS Holding or LS Alaska, as the case may
be, payable to the order of such US Borrower or Guarantor, constituting valid
and legally enforceable Indebtedness of either LS Holding or LS Alaska to such
US Borrower or Guarantor (and to Lender as assignee of Borrower), without
offset, defense or counterclaim of any kind, nature or description whatsoever
and (D) the original of the Intercompany Note issued by LS Holding or LS Alaska
to Borrower shall be duly and validly endorsed and assigned by such US Borrower
or Guarantor payable to the order of Lender, in a manner satisfactory to Lender
and as so endorsed shall be delivered to, and held by, Lender as part of the
Collateral; and
(iv) as to loans by LS Holding to Guarantor or any US Borrower,
as of the date of any such loan and after giving effect thereto, the Excess
Availability of LS Holding shall be not less than $2,000,000 (LS Holding may not
make loans to LS Alaska unless and until
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it becomes a US Borrower);
(j) the purchase of trade fixtures from a Person (other than an
Affiliate excluding Xxxxxxx) in connection with the opening of a new retail
store location by any Borrower or Parent, PROVIDED, THAT, (i) the purchase price
shall not exceed $500,000 and (ii) in no event shall the total amount of all
cash payments by Borrowers in connection with such purchases, together with all
amounts paid by Borrowers in respect of mergers under Section 9.7(a)(iii),
purchases of assets under Section 9.10(g) and purchases of Capital Stock under
Section 9.10(h), exceed $2,000,000 in any calendar year and $4,000,000 in the
aggregate at any time (provided, that, cash payments which represent Xxxxxxx
Stock Sale Proceeds shall not be included as payments of cash for determining
compliance with this Section); and
(k) the acquisition by Parent or LS Alaska of the retail store
(together with related Inventory, furniture, fixtures, equipment, display cases
and other retail items) located at 000 Xxxxxxx Xxxxxx in Ketchikan, Alaska,
PROVIDED, THAT, (i) the purchase price (inclusive of related costs and expenses)
shall not exceed $750,000 and (ii) as of the date of the purchase and after
giving effect thereto, no Event of Default, or act, condition or event which
with notice or passage of time or both would constitute an Event of Default,
shall exist or have occurred and be continuing;
(l) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; PROVIDED, THAT, as to such loans and advances, (i)
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change the terms of such loans and advances or any agreement, document or
instrument related thereto EXCEPT, THAT, such Borrower, Guarantor or Subsidiary,
as the case may be, after prior written notice to Lender, 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 a portion of
such indebtedness (other than pursuant to payments thereof), or to release any
liens or security interests in any assets of Borrower which secure such
indebtedness (if any), or to reduce the rate of interest or any fees in
connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower or otherwise more favorable to
Borrower, Guarantor or Subsidiary, as the case may be (as determined in good
faith by Lender) and (ii) Borrowers and Guarantors shall furnish to Lender all
notices or demands in connection with such loans and advances either received by
any Borrower or Guarantor or on its behalf, promptly after the receipt thereof,
or sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS. Each Borrower and Guarantor shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of any Capital Stock of such Borrower or Guarantor now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, EXCEPT THAT:
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(a) such Borrower, Guarantor or Subsidiary 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);
(b) Borrowers and Guarantors may pay dividends to the extent
permitted in Section 9.12 below;
(c) Borrowers and Guarantors may repurchase Capital Stock consisting
of common stock held by employees pursuant to any employee stock ownership plan
thereof upon the termination, retirement or death of any such employee in
accordance with the provisions of such plan, PROVIDED, THAT, as to any such
repurchase, each of the following conditions is satisfied: (i) as of the date of
the payment for such repurchase and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, (ii) such
repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are bound,
and (iv) the aggregate amount of all payments for such repurchases in any
calendar year shall not exceed $200,000 (the "Annual Limit"), EXCEPT THAT,
repurchases may be made in excess of the Annual Limit, PROVIDED, THAT, each of
the following conditions is satisfied in the determination of Lender: (A) as of
the date of such repurchase and after giving effect thereto, the Excess
Availability of Borrowers shall be not less than $4,000,000, (B) as of the date
of any such repurchase and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing and (C) the aggregate
amount for all such repurchases (including for purposes of this calculation
those made within the Annual Limit) in any calendar year shall not exceed
$500,000.
