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REVOLVING CREDIT AGREEMENT
dated as of October 2, 1996
among
DISCOVERY ZONE, INC.
as DEBTOR-IN-POSSESSION,
AS BORROWER,
PERRY PARTNERS L.P.
AS LENDER,
and
THE GUARANTORS SIGNATORY HERETO,
each as DEBTOR-IN-POSSESSION,
AS GUARANTORS
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$25,000,000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS; CONSTRUCTION . . . . . . . . . . . . . . . . 1
1.01. Certain Definitions . . . . . . . . . . . . . . . . 1
1.02. Construction . . . . . . . . . . . . . . . . . . . 13
1.03. Accounting Principles . . . . . . . . . . . . . . . 13
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . 14
2.01. Revolving Credit Loans . . . . . . . . . . . . . . 14
(a) The Commitment . . . . . . . . . . . . . . 14
(b) Revolving Credit . . . . . . . . . . . . . 14
2.02. Note . . . . . . . . . . . . . . . . . . . . . . . 14
2.03. Making of Loans . . . . . . . . . . . . . . . . . . 15
2.04. Mandatory Prepayment; Optional Prepayment . . . . . 15
(a) Mandatory Prepayment . . . . . . . . . . . 15
(b) Optional Prepayment . . . . . . . . . . . . 16
2.05. Interest Rate . . . . . . . . . . . . . . . . . . . 16
2.06. Interest Payment Dates . . . . . . . . . . . . . . 16
2.07. Amortization . . . . . . . . . . . . . . . . . . . 17
2.08. Payments . . . . . . . . . . . . . . . . . . . . . 17
(a) Time, Place and Manner . . . . . . . . . . 17
(b) Facility Fee . . . . . . . . . . . . . . . 17
(c) Letter of Credit Fees . . . . . . . . . . . 18
(d) Administration Fee . . . . . . . . . . . . 18
(e) Anniversary Fee . . . . . . . . . . . . . . 18
(f) Audit and Collateral Monitoring Fees . . . 18
(g) Fees . . . . . . . . . . . . . . . . . . . 18
2.09. Use of Proceeds . . . . . . . . . . . . . . . . . . 18
2.10. Increased Costs and Reduced Return . . . . . . . . 19
ARTICLE III LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . 20
3.01. Letters of Credit . . . . . . . . . . . . . . . . . 20
(a) General . . . . . . . . . . . . . . . . . . 20
(b) Request for Issuance . . . . . . . . . . . 23
ARTICLE IV SECURITY; ADMINISTRATIVE PRIORITY . . . . . . . . . . . . 24
4.01. Grant of Lien and Security Interest . . . . . . . . 24
4.02. Administrative Priority . . . . . . . . . . . . . . 24
4.03. Grants, Rights and Remedies Cumulative . . . . . . 25
4.04. No Filings Required . . . . . . . . . . . . . . . . 25
4.05. Survival . . . . . . . . . . . . . . . . . . . . . 25
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ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 26
5.01. Organization and Qualification . . . . . . . . . . 26
5.02. Authority and Authorization . . . . . . . . . . . . 26
5.03. Execution and Binding Effect . . . . . . . . . . . 27
5.04. Authorizations and Filings . . . . . . . . . . . . 27
5.05. Absence of Conflicts . . . . . . . . . . . . . . . 27
5.06. Financial Statements . . . . . . . . . . . . . . . 27
(a) Historical Statements . . . . . . . . . . . 27
(b) Projections . . . . . . . . . . . . . . . . 28
5.07. No Event of Default . . . . . . . . . . . . . . . . 28
5.08. Litigation . . . . . . . . . . . . . . . . . . . . 28
5.09. ERISA . . . . . . . . . . . . . . . . . . . . . . . 28
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . 29
5.11. Financial Accounting Practices, etc. . . . . . . . 29
5.12. Power To Carry On Business . . . . . . . . . . . . 29
5.13. No Material Adverse Change . . . . . . . . . . . . 29
5.14. Existing Liens; Capitalized Leases . . . . . . . . 29
5.15. Compliance with Laws . . . . . . . . . . . . . . . 30
5.16. Subsidiaries . . . . . . . . . . . . . . . . . . . 30
5.17. Accurate and Complete Disclosure . . . . . . . . . 30
5.18. Insurance . . . . . . . . . . . . . . . . . . . . . 30
5.19. Environmental Matters . . . . . . . . . . . . . . . 30
5.20. Administrative Priority; Lien Priority . . . . . . 31
5.21. Bankruptcy Court Order . . . . . . . . . . . . . . 31
5.22. Real Property . . . . . . . . . . . . . . . . . . . 31
5.23. Location of Bank Accounts . . . . . . . . . . . . . 32
5.24. Use of Proceeds . . . . . . . . . . . . . . . . . . 32
5.25. Intellectual Property . . . . . . . . . . . . . . . 32
5.26. Franchises . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI CONDITIONS OF CREDIT EXTENSIONS . . . . . . . . . . . . . 33
6.01. Conditions Precedent to Initial Credit Extension . 33
6.02. Conditions Precedent to Each Credit Extension . . . 34
ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 36
7.01. Reporting and Information Requirements . . . . . . 36
(a) Annual Reports . . . . . . . . . . . . . . 36
(b) Quarterly Reports . . . . . . . . . . . . . 37
(c) Monthly Reports . . . . . . . . . . . . . . 37
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(d) Certain Reports . . . . . . . . . . . . . . 38
(e) Pleadings, Etc. . . . . . . . . . . . . . . 38
(f) Reports to Committees . . . . . . . . . . . 38
(g) Other Reports and Information . . . . . . . 38
(h) Further Information . . . . . . . . . . . . 38
(i) Projections . . . . . . . . . . . . . . . . 38
(j) Notice of Event of Default . . . . . . . . 39
(k) Notice of Material Adverse Change . . . . . 39
(l) Visitation and Verification . . . . . . . . 39
7.02. Preservation of Existence and Franchises . . . . . 39
7.03. Insurance . . . . . . . . . . . . . . . . . . . . . 39
7.04. Maintenance of Properties . . . . . . . . . . . . . 39
7.05. Financial Accounting Practices, etc . . . . . . . . 40
7.06. Compliance with Laws . . . . . . . . . . . . . . . 40
7.07. Further Assurances . . . . . . . . . . . . . . . . 40
7.08. Cash Management System . . . . . . . . . . . . . . 40
7.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII NEGATIVE COVENANTS
8.01. Final Bankruptcy Court Order: Administrative
Priority; Lien Priority; Payment of Claims . . . . 42
8.02. Liens . . . . . . . . . . . . . . . . . . . . . . . 42
8.03. Indebtedness . . . . . . . . . . . . . . . . . . . 44
8.04. Guarantees and Contingent Liabilities . . . . . . . 44
8.05. Loans, Advances and Investments . . . . . . . . . . 45
8.06. Dividends and Related Distributions . . . . . . . . 45
8.07. Merger, etc . . . . . . . . . . . . . . . . . . . . 45
8.08. Dispositions of Assets . . . . . . . . . . . . . . 46
8.09. Affiliates . . . . . . . . . . . . . . . . . . . . 46
8.10. Continuation of or Change In Business . . . . . . . 46
8.11. Payments . . . . . . . . . . . . . . . . . . . . . 47
8.12. Capital Expenditures . . . . . . . . . . . . . . . 47
8.13. Lease Obligations . . . . . . . . . . . . . . . . . 47
8.14. EBITDAR . . . . . . . . . . . . . . . . . . . . . . 47
8.15. Gross Revenue . . . . . . . . . . . . . . . . . . . 48
8.16. Fiscal Year . . . . . . . . . . . . . . . . . . . . 49
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ARTICLE IX DEFAULTS
9.01. Events of Default . . . . . . . . . . . . . . . . . 49
9.02. Consequences of an Event of Default . . . . . . . . 51
9.03. Certain Remedies . . . . . . . . . . . . . . . . . 52
ARTICLE X MISCELLANEOUS
10.01. Holidays . . . . . . . . . . . . . . . . . . . . . 52
10.02. Records . . . . . . . . . . . . . . . . . . . . . 52
10.03. Amendments and Waivers . . . . . . . . . . . . . . 52
10.04. No Implied Waiver; Cumulative Remedies . . . . . . 52
10.05. Notices . . . . . . . . . . . . . . . . . . . . . 53
10.06. Expenses; Taxes; Attorneys' Fees;
Indemnification . . . . . . . . . . . . . . . . . 54
10.07. Application . . . . . . . . . . . . . . . . . . . 55
10.08. Severability . . . . . . . . . . . . . . . . . . . 55
10.09. Governing Law . . . . . . . . . . . . . . . . . . 55
10.10. Prior Understandings . . . . . . . . . . . . . . . 56
10.11. Duration; Survival . . . . . . . . . . . . . . . . 56
10.12. Counterparts . . . . . . . . . . . . . . . . . . . 56
10.13. Successors and Assigns; Participations . . . . . . 56
10.14. The Lender as Party in Interest . . . . . . . . . 56
10.15. Confidentiality . . . . . . . . . . . . . . . . . 57
10.16. Releases of Collateral . . . . . . . . . . . . . . 58
10.17. Waiver of Jury Trial . . . . . . . . . . . . . . . 58
ARTICLE XI GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.01. Guaranty . . . . . . . . . . . . . . . . . . . . . 59
11.02. Waiver . . . . . . . . . . . . . . . . . . . . . . 59
11.03. Subordination . . . . . . . . . . . . . . . . . . 61
11.04. Covenants . . . . . . . . . . . . . . . . . . . . 61
11.05. Costs of Collection . . . . . . . . . . . . . . . 61
11.06. Claims . . . . . . . . . . . . . . . . . . . . . . 61
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Pledge and Security Agreement
Exhibit E - Form of Security Agreement
Exhibit F - Form of Bankruptcy Court Order
Exhibit G-1 - Form of Opinion of General Counsel
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Exhibit G-2 - Form of Opinion of Shearman & Sterling
Exhibit H - Form of Depositary Bank Notice Letter
Exhibit I - Form of Release Certificate
Exhibit J - Form of Cash Concentration Account Agreement
Schedule 5.01 - Jurisdiction of Qualification
Schedule 5.08 - Litigation
Schedule 5.16 - Subsidiaries
Schedule 5.18 - Insurance
Schedule 5.22 - Real Property
Schedule 5.23 - Bank Accounts
Schedule 5.25 - Licenses
Schedule 5.26 - Franchise Agreements
Schedule 8.02 - Liens
Schedule 8.03 - Indebtedness
Schedule 8.04 - Guarantees
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REVOLVING CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made as of October 2,1996, among
DISCOVERY ZONE, INC., a Delaware Corporation, as debtor and
debtor-in-possession (the "Borrower"), the Guarantors signatory hereto, each as
debtor and debtor-in-possession (each a "Guarantor" and collectively the
"Guarantors"), and PERRY PARTNERS L.P. (the "Lender").
BACKGROUND
The Borrower and the Guarantors filed voluntary petitions for
relief under chapter 11 of title 11 of the United States Code on March 25,
1996. The Borrower and the Guarantors have requested the Lender to provide the
Borrower with a $25,000,000 revolving credit facility, including a $7,000,000
subfacility for the issuance of letters of credit, and, subject to the terms
and conditions set forth herein, the Lender has agreed to provide such facility.
In consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and
terms defined elsewhere in this Agreement, as used herein the following words
and terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"Accounts Receivable" shall mean all rights of an Obligor to
payment for goods sold or services rendered, including accounts, contract
rights, general intangibles and any and all such rights evidenced by chattel
paper, instruments or documents, whether due or to become due and whether or
not earned by performance, and whether now or hereafter acquired or arising in
the future, and any proceeds arising therefrom or relating thereto.
"Affiliate" of a Person shall mean any Person which directly
or indirectly controls, or is controlled by, or is under common control with,
such Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
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"Agreed Administrative Expense Priorities" shall mean that
administrative expenses with respect to the Obligors and, with respect to
clause (ii) of clause first, any official committee appointed by the Bankruptcy
Court, shall have the following order of priority:
first, (i) amounts payable pursuant to 28 U.S.C. Section
1930(a)(6), (ii) allowed fees and expenses of professionals retained
in the Chapter 11 Cases pursuant to Section Section 327 and 1103 of
the Bankruptcy Code, (iii) sales taxes collected by the Obligors that
constitute trust funds under Section 111.016 of the Texas Tax Code,
and (iv) allowed expenses of members of the Official Committee of
Unsecured Creditors appointed in the Chapter 11 Cases; provided,
however, that the amount entitled to priority under subclauses (i),
(ii) and (iv) of this clause first ("Priority Expenses") shall not
exceed $1,500,000 outstanding in the aggregate at any time (inclusive
of any holdbacks required by the Bankruptcy Court) (the "Priority
Expense Cap"); provided, however, that after the occurrence and during
the continuance of an Event of Default any payments actually made to
professionals under Section Section 330 and 331 of the Bankruptcy
Code shall reduce the Priority Expense Cap;
second, all Obligations; and
third, all other allowed administrative expenses.
"Agreement" shall mean this Revolving Credit Agreement as
amended, modified, supplemented or restated from time to time.
"Avoidance Action Proceeds" shall mean recoveries received by
any of the Obligors from claims arising under Sections 544, 545, 547, 548, 549,
550 or 553 of the Bankruptcy Code.
"Bank" shall mean Citibank, N.A., its successors or any other
bank designated by the Lender to the Borrower from time to time that is
reasonably acceptable to the Borrower.
"Bankruptcy Code" shall mean Xxxxx 00, Xxxxxx Xxxxxx Code, 11
U.S.C. Section Section 101 et seq., as amended.
"Bankruptcy Court" shall mean the United States Bankruptcy
Court for the District of Delaware or such other court having original
jurisdiction over the Chapter 11 Cases.
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"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which
any Obligor, or any ERISA Affiliate is or within the immediately preceding six
(6) years was an "employer" as defined in Section 3(5) of ERISA.
"Borrower" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Borrower's Account" shall have the meaning given that term in
Section 2.08(a) hereof.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions are authorized or obligated
to close in New York, New York.
"Capital Expenditures" shall mean, for any period on a
consolidated basis for the Obligors the sum, without duplication, of (i) the
aggregate amount of all expenditures, except interest capitalized during
construction, during such period which, in accordance with GAAP, are required
to be included in property, plant or equipment or similar fixed asset account
plus (ii) the entire principal amount of any debt obligations (including
obligations under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, to the extent required to be so recorded) assumed
in connection with any such expenditures.
"Capital Guideline" means any law rule, regulation, policy,
guideline or directive (whether or not having the force of law and whether or
not the failure to comply therewith would be unlawful), (i) regarding capital
adequacy, capital ratios, capital requirements, the calculation of a bank's
capital or similar matters, or (ii) affecting the amount of capital required to
be obtained or maintained by the Letter of Credit Issuer or the manner in which
the Letter of Credit Issuer allocates capital to any of its contingent
liabilities (including letter of credit), advances, acceptances, commitments,
assets or liabilities.
"Capitalized Lease" shall mean at any time any lease which is
required under GAAP to be capitalized on the balance sheet of the lessee at
such time, and "Capitalized Lease Obligation" of any Person at any time shall
mean the aggregate amount which is required under GAAP to be reported as a
liability on the balance sheet of such Person at such time as lessee under a
Capitalized Lease.
"Carve-Out Expenses" shall mean those amounts, fees, expenses
and claims set forth in clause "first" of the definition of the term "Agreed
Administrative Expense Priorities."
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"Cash Collateral Account" shall mean the deposit account
maintained at the Bank, or such other bank as the Lender may select, which
deposit account shall be under the sole dominion and control of the Lender.
"Cash Concentration Account" shall mean the deposit account,
maintained by the Borrower at the Cash Concentration Account Bank and listed on
Schedule 5.23 hereto, which deposit account shall be under the sole dominion
and control of the Lender.
"Cash Concentration Account Agreement" shall mean the
agreement, substantially in the form of Exhibit J hereto, among the Lender, the
Borrower and the Cash Concentration Account Bank.
"Cash Concentration Account Bank" shall mean Xxxxxx Bank or
such other bank as the Borrower may select with the written approval of the
Lender.
"Chapter 11 Cases" shall mean each of the Obligors'
reorganization cases under chapter 11 of the Bankruptcy Code, pending in the
Bankruptcy Court.
"Closing Date" shall mean the first date on which each of the
conditions set forth in Section 6.01 shall have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of the Code shall be construed also to refer to any successor sections.
"Collateral" shall have the meaning given that term in Section
4.01 hereof.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance or hazardous waste, including any such substance regulated
under any Environmental Law.
"Credit Extension" shall mean (a) the making of any Loan by
the Lender or (b) the issuance, or extension of the expiration date of, any
Letter of Credit which the Lender assists the Borrower in opening or
establishing.
"Cumulative EBITDAR" shall mean, for any fiscal quarter of the
Obligors after July 1, 1996, the aggregate EBITDAR for the period beginning on
such date and ending at the end of such fiscal quarter.
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"Cumulative Gross Revenue" shall mean, for any fiscal quarter
of the Obligors after July 1, 1996, the aggregate Gross Revenue for the period
beginning on such date and ending at the end of such fiscal quarter.
"Current Commitment" shall have the meaning assigned to that
term in Section 2.01 hereof
"Depository Accounts" shall mean the lock-box or blocked
depository accounts maintained by the Borrower for the collection of the cash
of the Borrower.
"Depository Bank" shall mean each financial institution at
which a Depository Account is maintained.
"Designated Borrowing Officer" shall mean Xxxx Xxxxxxx, chief
financial officer, any successor chief financial officer of the Borrower or
Xxxxx Xxxxx, chief executive officer, or any successor chief executive officer.
"Designated Financial Officer" of a Person shall mean the
individual designated from time to time by the Board of Directors or governing
body performing like functions of such Person to be the chief financial officer
or Treasurer of such Person (and individuals designated from time to time by
the Board of Directors or governing body performing like functions of such
Person to act in lieu of the chief financial officer or the Treasurer).
"Disbursement Account" shall mean the deposit account in the
name of the Borrower maintained at a bank in the United States designated by
the Borrower to the Lender from time to time into which there shall be
deposited proceeds of Loans and funds disbursed to the Borrower by the Lender.
"Dollar", "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
"EBITDAR" shall mean, for any period, the consolidated net
income (or net loss) of the Obligors for such period as determined in
accordance with GAAP, plus (i) the sum of, without duplication, the following
for the Obligors, (A) depreciation expense, (B) amortization expense net of
negative goodwill amortization, (C) the excess, if any, of gross interest
expense for such period over gross interest income for such period, in each
case determined in accordance with GAAP, (D) total income tax expense, (E)
restructuring expenses and (F) non-cash losses (provided that any such losses
do not at any time result in a cash outlay by any Obligor), which include the
cumulative effect on earnings from the adoption of GAAP pronouncements, less
(ii) extraordinary gains for the Obligors.
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"Entry Date" shall mean the date the Interim Bankruptcy Court
Order or, if no Interim Bankruptcy Court Order is obtained, the Final
Bankruptcy Court Order is entered.