9.12 TRANSACTIONS WITH AFFILIATES. Each Borrower and Guarantor shall not,
and shall not permit any of its Subsidiaries to, 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 (excluding
Xxxxxxx) of such Borrower or Guarantor, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's or Guarantor's
business (as the case may be) in accordance with such current practices in
effect immediately prior to the date hereof and upon fair and reasonable terms
no less favorable to such Borrower or Guarantor than such Borrower or Guarantor
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 such Borrower or Guarantor, EXCEPT (i) reasonable
compensation to officers, employees and directors for services rendered to such
Borrower or Guarantor in the ordinary course of business, (ii) payments by any
such Borrower or Guarantor to Parent for actual and necessary reasonable
out-of-pocket legal and accounting, insurance, marketing, payroll and similar
types of services paid for by Parent on behalf of such Borrower or Guarantor, in
the ordinary course of their respective businesses or as
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the same may be directly attributable to such Borrower or Guarantor and for the
payment of taxes by or on behalf of Parent and (iii) payments by any Borrower or
Guarantor to Xxxxxxx pursuant to the Xxxxxxx Agreements.
9.13 COMPLIANCE WITH ERISA. Each Borrower and Guarantor shall, and shall
cause each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other Federal and State law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (c) not terminate any
of such Plans so as to incur any 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, Guarantor 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 and Guarantor
shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on the Saturday closest to the 31st day of
May of each year, and (b) fiscal quarters to end on the last day of the
thirteenth (13th) week following the end of the immediately preceding fiscal
quarter, PROVIDED, THAT, the end of the fourth fiscal quarter shall be on the
last day of the fourteenth (14th) week following the end of the third fiscal
quarter whenever necessary to have the fourth fiscal quarter end on the Saturday
closest to May 31 of each year.
9.15 CHANGE IN BUSINESS. Each Borrower and Guarantor shall not engage in
any business other than the business of such Borrower or Guarantor on the date
hereof and any business reasonably related, ancillary or complimentary to the
business in which such Borrower or Guarantor is engaged on the date hereof.
9.16 LIMITATION OF RESTRICTIONS AFFECTING SUBSIDIARIES. Each Borrower and
Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (iv) customary restrictions on
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dispositions of real property interests found in reciprocal easement agreements
of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor,
(v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of
such Borrower or Guarantor prior to the date on which such Subsidiary was
acquired by Borrower or and outstanding on such acquisition date, and (vi) the
extension or continuation of contractual obligations in existence on the date
hereof; PROVIDED, THAT, any such encumbrances or restrictions contained in such
extension or continuation are no less favorable to Lender than those
encumbrances and restrictions under or pursuant to the contractual obligations
so extended or continued.
9.17 NET WORTH. At any time that the daily average of the amount of Excess
Availability for fourteen (14) consecutive days is less than $4,000,000, Parent
and its Subsidiaries on a consolidated basis, shall (a) for the period
commencing the date of the Agreement through and including January 31, 2003, at
all times have and maintain Net Worth of not less than $15,000,000 and (b) at
all times on or after February 1, 2003, have, and shall maintain, Net Worth of
not less than $16,000,000.
9.18 LICENSE AGREEMENTS.
(a) Each Borrower and Guarantor 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, subject to
any bona fide dispute with respect thereto which is being contested in good
faith by such Borrower or Guarantor, (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 9.19(b) below, such Borrower or Guarantor may
cancel, surrender or release any material License Agreement in the ordinary
course of the business of such Borrower or Guarantor; PROVIDED, THAT, such
Borrower or Guarantor (as the case may be) shall give Lender 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 Lender prompt written
notice of any material License Agreement entered into by such Borrower or
Guarantor after the date hereof, together with a true, correct and complete copy
thereof (subject to any applicable confidentiality requirements) and such other
information with respect thereto as Lender may request, (v) give Lender prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Lender (promptly upon
the receipt thereof by such Borrower or Guarantor in the case of a notice to
such Borrower or Guarantor and concurrently with the sending thereof in the case
of a notice from such Borrower or Guarantor) a copy of each notice of default
and every other notice and other communication received or delivered by such
Borrower or Guarantor in connection with any material License Agreement which
relates to the right of such Borrower or Guarantor to continue to use the
property subject to such License Agreement, and (vi) furnish to Lender, promptly
upon the request of Lender, such information and evidence as Lender may
reasonably require from time to time concerning the observance, performance and
compliance by such
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Borrower or Guarantor or the other party or parties thereto with the material
terms, covenants or provisions of any material License Agreement.