"Environmental Law" means all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to
the regulation and protection of human health, safety, the environment and
natural resources. Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Material
Transportation Act, as amended (49 U.S.C. Section 180 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (42 U.S.C. Section 7401
et seq.); the Clean Air Act, as amended (42 U.S.C. Section 740 et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); and their state and local counterparts or equivalents.
"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, monetary obligations, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, expert
and consulting and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand
by any other Person, and which relate to any environmental condition or a
Release.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default
described in Section 9.01 hereof.
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"Existing Credit Agreement" shall mean the Credit Agreement
dated as of April 30, 1996, as amended, by and among the Borrower, the
Guarantors and the Existing Lender.
"Existing Lender" shall mean Xxxxxxxx, LLC.
"Existing Loan Documents" shall mean the Existing Credit
Agreement and the Related Documents (as defined in the Existing Credit
Agreement).
"Filing Date" shall mean March 25, 1996.
"Final Bankruptcy Court Order" shall mean the order of the
Bankruptcy Court finally approving the Credit Extensions made and to be made to
the Borrower in accordance with this Agreement in form and substance
satisfactory to the Lender, as the same may be amended, modified or
supplemented from time to time with the express written joinder or consent of
the Lender and the Borrower.
"GAAP" shall mean generally accepted accounting principles as
such principles shall be in effect in the United States at the Relevant Date.
"Governmental Authority" shall mean any nation or government,
any federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Revenue" shall mean, for any period, the revenue
received by the Obligors, including Accounts Receivable, from the operation of
their businesses for such period, as determined in accordance with GAAP.
"Guarantee" of or by any Person shall mean any obligation of
such Person guaranteeing any Indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
or to purchase (or to advance or supply funds for the purchase of) any security
for the payment of such Indebtedness, (ii) to purchase property, securities, or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
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"Guarantors" shall have the meaning given that term in the
introductory paragraph this Agreement and shall include any other Person which
from time to time guarantees all or any part of the Obligations.
"Indebtedness" shall mean as to any Person (i) indebtedness
for borrowed money; (ii) indebtedness for the deferred purchase price of
property or services (other than property including Inventory and services
purchased in the ordinary course of business); (iii) indebtedness evidenced by
bonds, debentures, notes or other similar instruments (other than performance,
surety and appeal or other similar bonds arising in the ordinary course of
business); (iv) obligations and liabilities secured by a Lien, claim or
encumbrance, upon property owned by such Person, whether or not owing by such
Person and even though such Person has not assumed or become liable for the
payment thereof; (v) obligations and liabilities directly or indirectly
Guaranteed by such Person; and (vi) obligations or liabilities created or
arising under any conditional sales contract or other title retention agreement
with respect to property used and/or acquired by such Person, even though the
rights and remedies of the lessor, seller and/or lender thereunder are limited
to repossession of such property.
"Indemnified Parties" shall have the meaning given that term
in Section 10.06 hereof.
"Interim Bankruptcy Court Order" shall mean the order of the
Bankruptcy Court, if any, approving the Credit Extensions in accordance with
this Agreement on an interim basis, as the same may be amended, modified or
supplemented from time to time with the express written joinder or consent of
the Lender and the Borrower.
"Inventory" means all goods and merchandise of the Borrower
including, but not limited to, all materials and supplies of every nature used
or usable in connection with the shipping, storing, advertising or sale of such
goods and merchandise, whether now owned or hereafter acquired and all such
property the sale or other disposition of which would give rise to Accounts
Receivable.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Governmental Authority.
"Lender" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Lender Account" shall mean an account in the name of the
Lender designated to the Borrower from time to time into which the Borrower
shall make all payments to the Lender under this Agreement.
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"Letter of Credit Application" shall have the meaning given to
that term in Section 3.01 hereof.
"Letter of Credit" shall have the meaning given to that term
in Section 3.01.
"Letter of Credit Exposure" at any time shall mean the sum at
such time of (a) the aggregate amount of all Unreimbursed Draws under Letters
of Credit (whether or not such Letters of Credit are then outstanding) and (b)
the aggregate Undrawn Letter of Credit Availability under all outstanding
Letters of Credit.
"Letter of Credit Fees" shall mean all fees payable pursuant
to Section 2.08(c).
"Letter of Credit Guaranty" shall mean the guaranty delivered
by the Lender to the Letter of Credit Issuer of the Borrower's Reimbursement
Obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of a Letter of
Credit, which issuer shall be mutually acceptable to the Lender and the
Borrower.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loan or loans made by
the Lender to the Borrower under this Agreement.
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations or condition (financial or otherwise) of the
Obligors, taken as a whole, (ii) the ability of the Obligors, taken as a whole,
to perform their obligations hereunder or under the Note and any other Related
Document or (iii) the legality, validity or enforceability of this Agreement or
any Related Document, determined in the reasonable discretion of the Lender.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by the Borrower or any ERISA
Affiliate.
"Net Sale Proceeds" shall mean proceeds (including any notes
received as consideration and any other non-cash considerations) received by
the Obligors from the sale, lease, assignment or other disposition outside of
the ordinary course of business of any asset
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or property of any such Person, net of the costs and expenses of sale, lease,
assignment or other disposition, taxes paid or payable as a result thereof and
amounts applied to the repayment of Indebtedness secured by a Permitted Lien on
the asset or property disposed of.
"Note" shall mean the promissory note of the Borrower,
substantially in the form attached hereto as Exhibit A, executed and delivered
under this Agreement, as modified or restated from time to time, and any
promissory note or notes issued in exchange or replacement thereof, including
all extensions, renewals, refinancings or refundings thereof in whole or part.
"Notice of Borrowing" shall have the meaning given to that
term in Section 2.03.
"Obligations" shall mean all indebtedness, obligations and
liabilities of the Obligors to the Lender incurred under or related to this
Agreement, the Note or any other Related Document, whether such indebtedness,
obligations or liabilities are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment
or performance, now existing or hereafter arising, including without limitation
all indebtedness, obligations (including Reimbursement Obligations) and
liabilities of any nature whatsoever, including amounts due under Section 10.06
hereof and similar agreements contained in the other Related Documents, from
time to time arising under or in connection with or evidenced or secured by
this Agreement, the Note, the Letters of Credit or any other Related Document,
including but not limited to the principal amount of Loans outstanding,
together with interest thereon, the amount of the Letter of Credit Exposure,
together with interest thereon and all expenses, fees and indemnities hereunder
or under any other Related Document. Without limitation, such amounts include
all Loans and interest thereon and the amount of all Letter of Credit Exposure
whether or not such Loans were made or any Letters of Credit to which such
Letter of Credit Exposure relates were issued in compliance with the terms and
conditions hereof or in excess of the Lender's obligation to lend and arrange
for the issuance of Letters of Credit hereunder. If and to the extent any
amounts in any account (including the Lender Account, the Depository Account,
the Cash Concentration Account or the Cash Collateral Account or otherwise)
constituting Collateral are applied to Obligations hereunder, and the Lender is
subsequently obligated to return or repay any such amounts to any Person for
any reason, the amount so returned or repaid shall be deemed a Loan hereunder
and shall constitute an Obligation.
"Obligors" shall mean the Guarantors and the Borrower.
"Office" when used in connection with the Lender shall mean
its office located at 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Attention: Xxxx Xxxxx or at such other office or offices of the Lender as may
be designated in writing from time to time by
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the Lender to the Borrower and when used in connection with the Bank or the
Letter of Credit Issuer shall mean the office of such entity designated in
writing from time to time by the Lender to the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Permitted Disposition" shall have the meaning given that term
in Section 10.16 hereof.
"Permitted Indebtedness" shall have the meaning given that
term in Section 8.03 hereof.
"Permitted Liens" shall have the meaning given that term in
Section 8.02 hereof.
"Person" shall mean an individual, corporation, partnership,
limited liability company, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions),
Governmental Authority or agency, or any other entity.
"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge and Security
Agreement, dated as of the date hereof, made by the Obligors, in favor of the
Lender, in the form of Exhibit D hereto, as modified, amended or supplemented
from time to time.
"Potential Default" shall mean any event or condition which
with notice or passage of time, or any combination of the foregoing, would
constitute an Event of Default.
"Prime Rate" shall have the meaning given that term in Section
2.05 hereof.
"Priority Expenses" shall mean those expenses entitled to a
priority as set forth in the clause "first" of the definition of the term
"Agreed Administrative Expense Priorities".
"Projections" shall have the meaning given that term in
Section 5.06(b) hereof.
"Regular Rate" shall have the meaning given that term in
Section 2.05 hereof.
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"Reimbursement Obligation" shall mean the obligation of the
Borrower to reimburse the Lender for amounts payable by the Lender under a
Letter of Credit Guaranty in respect of any drawings made under any Letter of
Credit issued by the Letter of Credit Issuer, together with interest thereon.
"Related Documents" or "Loan Documents" means this Agreement,
the Note, the Security Agreement, the Pledge Agreement, the Letters of Credit,
each Letter of Credit Application, the Interim Bankruptcy Court Order, the
Final Bankruptcy Court Order, the other documents, instruments and agreements
referred to in Section 6.01 hereof, and all other instruments, agreements and
documents now existing or hereafter entered into or in effect by the Borrower
or any other Person from time to time creating, evidencing, directly or
indirectly guaranteeing, or granting the Lender a Lien to secure, any
obligations under or in connection with this Agreement, the Note, the Security
Agreement, the Pledge Agreement, the Letters of Credit, each Letter of Credit
Application, the Interim Bankruptcy Order, the Final Bankruptcy Court Order, or
any other Related Document, and all other instruments, agreements and documents
from time to time delivered in connection with or otherwise relating to any
Related Document.
"Release" means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration by such Person of a Contaminant into the indoor or
outdoor environment or into or out of any property owned by such Person or any
of its Subsidiaries, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or property.
"Release Certificate" shall have the meaning given that term
in Section 10.16 hereof.
"Relevant Date" shall mean the time a relevant computation or
determination is to be made or the date of relevant financial statements.
"Remedial Action" means all actions required by a Governmental
Authority to (i) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (ii) prevent a Release or
condition that is reasonably likely to result in a Release or minimize further
release of Contaminants so they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or
(iii) perform preremedial studies and investigations and post-remedial
monitoring and care, unless such action shall have been stayed or enjoined by a
court of competent jurisdiction.
"Reportable Event" shall mean any of the events described in
Sections 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
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"Revolving Credit Commitment" shall mean the commitment of the
Lender to make Loans to the Borrower pursuant to Section 2.01(a) hereof (i)
during the period when the Interim Bankruptcy Court Order is in effect, in an
aggregate principal amount not to exceed $20,000,000, and (ii) during the
period when the Final Bankruptcy Court Order is in effect in an aggregate
principal amount not to exceed $25,000,000, as such amount may be permanently
reduced pursuant to the terms of this Agreement.
"Security Agreement" shall mean the Security Agreement
executed and delivered by the Obligors to the Lender substantially in the form
attached hereto as Exhibit E, as modified, amended or supplemented from time to
time.
"Stated Amount" of a Letter of Credit shall mean the face
amount thereof, drawn or undrawn, regardless of the existence or satisfaction
of any conditions or limitations on drawing.
"Subsidiary" means, with respect to any Person, any
corporation, limited or general partnership, trust, association or other
business entity of which an aggregate of 50% or more of the outstanding stock
or other interests entitled to vote in the election of the board of directors
of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned or controlled by such
Person and/or one or more Subsidiaries of such Person.
"Termination Date" shall have the meaning given that term in
Section 2.01(a) hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which the Borrower or any
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan; or (v) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Undrawn Letter of Credit Availability" with respect to a
Letter of Credit at any time shall mean the maximum amount available to be
drawn under such Letter of Credit at such time, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
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"Unreimbursed Draws" with respect to a Letter of Credit at any
time shall mean the aggregate amount at such time of all payments made by a
Letter of Credit Issuer or payments made by the Lender under a Letter of Credit
Guaranty in respect of such payments under such Letter of Credit, to the extent
not repaid by the Borrower.
1.02. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Lender include good faith estimates by the Lender (in
the case of quantitative determinations) and good faith beliefs by the Lender
(in the case of qualitative determinations). The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The section and
other headings contained in this Agreement and the Table of Contents preceding
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any
respect. Section, subsection and exhibit references are to this Agreement
unless otherwise specified.
1.03. Accounting Principles. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP.
ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans.
(a) The Commitment. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth and
subject to the Interim Bankruptcy Court Order or the Final Bankruptcy Court
Order, as the case may be, the Lender agrees to make loans to the Borrower at
any time and from time to time on or after the date hereof and to, but not
including, the Termination Date (as defined below), in an aggregate principal
amount not exceeding at any one time outstanding the Lender's Current
Commitment at such time. The Lender's "Current Commitment" at any time shall
be equal to the Revolving Credit Commitment, as such amount may have been
reduced under Section 2.04(a) hereof at such time. The Lender shall have no
obligation to make Loans hereunder or arrange for the issuance of Letters of
Credit on or after the Termination Date or which, when added to the aggregate
amount of all outstanding and contemporaneous Loans and the Letter of Credit
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Exposure at such time, would cause the amount of all Loans and the Letter of
Credit Exposure at any time to exceed the Current Commitment at such time. The
"Termination Date" means the date on which the Revolving Credit Commitment
expires, which shall be the earliest of (i) the date of the substantial
consummation (as defined in Section 1101(2) of the Bankruptcy Code) of a plan
of reorganization in the Obligors' Chapter 11 Cases that has been confirmed by
an order of the Bankruptcy Court, (ii) October 28, 1996, if the Final
Bankruptcy Court Order shall not have been entered on or before such date, and
(iii) May 2, 1998.
(b) Revolving Credit. Within the limits of time and
amount set forth in this Section 2.01, and subject to the provisions of this
Agreement, the Borrower may borrow, repay and reborrow hereunder.
2.02. Note. The obligation of the Borrower to repay the
unpaid principal amount of the Loans made to it by the Lender and to pay
interest thereon shall be evidenced in part by the Note dated the date of the
Entry Date with the blanks appropriately filled in. The executed Note shall be
delivered by the Borrower to the Lender on the Entry Date.
2.03. Making of Loans.
(a) The Borrower shall be entitled to request a Loan not
more frequently than once per calendar week. Whenever the Borrower desires
that the Lender make a Loan, the Borrower shall provide written notice to the
Lender (i) not later than 12:00 noon (New York City time) on the Business Day
(which must be a Monday or, if any Monday is not a Business Day, the next
succeeding Business Day) immediately prior to the date of the proposed
borrowing, setting forth: (A) the principal amount of the proposed borrowing,
and (B) the proposed borrowing date, which must be a Business Day. Such notice
shall be given by a writing in substantially the form of Exhibit B hereto
containing the original or facsimile signature of a Designated Borrowing
Officer (a "Notice of Borrowing"). On the date specified in such notice, the
Lender shall, subject to the terms and conditions of this Agreement, make such
amount available to the Borrower on the date specified in such notice in funds
immediately available, by depositing such proceeds in the Disbursement Account.
(b) The Lender shall be entitled to rely conclusively on
the Designated Borrowing Officer's authority to request a Loan on behalf of the
Borrower until the Lender receives written notice to the contrary. The Lender
shall have no duty to verify the authenticity of the signature appearing on any
Notice of Borrowing.
(c) Any notice of borrowing pursuant to this Section 2.03
shall be irrevocable and the Borrower shall be bound to make a borrowing in
accordance therewith.
2.04. Mandatory Prepayment; Optional Prepayment.
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(a) Mandatory Prepayment. (i) Exceeding Current
Commitment. If at any time the Current Commitment is less than the aggregate
unpaid principal amount of the Loans then outstanding, plus the Letter of
Credit Exposure at such time, the Borrower shall immediately prepay the Loans
in an amount of not less than the amount of such difference or, if the Loans
then outstanding are less than the amount of such difference, provide cash
collateral to the Lender in an amount equal to 105% of such excess, which cash
collateral shall be deposited and held in the Cash Collateral Account until
such time as such excess no longer exists. The Borrower may reduce the
Revolving Credit Commitment by providing two Business Days' written notice to
the Lender of such reduction (which notice shall be irrevocable). The
Revolving Credit Commitment shall also be reduced by the aggregate amount of
any and all prepayments required by Section 2.04(a)(ii) hereof in excess of
$3,000,000. Reductions in the Revolving Credit Commitment shall be irrevocable
and may not be reinstated. Concurrently with any notice of reduction of the
Revolving Credit Commitment, the Borrower shall give notice to the Lender of
any mandatory prepayment which notice shall specify a prepayment date no later
than the effective date of such reduction of the Revolving Credit Commitment.
(ii) Disposition of Assets, etc. Without limiting any
other provision of this Agreement or any other Related Document permitting or
requiring prepayment of the Loans in whole or part, the Borrower shall prepay
the Loans in whole or part without premium or penalty, in an amount equal to
100% of the Net Sale Proceeds constituting cash received by any Obligor from
any sale, lease, transfer or other disposition of any asset outside of the
ordinary course of the business of the Obligors and the proceeds of any claim
made under any insurance policy covering any assets of the Obligors. Any
prepayment required under this clause (ii) shall be made on the first Business
Day after the consummation of such transfer, sale, disposition, settlement,
issuance or other event triggering a prepayment.
(iii) Failure to Obtain Final Bankruptcy Court Order.
Without limiting any other provision of this Agreement or any other Related
Document permitting or requiring prepayment of the Loans in whole or part, the
Borrower shall prepay the Loans in whole without premium or penalty on October
28, 1996, in the event the Final Bankruptcy Court Order shall not have been
entered on or before such date, and shall provide cash collateral to the Lender
in an amount equal to 105% of the stated amount of all outstanding Letters of
Credit to be held in the Cash Collateral Account.
(iv) Other Mandatory Prepayments. The Lender shall on
each Business Day, apply all funds deposited in the Lender Account to the
payment, in whole or in part, of the Obligations outstanding.
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(b) Optional Prepayment. The Borrower may without
penalty or premium at any time or from time to time prepay, in whole or in
part, any or all Loans then outstanding.
2.05. Interest Rate. Each Loan shall bear interest on the
principal amount thereof from time to time outstanding for each day until paid
at a rate per annum for each day equal to the Regular Rate for such day.
"Regular Rate" for any day shall mean the Prime Rate for such day plus 3.50%.
"Prime Rate", as used herein, shall mean the interest rate per annum publicly
announced from time to time by Chase Manhattan Bank in New York, New York or
its successors as its Prime Rate, such interest rate to change automatically
from time to time effective as of the announced effective date of each change
in the Prime Rate. The Prime Rate is not intended to be the lowest rate of
interest charged by Chase Manhattan Bank to its borrowers.
2.06. Interest Payment Dates. The Borrower shall pay
interest on the unpaid principal amount of each Loan from the date of such Loan
until such principal amount shall be paid in full, which interest shall be
payable monthly in arrears on the first Business Day of each month, commencing
October 1, 1996. After maturity of any principal amount of any Loan (by
acceleration, at scheduled maturity or otherwise), interest on such amount
shall be due and payable on demand.