(b) Each Borrower and Guarantor 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 Lender or give Lender prior written notice
that such Borrower or Guarantor 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 such Borrower or
Guarantor to extend or renew any material License Agreement to which it is a
party, Lender 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 (in accordance with the terms thereof), whether in its own name and
behalf, or in the name and behalf of a designee or nominee of Lender or in the
name and behalf of such Borrower or Guarantor, as Lender shall determine at any
time that an Event of Default shall exist or have occurred and be continuing.
Lender may, but shall not be required to, perform any or all of such obligations
of such Borrower or Guarantor under any of the License Agreements, including,
but not limited to, the payment of any or all sums due from such Borrower or
Guarantor thereunder. Any sums so paid by Lender shall constitute part of the
Obligations.
9.19 AFTER ACQUIRED REAL PROPERTY. If any Borrower or Guarantor hereafter
acquires any Real Property, fixtures or any other property that is of the kind
or nature described in the 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 $1,000,000 (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 Lender, or duties or obligations of any Borrower or Guarantor (subject
to any restrictions or prohibitions imposed by any owner or lessor of any such
Real Property), promptly upon Lender's request, such Borrower or Guarantor shall
execute and deliver to Lender a mortgage, deed of trust or deed to secure debt,
as Lender may determine, in form and substance substantially similar to the
Mortgage and as to any provisions relating to specific state laws satisfactory
to Lender 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 Lender a first and only lien and mortgage on and security interest
in such Real Property, fixtures or other property (except as such Borrower or
Guarantor would otherwise be permitted to incur hereunder or under the Mortgage
or as otherwise consented to in writing by Lender) and such other agreements,
documents and instruments as Lender may require in connection therewith.
9.20 CREDIT CARD AGREEMENTS. Each Borrower shall (a) observe and perform
all material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
(b) not do, permit, suffer or refrain from doing anything, as a result of which
there could be a default under or breach of any of the terms of any of the
Credit Card Agreements; (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,
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that, (i) any such Borrower may terminate or cancel any of the Credit Card
Agreements in the ordinary course of the business of such Borrower; PROVIDED,
THAT, such Borrower shall give Lender not less than fifteen (15) days prior
written notice of its intention to so terminate or cancel any of the Credit Card
Agreements and (ii) a Borrower may modify or amend any of the Credit Card
Agreements, so long as such modification or amendment does not give the Credit
Card Issuer or Credit Card Processor party thereto greater rights to setoff
against amounts otherwise payable to such Borrower or greater rights to cease or
suspend payments to such Borrower; (d) not enter into any new Credit Card
Agreements with any new Credit Card Issuer unless (i) Lender shall have received
not less than thirty (30) days prior written notice of the intention of such
Borrower to enter into such agreement (together with such other information with
respect thereto as Lender may request) and (ii) such Borrower delivers, or
causes to be delivered to Lender, a Credit Card Acknowledgment in favor of
Lender; (e) give Lender 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 Lender may request; and (f) furnish to Lender, promptly upon the
request of Lender, such information and evidence as Lender 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 COSTS AND EXPENSES. Borrowers and Guarantors shall pay to Lender on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) 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 Lender's customary charges and fees with respect
thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and such Borrower's or Guarantor's operations, plus a per diem charge
at the rate of $750 per person per day for Lender's examiners in the field and
office; and (g) the reasonable fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
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9.22 FURTHER ASSURANCES. At the request of Lender at any time and from time
to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of any Borrower or Guarantor representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Lender, Lender
may, at Lender's option, cease to make any further Loans or provide any further
Letter of Credit Accommodations until Lender has received such certificate and,
in addition, Lender has determined that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a)(i) any Borrower fails to pay any of the Obligations when due or
(ii) any Borrower or Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure
shall continue for twenty (20) days; PROVIDED, THAT, such twenty (20) day period
shall not apply in the case of: (A) any failure to observe any such covenant
which is not capable of being cured at all or within such twenty (20) day period
or which has been the subject of a prior failure within a six (6) month period
or (B) an intentional breach by any Borrower or Obligor of any such covenant or
(iii) any Borrower or Obligor fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than those described in Sections 10.1(a)(i) and