2.07. Amortization. To the extent not due and payable
earlier pursuant to the terms of this Agreement, the entire unpaid principal
amount of each of the Loans shall be due and payable on the Termination Date.
2.08. Payments.
(a) Time, Place and Manner. Except as otherwise provided
in Section 2.04(b) hereof, all payments and prepayments to be made in respect
of principal, interest, commitment fee, facility fee or other amounts due from
the Borrower hereunder, under the Note or any other Related Document shall be
payable at or before 12:00 Noon, New York City time, on the day when due
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived. Such payments shall be made to the Lender at the
Lender Account in Dollars in funds immediately available at such office without
setoff, counterclaim or other deduction of any nature. The Lender shall
maintain a separate loan account (the "Borrower's Account") on its books in the
name of the Borrower in which the Borrower will be charged with Loans made by
the Lender to it hereunder and with any other Obligations. The Borrower hereby
authorizes the Lender to, and the Lender may, from time to time charge the
Borrower's Account with any interest, fees or expenses that are due and payable
under this Agreement or any Related Document. The Borrower confirms that any
charges which the Lender may so make to the Borrower's Account as herein
provided will be
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made as an accommodation to the Borrower and solely at the Lender's discretion
and shall constitute a Loan to the Borrower. The Borrower's Account will be
credited upon receipt of "good funds" in the Lender Account with all amounts
actually received by the Lender from the Borrower or others for the Borrower's
Account. The Lender shall use reasonable efforts to provide the Borrower with
copies or other evidence of all charges to the Borrower's Account promptly,
provided that the failure to provide such copies or such other evidence to the
Borrower shall not relieve the Borrower of any of its obligations under this
Agreement. It is expressly understood and agreed by the Borrower that the
Lender shall have no responsibility to inquire into the correctness of the
apportionment, allocation or disposition of any Loans made to the Borrower or
of any Loans, interest, fees, costs or expenses for which the Borrower is
obligated under this Agreement. Interest on all Loans and all fees that accrue
on a per annum basis shall be computed on the basis of the actual number of
days elapsed in the period during which interest or such fee accrues and a year
of 360 days. In computing interest on any Loan, the date of the making of such
Loan shall be included and the date of payment shall be excluded; provided,
however, that if a Loan is repaid on the same day in which it is made, one
day's interest shall be paid on such Loan.
(b) Facility Fee. The Borrower shall pay to the Lender,
a facility fee of $160,000, payable on the Closing Date.
(c) Letter of Credit Fees. The Borrower shall pay to the
Lender a fee for each Letter of Credit issued hereunder, such fee to be equal
to 2% per annum of the initial Stated Amount of such Letter of Credit. This
fee shall be payable in advance on or prior to the issuance of each such Letter
of Credit. The Borrower shall also pay the normal and customary letter of
credit fees and charges of the Letter of Credit Issuer for the administration,
issuance and processing of any Letters of Credit issued by such Letter of
Credit Issuer.
(d) Administration Fee. The Borrower shall pay to the
Lender an annual Administration Fee of $220,000 payable in quarterly arrears,
in four equal installments of $55,000, payable at the end of each fiscal
quarter of the Borrower, commencing with the fiscal quarter ended September 30,
1996, subject to the occurrence of the Entry Date.
(e) Anniversary Fee. The Borrower shall pay to the
Lender a fee payable on May 2, 1997, in an amount equal to 2% of the Revolving
Credit Commitment on such date.
(f) Audit and Collateral Monitoring Fees. The Borrower
acknowledges that the Lender may upon reasonable notice to the Borrower conduct
audits and/or field examinations of the Borrower and the Guarantors at any
reasonable time and from time to time in a manner so as to not unduly disrupt
the business of the Borrower or Guarantors, provided that such notice shall not
be required if an Event of Default has occurred and is continuing. The
Borrower agrees to pay, for the account of the Lender, $1,000 per day per
examiner plus
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the examiner's out-of-pocket costs and reasonable expenses incurred in
connection with all such visits, inspections, audits and examinations.
(g) Exit Fee. The Borrower shall pay to the Lender a
deferred facility fee of $300,000 (the "Exit Fee") with respect to the Loans
upon the earlier to occur of (i) the Termination Date and (ii) the date upon
which the Loans and all related Obligations are required to be, or actually
paid in full, whether by pre-payment or otherwise. The Exit Fee is in
consideration for the making of the Loans, and the Borrower agrees that the
Lender has earned the Exit Fee payable to the Lender upon the initial making of
the Loans. It is understood and agreed that the Borrower's Obligation with
respect to the Exit Fee is guaranteed by the Guarantors pursuant to the
Guarantees and are secured by the Collateral covered by the Related Documents.
(h) Fees. All fees required to be paid pursuant to any
Related Document shall be paid as required therein. All fees under this
Agreement or the other Related Documents are non-refundable under all
circumstances,
2.09. Use of Proceeds. The Borrower hereby covenants,
represents and warrants that the proceeds of the Loans made to them will be
used solely (i) to repay all amounts outstanding under the Existing Loan
Documents and (ii) to fund working capital in the ordinary course of the
Obligors' businesses and for other general corporate purposes of the Obligors
(including, without limitation, payments of fees and expenses to professionals
under Section Section 330 and 331 of the Bankruptcy Code and administrative
expenses of the kind specified in Section 503(b) of the Bankruptcy Code
incurred in the ordinary course of business of the Obligors). The Borrower may
disburse the proceeds as Loans to any Obligor; provided, however, that the
Borrower may not disburse the proceeds of any Loan to any Subsidiary or
Affiliate unless such Subsidiary or Affiliate is (i) a debtor and
debtor-in-possession in a Chapter 11 Case, and (ii) is a Guarantor under this
Agreement.
2.10. Increased Costs and Reduced Return.
(a) If the Letter of Credit Issuer shall have determined
that the adoption or implementation of, or any change in, any law, rule, treaty
or regulation, or any policy, guideline or directive of, or any change in the
interpretation or administration thereof by, any court, central bank or other
administrative or Governmental Authority, or compliance by the Letter of Credit
Issuer or any Person controlling the Letter of Credit Issuer with any directive
of or guideline from any central bank or other Governmental Authority or the
introduction of or change in any accounting principles applicable to the Letter
of Credit Issuer or any Person controlling the Letter of Credit Issuer (in each
case, whether or not having the force of law), shall (i) change the basis of
taxation of payments to the Letter of Credit Issuer or any Person controlling
the Letter of Credit Issuer of any amounts payable hereunder or under any Letter
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of Credit Guaranty (except for taxes on the overall net income of the Letter of
Credit Issuer or any Person controlling the Letter of Credit Issuer), (ii)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against any Letter of Credit or against assets of or held by, or
deposits with or for the account of, or credit extended by, the Letter of
Credit Issuer or any Person controlling the Letter of Credit Issuer, or (iii)
impose on the Letter of Credit Issuer or any Person controlling the Letter of
Credit Issuer any other condition regarding this Agreement or any Letter of
Credit, and the result of any event referred to in clauses (i), (ii) or (iii)
above shall be to increase the cost to the Letter of Credit Issuer of issuing
or guaranteeing any Letter of Credit, or agreeing to issue or guaranty any
Letter of Credit, or to reduce any amount received or receivable by the Letter
of Credit Issuer or the Lender hereunder or under any Letter of Credit
Guaranty, then, upon demand by the Letter of Credit Issuer or the Lender, the
Borrower shall pay to the Letter of Credit Issuer or the Lender such additional
amounts as will compensate the Letter of Credit Issuer or the Lender for such
increased costs or reductions in amount.
(b) If the Letter of Credit Issuer shall have determined
that any Capital Guideline or adoption or implementation of, or any change in,
any Capital Guideline by the Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Person controlling such Letter of Credit Issuer with any Capital
Guideline or with any request or directive of any such Governmental Authority
with respect to any Capital Guideline, or the implementation of, or any change
in, any applicable accounting principles (in each case, whether or not having
the force of law), either (i) affects or would affect the amount of capital
required or expected to be maintained by the Letter of Credit Issuer or any
Person controlling the Letter of Credit Issuer and the Letter of Credit Issuer
determines that the amount of such capital is increased as a direct or indirect
consequence of any Letters of Credit issued or any guaranty with respect
thereto, or the Letter of Credit Issuer's other obligations hereunder, or (ii)
has or would have the effect of reducing the rate of return on the Letter of
Credit Issuer's or any such other controlling Person's capital to a level below
that which the Letter of Credit Issuer or such controlling Person could have
achieved but for such circumstances as a consequence of any Letters of Credit
issued, or any guaranty with respect thereto or any agreement to issue Letters
of Credit or the Letter of Credit Issuer's other obligations hereunder (in each
case, taking into consideration the Letter of Credit Issuer's or such other
controlling Person's policies with respect to capital adequacy), then, upon
demand by the Letter of Credit Issuer or the Lender, the Borrower shall pay to
the Letter of Credit Issuer or the Lender from time to time such additional
amounts as will compensate the Letter of Credit Issuer for such cost of
maintaining such increased capital or such reduction in the rate of return on
the Letter of Credit Issuer's or such other controlling Person's capital.
(c) All amounts payable under this Section 2.10 shall
bear interest from the date that is three Business Days after the date of
demand by the Letter of Credit Issuer or the
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Lender until payment in full to the Letter of Credit Issuer or the Lender at
the Regular Rate. A certificate of the Letter of Credit Issuer or the Lender
claiming compensation under this Section 2.10 specifying the event herein above
described and the nature of such event shall be submitted by the Letter of
Credit Issuer or the Lender to the Borrower, setting forth the additional
amount due and an explanation in reasonable detail of the calculation thereof,
the Letter of Credit Issuer's reasons for invoking the provisions of this
Section 2.10 and shall be final and conclusive absent objectively determinable
error.
ARTICLE III
LETTERS OF CREDIT
3.01. Letters of Credit.
(a) General. In order to assist the Borrower in
establishing or opening documentary and standby letters of credit (the "Letters
of Credit") with the Letter of Credit Issuer, the Borrower has requested the
Lender to join in the applications for such Letters of Credit, and/or guarantee
payment or performance of such Letters of Credit and any drafts or acceptances
thereunder through the issuance of the Letter of Credit Guaranty, thereby
lending the Lender's credit to the Borrower, and the Lender has agreed to do
so. These arrangements shall be handled by the Lender subject to the terms and
conditions set forth below. The Lender shall have no obligation to arrange for
the issuance of Letters of Credit on or after the Termination Date or which,
when added to the aggregate amount of all outstanding and contemporaneous Loans
and the Letter of Credit Exposure at such time, would cause the amount of all
Loans and the Letter of Credit Exposure at any time to exceed the Current
Commitment at such time. In addition, the Lender shall not be required to be
the issuer of any Letter of Credit. The Letter of Credit Issuer shall be a
bank mutually acceptable to the Lender and the Borrower. The Borrower will be
the account party for any application for a Letter of Credit, which shall be
substantially in the form of Exhibit C hereto or such other form as may from
time to time be approved by the Letter of Credit Issuer and the Lender, and
shall be duly completed in a manner reasonably acceptable to the Lender,
together with such other certificates, documents and other papers and
information as the Letter of Credit Issuer or the Lender may reasonably request
(the "Letter of Credit Application").
(i) The aggregate Letter of Credit Exposure shall not
exceed $7,000,000. In addition, the amount, purpose, form and extent of the
Letters of Credit and changes or modifications thereof by the Borrower and/or
the Letter of Credit Issuer of the terms and conditions thereof shall in all
respects be subject to the prior approval of the Lender in the exercise of its
reasonable discretion, provided, however, that (x) the expiry date of all
Letters of Credit shall be no later than 15 days prior to the Termination Date
unless on or prior to 15
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days prior to the Termination Date such Letters of Credit shall be cash
collateralized in an amount equal to 105% of the face amount of such Letters of
Credit and (y) the Letters of Credit and all documentation in connection
therewith shall be in form and substance reasonably satisfactory to the Lender
and the Letter of Credit Issuer.
(ii) The Lender shall have the right, without prior notice
to the Borrower, to charge the Borrower's Account with the amount of any and
all indebtedness, liability or obligation of any kind (including
indemnification for capital adequacy and reserve requirement charges) incurred
by the Lender under the Letter of Credit Guaranty at the earlier of (x) payment
by the Lender under the Letter of Credit Guaranty, or (y) with respect to any
Letter of Credit which is not cash collateralized as provided in this
Agreement, the occurrence and continuance of an Event of Default. Any amount
charged to the Borrower's Account shall be deemed a Loan hereunder. Any
charges, fees, commissions, costs and expenses charged to the Lender for the
Borrower's Account by the Letter of Credit Issuer in connection with or arising
out of Letters of Credit issued pursuant to this Agreement or out of
transactions relating thereto will be charged to the Borrower's Account in full
when charged to or paid by the Lender and when made by any such Letter of
Credit Issuer shall be conclusive on the Borrower.
(iii) The Borrower unconditionally indemnifies the Lender
and holds the Lender harmless from any and all loss, claim or liability
incurred by the Lender arising from any transactions or occurrences relating to
Letters of Credit established or opened for the Borrower's Account, and any
drafts or acceptances thereunder, and all Obligations thereunder, including any
such loss or claim due to any action taken by the Letter of Credit Issuer,
other than for any such loss, claim or liability arising out of the gross
negligence or willful misconduct of the Lender as determined by a final
judgment of a court of competent jurisdiction. The Borrower further agrees to
jointly and severally hold the Lender harmless from any errors or omission,
negligence or misconduct by the Letter of Credit Issuer. The Borrower's
unconditional obligation to the Lender hereunder shall not be modified or
diminished for any reason or in any manner whatsoever, other than as a result
of the Lender's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. The Borrower agrees that any
charges incurred by the Lender for the Borrower's Account by the Letter of
Credit Issuer shall be conclusive on the Borrower and may be charged to the
Borrower's Account.
(iv) The Lender shall not be responsible for the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereof even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or
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forged; the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the shipping thereof; or any breach of contract between the
shipper or vendors and the Borrower. Furthermore, without being limited by the
foregoing, the Lender shall not be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
(v) The Borrower agrees that any action taken by the
Lender, if taken in good faith and in the absence of gross negligence or
willful misconduct, or any action taken by the Letter of Credit Issuer, under
or in connection with the Letters of Credit, the guarantees, the drafts or
acceptances, shall be binding on the Borrower (with respect to the Letter of
Credit Issuer and the Lender) and shall not put the Lender in any resulting
liability to the Borrower. In furtherance thereof, the Lender shall have the
full right and authority to clear and resolve any questions of non-compliance
of documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefore), indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents; and to agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letters of Credit, drafts or
acceptances; all in the Lender's sole name, provided that the Lender shall give
the Borrower notice of such action promptly thereafter and the Letter of Credit
Issuer shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from the Lender, all without any
notice to or any consent from the Borrower. Notwithstanding any of the
foregoing, in the absence of a continuing Event of Default, the Lender shall
not take any of the foregoing actions that result in a departure in any
material respect from the terms of the relevant Letter of Credit or Letter of
Credit Application.
(vi) Without the Lender's express consent and endorsement
in writing, which in the absence of a continuing Event of Default shall not be
unreasonably withheld, the Borrower agrees: (x) not to execute any and all
applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances or documents; or to agree to
any amendments, renewals, extensions, modifications, changes or cancellations
of any of the terms or conditions of any of the applications, Letters of
Credit, drafts or acceptances; and (y) after the occurrence of an Event of
Default which is not cured within any applicable grace period, if any, or
waived by the Lender, not to (A) clear and resolve any questions of
non-compliance of documents, or (B) give any instructions as to acceptances or
rejection of any documents or goods.
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(vii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or handling of
Inventory will have been promptly procured; all foreign and domestic material
governmental laws and regulations in regard to the shipment and importation of
Inventory or the financing thereof will have been promptly and fully complied
with, in each case, where the failure to obtain such certificate or license or
the failure to comply with such laws could result in a Material Adverse Effect;
and any certificates in that regard that the Lender may at any time reasonable
request will be promptly furnished. As between the Borrower, on the one hand,
and the Lender and the Letter of Credit Issuer, on the other hand, the Borrower
assumes all risk, liability and responsibility for, and agree to pay and
discharge, all present and future local, state, federal or foreign taxes,
duties, or levies. As between the Borrower, on the one hand, and the Lender
and the Letter of Credit Issuer, on the other hand, any embargo, restriction,
laws, customs or regulations of any country, state, city, or other political
subdivision, where such Inventory is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid,
shall be solely the Borrower's risk, liability and responsibility.
(viii) Upon any payments made to the Letter of Credit
Issuer under a Letter of Credit Guaranty, the Lender shall, without prejudice
to its rights under this Agreement (including that such unreimbursed amounts
shall constitute Loans hereunder), acquire by subrogation, any rights,
remedies, duties or obligations granted or undertaken by the Borrower to the
Letter of Credit Issuer in any application for Letters of Credit, any standing
agreement relating to Letters of Credit or otherwise, all of which shall be
deemed to have been granted to the Lender and apply in all respects to the
Lender and shall be in addition to any rights, remedies, duties or obligations
contained herein.
(ix) In the event that the Borrower is required to provide
cash collateral for any Letter of Credit, the Borrower shall deposit such cash
collateral in the Cash Collateral Account.
(b) Request for Issuance. The Borrower may from time to
time, upon notice not later than 12:00 noon, New York City time, at least three
(3) Business Days in advance, request the Lender to assist the Borrower in
establishing or opening a Letter of Credit by delivering to the Lender, with a
copy to the Letter of Credit Issuer, a Letter of Credit Application, together
with any necessary related documents.
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ARTICLE IV
SECURITY; ADMINISTRATIVE PRIORITY
4.01. Grant of Lien and Security Interest.
(a) The Obligors hereby, jointly and severally, assign,
pledge, transfer, grant, bargain and sell, confirm and set over unto the
Lender, and hereby grant and create in favor of the Lender a security interest
in and to, all of the property, assets or interests in property or assets of
the Obligors of any kind or nature whatsoever, real or personal, now existing
or hereafter acquired or created, including without limitation all property of
the estates (within the meaning of the Bankruptcy Code) of the Obligors, and
all proceeds, rents, products and profits of any of the foregoing other than
Avoidance Action Proceeds (all property of the Obligors subject to the security
interest referred to in this Section 4.01 being hereinafter referred to as the
"Collateral").
(b) The liens and security interests in favor of the
Lender referred to in Section 4.01(a) hereof shall be valid and perfected liens
and security interests, prior to all other liens and interests hereafter
arising, except for Carve-Out Expenses and Permitted Liens. Such liens and
security interests and their priority shall remain in effect until the
Revolving Credit Commitment has been terminated and all Obligations have been
repaid in cash in full and all Letters of Credit outstanding are cash
collateralized in an amount equal to 105% of the face amount of such Letters of
Credit.
(c) Notwithstanding anything herein to the contrary, no
Person entitled to Carve-Out Expenses shall be entitled to sell or otherwise
dispose of Collateral.