10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by any
Borrower or Guarantor in this Agreement, the other Financing Agreements or any
other written agreement, schedule, confirmatory assignment or otherwise shall
when made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against any
Borrower or 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
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payment of money, or injunction, attachment, garnishment or execution is
rendered against any Borrower or Obligor or any of the Collateral having a value
in excess of $250,000;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or Obligor makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with a moratorium or adjustment
of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property;
(i) any default in respect of any Indebtedness of any Borrower or
Obligor (other than Indebtedness owing to Lender 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 Borrower or Obligor
under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto; or any Credit Card Issuer or Credit Card
Processor withholds payment of amounts otherwise payable to any Borrower to fund
a reserve account or otherwise hold as collateral, or shall require any Borrower
to pay funds into a reserve account or for such Credit Card Issuer or Credit
Card Processor to otherwise hold as collateral, or any Borrower shall provide a
letter of credit, guarantee, indemnity or similar instrument to or in favor of
such Credit Card Issuer or Credit Card Processor such that in the aggregate all
of such funds in the reserve account, other amounts held as collateral and the
amount of such letters of credit, guarantees, indemnities or similar instruments
shall exceed $500,000 or any Credit Card Issuer or Credit Card Processor shall
debit or deduct any amounts from any deposit account of any Borrower;
(j) 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
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thereto (other than Lender) in accordance with its terms, or any such party
shall challenge the enforceability hereof or thereof, or shall assert in
writing, or take any action or fail to take any action based on the assertion
that any provision hereof or of any of the other Financing Agreements has ceased
to be or is otherwise not valid, binding or enforceable in accordance with its
terms, or any security interest provided for herein or in any of the other
Financing Agreements shall cease to be a valid and perfected first priority
security interest in any of the Collateral purported to be subject thereto
(except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of any Borrower in an aggregate amount in
excess of $500,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$750,000 or (ii) any other property of any Borrower or Guarantor which is
necessary or material to the conduct of its business;
(n) 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 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;
(o) there shall be an act, condition or event which has or may have a
Material Adverse Effect after the date hereof;
(p) any Foreign Subsidiary fails to perform or observe any of the
covenants contained in the Foreign Subsidiary Agreements; or
(q) there shall be an event of default under any of the other
Financing Agreements.
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10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
any Borrower or Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements, the
UCC or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
any Borrower or Obligor of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against any
Borrower or Obligor to collect the Obligations without prior recourse to the
Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion, (i)
accelerate the payment of all Obligations and demand immediate payment thereof
to Lender, (PROVIDED, THAT, upon the occurrence of any Event of Default
described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically
become immediately due and payable), (ii) with or without judicial process or
the aid or assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require any Borrower or Obligor, at Borrowers' expense, to assemble and
make available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Lender
or elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or
Obligor, which right or equity of redemption is hereby expressly waived and
released by Borrowers and Obligors and/or (vii) terminate this Agreement. If any
of the Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until payment
therefor is finally collected by Lender. If notice of disposition of Collateral
is required by law, ten (10) days prior notice by Lender to Parent designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrowers and Obligors waive any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, each Borrower and
Obligor waives the posting of any bond which might otherwise be required. At any
time an Event of Default exists or has occurred and is continuing, upon Lender's
request, Borrowers will either, as Lender shall specify, furnish cash collateral
to the issuer to be used to secure and fund
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Lender's reimbursement obligations to the issuer in connection with any Letter
of Credit Accommodations or furnish cash collateral to Lender for the Letter of
Credit Accommodations. Such cash collateral shall be in the amount equal to one
hundred ten (110%) percent of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the latest expiration date of such Letter of Credit Accommodations.
(c) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors and
other obligors in respect thereof that the Receivables have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors and other obligors to make payment of Receivables
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its or their failure to collect or enforce the payment thereof nor
for the negligence of its or their agents or attorneys with respect thereto and
(iv) take whatever other action Lender may in good xxxxx xxxx 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 Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers and Guarantors shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require. In
the event any account debtor returns Inventory when an Event of Default exists
or has occurred and is continuing, Borrowers and Guarantors shall, upon Lender's
request, hold the returned Inventory in trust for Lender, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Lender's instructions, and not issue any credits, discounts
or allowances with respect thereto without Lender's prior written consent.
(d) To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), each Borrower and Guarantor acknowledges and agrees that
it is not commercially unreasonable for Lender (i) to fail to incur expenses
reasonably deemed significant by 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
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a specialized nature, (vi) to contact other persons, whether or not in the same
business as any Borrower or Guarantor, for expressions of interest in acquiring
all or any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lenders against
risks of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Each Borrower
and Guarantor acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Lender would not be
commercially unreasonable in the exercise by any Lender of remedies against the
Collateral and that other actions or omissions by Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section. Without limitation of the foregoing, nothing contained in this Section
shall be construed to grant any rights to any Borrower or Guarantor or to impose
any duties on Lender that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.
(e) For the purpose of enabling Lender to exercise the rights and
remedies hereunder, each Borrower and Obligor hereby grants to Lender, to the
extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
(f) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due, PROVIDED, THAT, notwithstanding
anything herein to the contrary, Lender shall only apply the cash proceeds from
the disposition of any Collateral to the payment of the USVI Obligations.
Borrowers and Guarantors shall remain liable to Lender for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including attorneys' fees and
expenses.
(g) Without limiting the foregoing, upon the occurrence of a Default
or an Event of Default, Lender may, at Lender's option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and
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Letter of Credit Accommodations available to Borrowers and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrowers and/or (iii) establish such
additional Reserves as Lender determines without limitation or restriction
notwithstanding anything to the contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL WAIVER.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements (other than the 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 Florida but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
Florida.
(b) Borrowers, Guarantors and Lender irrevocably consent and submit
to the non-exclusive jurisdiction of the Circuit Court of Miami-Dade County,
Florida and the United States District Court for the Southern District of
Florida, whichever Lender 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 Lender shall have the right to bring any action or
proceeding against any Borrower or Guarantor or its or their property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
any Borrower or Guarantor or its or their property).
(c) Each Borrower and Guarantor hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon any Borrower or Guarantor (or Parent on behalf of such
Borrower or Guarantor) in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, such Borrower or Guarantor
shall appear in answer to such process, failing which such Borrower or Guarantor
shall be deemed in default and judgment may be entered by Lender against such
Borrower or Guarantor for the amount of the claim and other relief requested.
(d) BORROWERS, GUARANTORS AND LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER
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FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE. BORROWERS, GUARANTORS AND LENDER HEREBY AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR OR 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) Lender shall not have any liability to any Borrower or Guarantor
(whether in tort, contract, equity or otherwise) for losses suffered by such
Borrower or Guarantor in connection with, arising out of, or in any way related
to the transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement. Each Borrower and Guarantor: (i) certifies that neither Lender nor
any representative, agent or attorney acting for or on behalf of Lender has
represented, expressly or otherwise, that Lender 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, Lender is 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 and Guarantor hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and chattel paper, included in or evidencing
any of the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on any Borrower or Guarantor which Lender may elect to
give shall entitle such Borrower or Guarantor to any other or further notice or
demand in the same, similar or other circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrowers. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any
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right, power and/or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right, power and/or remedy which Lender would otherwise
have on any future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Each Borrower and Guarantor waives all rights