4.02. Administrative Priority. Each of the Obligors hereby
agrees that the joint and several Obligations of the Obligors shall constitute
allowed administrative expenses in the Chapter 11 Cases having priority over
all administrative expenses and unsecured claims against the Obligors now
existing or hereafter arising, of any kind or nature whatsoever, including
without limitation all administrative expenses of the kind specified in Section
Section 503(b) and 507(b) of the Bankruptcy Code, subject, as to priority,
only to Carve-Out Expenses having priority over the Obligations to the extent
set forth in the Agreed Administrative Expense Priorities; provided, however,
that Avoidance Action Proceeds shall not be used to pay the superpriority
administrative expense claims granted to the Lender hereunder, provided,
further, that the Lender shall be entitled to receive Avoidance Action Proceeds
ratably with all other holders of administrative claims to the extent that the
superpriority administrative expense claims granted to the Lender hereunder are
not paid in full from the proceeds of the other assets of the Obligors.
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4.03. Grants, Rights and Remedies Cumulative. The liens
and security interests granted pursuant to Section 4.01 hereof and
administrative priority granted pursuant to Section 4.02 hereof may be
independently granted by the Related Documents and by other Related Documents
hereafter entered into. This Agreement, the Interim Bankruptcy Court Order,
the Final Bankruptcy Court Order and such other Related Documents supplement
each other, and the grants, priorities, rights and remedies of the Lender
hereunder and thereunder are cumulative.
4.04. No Filings Required. The liens and security
interests referred to in Section 4.01 hereof and in the Related Documents shall
be deemed valid and perfected by entry of the Interim Bankruptcy Court Order
and the Final Bankruptcy Court Order, as the case may be, and entry of such
orders shall have occurred on or before the date of the initial Credit
Extension hereunder. The Lender shall not be required to file any financing
statements, notices of lien, mortgages or similar instruments in any
jurisdiction or filing office, or to take possession of any Collateral or to
take any other action in order to validate or perfect the liens and security
interests granted by or pursuant to this Agreement, the Interim Bankruptcy
Order and the Final Bankruptcy Court Order, as the case may be, or any other
Related Document. If the Lender shall, in its sole discretion, from time to
time choose to file such financing statements, notices of lien, mortgages or
similar instruments, take possession of any Collateral, or take any other
action to validate or perfect any such security interests or liens, all such
documents shall be deemed to have been filed or recorded at the time and on the
date of entry of the Interim Bankruptcy Court Order or, if no Interim
Bankruptcy Court Order is obtained, the Final Bankruptcy Court Order. The
foregoing shall not apply to such of the Collateral as is or may hereafter be
located outside of the territorial limits of the United States of America to
the extent that the same may not be subject to the jurisdiction of the
Bankruptcy Court.
4.05. Survival. The liens, security interests, lien
priorities, administrative priorities and other rights and remedies granted to
the Lender pursuant to this Agreement, the Interim Bankruptcy Court Order, the
Final Bankruptcy Court Order and the other Related Documents (specifically
including but not limited to the existence, perfection and priority of the
liens and security interests provided herein and therein, and the
administrative priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other financing or extension of credit
or incurrence of debt by the Obligors (pursuant to Section 364 of the
Bankruptcy Code or otherwise), or by any dismissal or conversion of the Chapter
11 Cases, or by any other act or omission whatever. Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:
(a) except for the Carve-Out Expenses having priority
over the Obligations to the extent set forth in the Agreed
Administrative Expense Priorities and subject to the proviso in
Section 4.02, no costs or expenses of administration which have been or
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may be incurred in the Chapter 11 Cases or any conversion of the same
or in any other proceedings related thereto, and no priority claims,
are or will be prior to or on a parity with any claim of the Lender
against the Obligors in respect of any Obligation,
(b) the liens and security interests in favor of the
Lender set forth in Section 4.01 hereof and in the Related Documents
shall constitute valid and perfected first priority liens and security
interests, subject only to the Permitted Liens to which such liens and
security interests shall or may be subordinate and junior, and shall
be prior to all other liens and interests, now existing or hereafter
arising, in favor of any other creditor or any other Person whatever,
and
(c) the liens and security interests in favor of the
Lender set forth in Section 4.01 hereof and in the Related Documents
shall continue valid and perfected without the necessity that the
Lender file financing statements, notices of lien, mortgages or
otherwise perfect its liens and security interests under applicable
nonbankruptcy law except for such Collateral as is or may hereafter be
located outside of the territorial limits of the United States of
America to the extent that the same may not be subject to the
jurisdiction of the Bankruptcy Court.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Obligors hereby each jointly and severally represent and
warrant to the Lender as follows:
5.01. Organization and Qualification. Each of the Obligors
is a corporation, duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the Obligors is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to qualify would have a Material Adverse Effect on the Obligors.
Schedule 5.01 hereto correctly sets forth as of the date hereof the
jurisdictions in which the Obligors are qualified to do business.
5.02. Authority and Authorization. Each of the Obligors
has all necessary corporate power to execute and deliver this Agreement and the
other Related Documents to which it is or is to be a party. As of the Entry
Date, each of the Obligors will have the power and authority to perform its
obligations hereunder and thereunder, and all such action has been duly and
validly authorized by all necessary corporate and judicial action.
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5.03. Execution and Binding Effect. As of the Entry Date,
this Agreement and each of the other Related Documents required to be executed
and delivered on or prior to the date hereof have been duly and validly
executed and delivered by the Obligors party thereto, and constitute legal,
valid and binding obligations of the Obligors party thereto, enforceable in
accordance with the terms hereof or thereof, except as enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or
other laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law. Each Related Document that is not required to be executed and delivered
by the Obligors party thereto on or prior to the Entry Date, when executed and
delivered, will be validly executed and delivered by the Obligors party thereto
and will constitute legal, valid and binding obligations of the Obligors party
thereto enforceable in accordance with the terms thereof, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights generally
or by general principles of equity, regardless of whether such enforceability
is considered in equity or at law.
5.04. Authorizations and Filings. No authorization,
consent, approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority is or will be necessary in connection with execution and delivery by
the Obligors of this Agreement or the other Related Documents, consummation of
the transactions herein or therein contemplated, performance of or compliance
with the terms and conditions hereof or thereof or to ensure the legality,
validity, enforceability and admissibility in evidence hereof or thereof,
except for the Interim Bankruptcy Court Order and the Final Bankruptcy Court
Order.
5.05. Absence of Conflicts. Neither the execution and
delivery of this Agreement or the other Related Documents to which any of the
Obligors is a party nor consummation of the transactions herein or therein
contemplated nor performance of or compliance with the terms and conditions
hereof or thereof will (a) violate any Law, (b) conflict with or result in a
breach of or default under the Obligors' respective charter or by-laws, or any
material agreement or instrument to which the Obligors are parties or by which
they or any of their properties (now owned or hereafter acquired) may be
subject or bound (other than conflicts, breaches and defaults validly cured by
the Interim Bankruptcy Court Order and the Final Bankruptcy Court Order) or (c)
result in the creation or imposition of any Lien upon any property (now owned
or hereafter acquired) of the Obligors, except the Liens in favor of the Lender.
5.06. Financial Statements. (a) Historical Statements.
The Obligors have heretofore furnished to the Lender a consolidated balance
sheet of the Borrower as of December 31, 1995 and the related statements of
operations and cash flows for the fiscal year then ended, as examined and
reported on by independent certified public accountants, and a
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balance sheet and related statements of operations and cash flows of the
Borrower for the period ended August 31, 1996, as certified by a Designated
Financial Officer. Such financial statements (in the case of the statements as
of December 31, 1995, including the notes thereto) present fairly, in all
material respects, the financial condition of the Obligors as of the end of
such fiscal year and as of the end of such period and the results of their
operations and the cash flows for the fiscal year and months then ended, all in
conformity with GAAP applied on a basis consistent with that of the preceding
fiscal year, subject (in the case of the interim financial statements) to
year-end adjustments. Except as disclosed therein or set forth on Schedule
8.03 hereof, the Obligors do not have any material contingent liabilities
(including liabilities for taxes), unusual forward or long term commitments or
unrealized or anticipated losses from unfavorable commitments.
(b) Projections. The Obligors have heretofore furnished
to the Lender projections for the fiscal year of each of the Obligors ending
December 31, 1996, December 31, 1997 and December 31, 1998 (the "Projections"),
and such projections have been prepared in accordance with the standard set
forth in the second sentence of Section 5.17 hereof.
5.07. No Event of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Potential Default. None of the Obligors is in violation of any term of its
charter or by-laws.
5.08. Litigation. Except as set forth in the financial
statements referred to in Section 5.06 hereof and Schedule 5.08 hereof (which
has previously been delivered to the Lender), there is not, to the best
knowledge of the Obligors, any pending or threatened proceeding by or before
any Governmental Authority, arbitrator or grand jury against or affecting the
Obligors or any ERISA Affiliate, with respect to any Environmental Law or ERISA
law, which, if adversely decided, can reasonably be expected to have a Material
Adverse Effect.
5.09. ERISA. None of the Obligors or any ERISA Affiliate
maintains or has an obligation to contribute to any Plan, any Benefit Plan or
any Multiemployer Plan. None of the Obligors or any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Code or (ii) has taken or failed to take any action which would constitute
or result in a Termination Event which in each case would have a Material
Adverse Effect. None of the Obligors or any ERISA Affiliate has engaged in a
transaction within the meaning of Section 4069 of ERISA which would have a
Material Adverse Effect. None of the Obligors or any ERISA Affiliate has
incurred any liability to the PBGC which remains outstanding other than the
payments of premiums, and there are no premium payments which have become due
which are unpaid. None of the Obligors or any ERISA Affiliate has
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made a complete or partial withdrawal under Section 4203 or 4205 of ERISA from
a Multiemployer Plan in either case which would have a Material Adverse Effect.