to interpose any claims, deductions, setoffs or counterclaims of any nature
(other then compulsory counterclaims) in any action or proceeding with respect
to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 INDEMNIFICATION. Each US Borrower and Guarantor shall, jointly and
severally, and LS Holding, shall severally and not jointly, indemnify and hold
Lender, and its officers, directors, agents, employees, advisors and counsel and
their respective Affiliates (each such person being an "Indemnitee"), harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses (including reasonable attorneys' fees and expenses) imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel except that Borrowers and Guarantors shall not have any obligation under
this Section 11.5 to indemnify an Indemnitee with respect to a matter covered
hereby resulting from the gross negligence or wilful misconduct of such
Indemnitee as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction (but without limiting the obligations of Borrowers or
Guarantors as to any other Indemnitee). To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers and Guarantors shall pay
the maximum portion which it is permitted to pay under applicable law to Lender
in satisfaction of indemnified matters under this Section. To the extent
permitted by applicable law, no Borrower or Guarantor shall assert, and each
Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any of the other Financing Agreements or any
undertaking or transaction contemplated hereby. All amounts due under this
Section shall be payable upon demand. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender may, at its
97
option, terminate this Agreement and the other Financing Agreements, or Parent
or any Borrower may terminate this Agreement and the other Financing Agreements,
in each case, effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other party at least sixty (60) days prior
written notice; PROVIDED, THAT, this Agreement and all other Financing
Agreements must be terminated simultaneously. In addition, Borrowers may
terminate this Agreement at any time upon ten (10) days prior written notice to
Lender (which notice shall be irrevocable) and Lender may, at its option,
terminate this Agreement at any time on or after the occurrence and during the
continuance of an Event of Default; PROVIDED, THAT, in each case, this Agreement
and all other Financing Agreements must be terminated simultaneously. Upon the
Renewal Date or any other effective date of termination of the Financing
Agreements, Borrowers shall pay to Lender all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender (or at Lender's option, a letter of
credit issued for the account of Borrowers and at Borrowers' expense, in form
and substance satisfactory to Lender, by an issuer acceptable to Lender and
payable to Lender as beneficiary) in such amounts as Lender determines are
reasonably necessary to secure Lender from loss, cost, damage or expense,
including reasonable attorneys' fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. The amount of such cash collateral (or letter of credit,
as Lender 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
Lender Payment Account or such other bank account of Lender, as Lender may, in
its discretion, designate in writing to Parent for such purpose. Interest shall
be due until and including the next Business Day, if the amounts so paid by
Borrowers to the Lender Payment Account or other bank account designated by
Lender are received in such bank account later than 12:00 noon, Miami, Florida
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations (other than such indemnification
obligations for which no demand has been made) have been fully and finally
discharged and paid, and Lender's continuing security interest in the Collateral
and the rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid. Accordingly, each Borrower and
Guarantor waives any rights it may have under the UCC to demand the filing of
termination statements with respect to the Collateral and Lender shall not be
required to send such termination statements to Borrowers or Guarantors, or to
file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to the
second anniversary of the date of this Agreement, in view of the impracticality
and extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation
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of Lender's lost profits as a result thereof, Borrowers agree to pay to Lender,
upon the effective date of such termination, an early termination fee in the
amount equal to:
Amount Period
------ ------
(i) 1/2% of Maximum Credit From the date hereof to and including the
second anniversary of the date hereof
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers and
Guarantors agree that it is reasonable under the circumstances currently
existing. In addition, Lender shall be entitled to such early termination fee
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h) hereof, even if Lender does not exercise the right to terminate this
Agreement, but elects, at its option, to provide financing to any Borrower or
permit the use of cash collateral under the United States Bankruptcy Code. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations.
12.2 INTERPRETATIVE PROVISIONS.
(a) All terms used herein which are defined in Article 1, Article 8
or Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to any Borrower, Guarantor and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Lender, if such Event of Default is capable of
being cured as determined by Lender.
(g) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrowers and Guarantors shall have the burden of proving any lack of
good faith on the part of Lender alleged by any Borrower or Guarantor at any
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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 Parent most recently received
by Lender 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 Lender, Borrowers and
Guarantors, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.3 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, two (2) Business Days 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 any Borrower or Guarantor: c/o Little Switzerland, Inc.
100
161-B Crown Bay
St. Xxxxxx, Virgin Islands 00802
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
If to Lender: Congress Financial Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Portfolio Manager
- Little Switzerland
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
12.4 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 CONFIDENTIALITY.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrowers or Guarantor 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 Lender is a party relating to this
Agreement, (iv) to any Affiliate of Lender or to any Participant (or prospective
Participant) so long as such Participant (or prospective Participant) shall have
been instructed to treat such information as confidential in accordance with
this Section 12.5, or (v) to counsel for Lender or any Participant (or
prospective Participants so long as clause (iv) of this Section is satisfied as
to such Participant or prospective Participant).
(b) In the event that Lender receives a request or demand to disclose
any confidential information pursuant to any subpoena or court order, Lender
agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, statute, rule or regulation to the extent Lender determines in
good faith that it will not create any risk of liability to Lender, that
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Lender will promptly notify Parent of such request so that Parent or 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 Lender's reasonable expenses, cooperate
with Borrowers in the reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of the
disclosed information which Parent so designates, to the extent permitted by
applicable law or if permitted by applicable law, to the extent Lender
determines in good faith that it will not create any risk of liability to
Lender.
(c) In no event shall this Section 12.5 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers,
Guarantor or any third party, (ii) to apply to or restrict disclosure of
information that was or becomes available to Lender from a person other than
Borrowers or Guarantor, (iii) require Lender to return any materials furnished
by Borrowers or Guarantors to Lender or (iv) prevent Lender from responding to
routine informational requests in accordance with the CODE OF ETHICS FOR THE
EXCHANGE OF CREDIT INFORMATION promulgated by The Xxxxxx Xxxxxx Associates or
other applicable industry standards relating to the exchange of credit
information. The obligations of Lender under this Section 12.5 shall supersede
and replace the obligations of Lender under any confidentiality letter signed
prior to the date hereof.
12.6 SUCCESSORS. (a) This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and Guarantors and their
respective successors and assigns, except that Borrowers may not assign their
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Any such purported assignment without such express prior written consent
shall be void. Lender may assign, or sell participations in, all or any part of
the Loans, the Letter of Credit Accommodations or any other interest herein to
another financial institution or other person, in which event, the Participant
shall have, to the extent of such participation, the same rights and benefits as
it would have if it were the Lender hereunder, except as otherwise provided by
the terms of such participation.
(b) Lender may, at any time assign to one or more Eligible
Transferees, all of its rights and obligations under this Agreement and the
other Financing Agreements, pursuant to an assignment agreement, in form and
substance satisfactory to Lender, executed by such Eligible Transferee and
Lender. Notwithstanding anything to the contrary contained herein, Lender may
assign all of its rights and obligations under this Agreement and the other
Financing Agreements to any person (i) in connection with the merger,
consolidation, sale, transfer or other disposition of all or any substantial
portion of its business, loan portfolio or other assets to such person or (ii)
at any time a Default or Event of Default shall exist or have occurred and be
continuing or (iii) with the consent of Parent which shall not be unreasonably
withheld, delayed or conditioned.
(c) This Agreement is registered as to both principal and stated
interest with respect to the Loans made to LS Holding, and notwithstanding any
other provision hereof, transfer of the right to the principal of and stated
interest thereon may be effected only by an assignment by
102
Lender of its interest therein pursuant to the terms of this Agreement. LS
Holding acknowledges that it has received from Lender a completed Form W-8BEN,
and that Lender is not a 10% shareholder of LS Holding, as defined in Section
871(h) of the Code. For purposes of this Section of the Loan Agreement, the term
"Code" means the Internal Revenue Code of the United States Virgin Islands, 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.
12.7 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.
12.8 COUNTERPARTS, ETC. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
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IN WITNESS WHEREOF, Lender, Borrowers and Guarantors have caused these
presents to be duly executed as of the day and year first above written.
LENDER BORROWERS
------ ---------
CONGRESS FINANCIAL CORPORATION L.S. HOLDING, INC.
(FLORIDA)
By: By:
------------------------------- --------------------------------
Title: Title:
---------------------------- -----------------------------
L.S. HOLDING (FLORIDA), INC.
By:
--------------------------------
Title:
-----------------------------
L.S. WHOLESALE, INC.
By:
--------------------------------
Title:
-----------------------------
GUARANTOR
---------
LITTLE SWITZERLAND, INC.
By:
-------------------------------
Title:
----------------------------
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