There are no pending, or to the knowledge of the Obligors or any ERISA
Affiliate, threatened claims, actions, proceedings or lawsuits (other than
claims for benefits in the normal course) asserted or instituted against (i)
any Plan or its assets, (ii) any fiduciary with respect to any Plan, or (iii)
the Obligors or any ERISA Affiliate with respect to any Plan.
5.10. Taxes. All tax returns required to be filed by the
Obligors have been properly prepared, executed and filed. All taxes,
assessments, fees and other governmental charges upon the Obligors or upon any
of their respective properties, incomes, sales or franchises which are shown
thereon as due and payable have been paid. The reserves and provisions for
taxes, if any, on the books of the Obligors are adequate for all open years and
for its current fiscal period. None of the Obligors knows of any proposed
additional assessment or basis for any material assessment for additional taxes
(whether or not reserved against).
5.11. Financial Accounting Practices, etc. The Obligors
each make and keep books, records and accounts which, in reasonable detail,
accurately and fairly reflect their respective transactions and dispositions of
their respective assets and each maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization,
(ii) transactions are recorded as necessary (A) to permit preparation of
financial statements in conformity with GAAP except as previously disclosed to
the Lender and (B) to maintain accountability for assets, and (iii) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5.12. Power To Carry On Business. Each of the Obligors has
all the requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as presently planned to be conducted
(subject to Bankruptcy Court approval with respect to transactions outside the
ordinary course of business).
5.13. No Material Adverse Change. Between February 29,
1996 and the date hereof there has not occurred any event which may be
reasonably expected to have a Material Adverse Effect, other than events that
customarily occur as a result of events leading up to and following the
commencement of a case under chapter 11 of the Bankruptcy Code.
5.14. Existing Liens; Capitalized Leases. There are no
Liens on any assets of the Obligors other than (a) Liens created as of the
Entry Date in favor of the Lender hereunder and under the other Related
Documents, (b) obligations related to Capitalized Leases which do not exceed
$50,000 in the aggregate, and (c) Permitted Liens.
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5.15. Compliance with Laws. None of the Obligors is in
violation of or otherwise liable under any Law (including but not limited to
violations pertaining to the conduct of their respective businesses or the use,
maintenance or operation of the real and personal properties owned or possessed
by them), except for violations which in the aggregate do not have a Material
Adverse Effect and violations or any enforcement actions which will be staved
by virtue of the filing of the Chapter 11 Cases.
5.16. Subsidiaries. Schedule 5.16 hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding capital stock of each Subsidiary of each Obligor in existence
on the date hereof. All shares of such stock owned by each Obligor or one or
more of its Subsidiaries, as indicated in such Schedule, are owned free and
clear of all liens, security interests and other charges and encumbrances.
5.17. Accurate and Complete Disclosure. No representation
or warranty made by the Obligors under this Agreement or any other Related
Document and no written statement made by the Obligors in any financial
statement (furnished pursuant to this Agreement or otherwise), certificate,
report, exhibit or document furnished by the Obligors to the Lender pursuant to
or in connection with this Agreement or any other Related Document is or was or
will be, when delivered, when taken together with all other information
supplied by the Obligors to the Lender, false or misleading in any material
respect (including by omission of material information necessary to make such
representation, warranty or statement, in light of the circumstances under
which it was made, not misleading). To the extent the Obligors furnish any
projections of the financial position and results of operations of the Obligors
for, or as at the end of, certain future periods, such projections were
believed at the time furnished to be reasonable, have been or will have been
prepared on a reasonable basis and in good faith by the Obligors and have been
or will be based on assumptions believed by the Obligors to be reasonable at
the time made and upon the best information then reasonably available to the
Obligors.
5.18. Insurance. Each of the Obligors maintains with
financially sound and reputable insurers adequate insurance with respect to
their properties and businesses and those of their respective Subsidiaries.
Schedule 5.18 hereto sets forth a list of all insurance currently maintained by
the Obligors and their respective Subsidiaries.
5.19. Environmental Matters.
(a) The Obligors are in compliance in all material
respect with all applicable Environmental Laws;
(b) The Obligors have obtained all material permits,
approvals, authorizations and licenses required by Environmental Laws necessary
for their operations,
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and all such permits, approvals, authorizations and licenses are in good
standing and the Obligors are in material compliance with all material terms
and conditions of such permits, approvals, authorizations and licenses;
(c) None of the Obligors or any of their respective
currently owned or leased property or operations is subject to any outstanding
written order from or agreement with any Governmental Authority or other Person
or is subject to any judicial or docketed administrative proceeding respecting
(i) Environmental Laws, (ii) Remedial Action or (iii) any Environmental
Liabilities and Costs arising from a Release or threatened Release except for
any such order or proceeding which would not reasonably be expected to have a
Material Adverse Effect; and
(d) None of the Obligors has received any written notice
or claim to the effect that it is or is reasonably expected to be liable to any
Person as a result of a Release that can reasonably be expected to have a
Material Adverse Effect.
5.20. Administrative Priority; Lien Priority.
(a) After the Entry Date, the Obligations of the Obligors
will constitute allowed administrative expenses in the Chapter 11 Cases having
priority over all administrative expenses and unsecured claims against the
Obligors now existing or hereafter arising, of any kind or nature whatsoever,
including without limitation all administrative expenses of the kind specified
in Sections 503(b) and 507(b) of the Bankruptcy Code, subject, as to priority,
only to Carve-Out Expenses having priority over the Obligations to the extent
set forth in the Agreed Administrative Expense Priorities, and subject to the
proviso in Section 4.02.
(b) The Obligations will be secured by a valid and
perfected lien on and security interest in all of the Collateral.
5.21. Bankruptcy Court Order. The Interim Bankruptcy Court
Order or the Final Bankruptcy Court Order, as the case may be, is in full force
and effect, and has not been reversed, stayed, modified or amended absent the
joinder and consent of the Lender.
5.22. Real Property. Schedule 5.22 hereto sets forth a
complete and accurate description and list as of the date hereof of the
location, by state and street address, of all of the real property owned by the
Obligors together with a statement as to whether such real property is the
subject of a contract of sale (and, if so, a statement as to the status of such
sale and of any motion to the Bankruptcy Court with respect thereto). Each of
the Obligors has good and marketable title in fee simple to the real property
set forth opposite such Obligor's name in such Schedule.
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5.23. Location of Bank Accounts. Schedule 5.23 hereto sets
forth a complete and accurate list as of the date hereof of all deposit
accounts including all Depository Accounts and the Cash Concentration Accounts,
maintained by the Obligors together with a description thereof (i.e., the bank
at which such deposit account is maintained and the account number and the
purpose thereof).
5.24. Use of Proceeds. The Obligors will use the proceeds
of the Loans and the Letters of Credit, respectively, in accordance with
Sections 2.09 and 3.01(a)(i) hereof, respectively.
5.25. Intellectual Property. The Obligors own or license
or otherwise have the right to use all material licenses, permits, patents,
patent applications, trademarks, trademark applications, service marks,
tradenames. copyrights, copyright applications, franchises, authorizations and
other intellectual property rights that are necessary for the operations of
their businesses, without infringement upon or conflict with the rights of any
other Person with respect thereto, except for such infringements and conflicts
which, individually or in the aggregate, could not have a Material Adverse
Effect. Set forth in Schedule 5.25 is a complete and accurate list as of the
date hereof of all such material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyright registration numbers, copyright applications, franchises,
authorizations and other intellectual property rights of the Obligors. No
slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by Obligors
infringes upon or conflicts with any rights owned by any other Person, and no
claim or litigation regarding any of the foregoing is pending or threatened,
except for such infringements and conflicts which could not have, individually
or in the aggregate, a Material Adverse Effect. To the knowledge of the
Obligors, no patent, invention, device, application, principle or any statute,
law, rule, regulation, standard or code is pending or proposed, which,
individually or in the aggregate, could have a Material Adverse Effect.
5.26. Franchises. Set forth in Schedule 5.26 is a complete
and accurate list of all franchise agreements in effect as of the date hereof.
None of the Obligors has entered into any other franchise agreement or similar
arrangement which has not been terminated as of the date hereof.
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ARTICLE VI
CONDITIONS OF CREDIT EXTENSIONS
6.01. Conditions Precedent to Initial Credit Extension.
The obligation of the Lender to make the initial Credit Extension hereunder
(whether such Credit Extension shall consist of the making of a Loan or
assistance to the Borrower in establishing or opening Letters of Credit) is
subject to the satisfaction on or before the date thereof of each of the
following conditions, in addition to the conditions set forth in Section 6.02:
(a) The Interim Bankruptcy Court Order or the Final
Bankruptcy Court Order, as the case may be, substantially in the form
of Exhibit F hereto, shall have been entered by the Bankruptcy Court
on or before September 30, 1996, approving, on an emergency and
interim basis in the case of the Interim Bankruptcy Court Order, the
transaction contemplated therein and the Lender shall have received a
certified copy of the same, and such order shall be in full force and
effect and shall not have been reversed, stayed, modified or amended.
(b) The Borrower shall have executed and delivered to the
Lender the Note in substantially the form of Exhibit A hereto, which
shall be dated the Entry Date.
(c) The Obligors shall have executed and delivered to the
Lender the Security Agreement and the Pledge Agreement, each of which
shall be dated the Entry Date.
(d) The Borrower shall have paid to the Lender all fees
when due and other amounts due and payable to the Lender when due,
including but not limited to amounts due under Section 2.08 or 10.06
hereof. The Borrower shall have paid to counsel to the Lender all
reasonable fees and other client charges due to such counsel on the
date of the initial Credit Extension.
(e) The Lender shall have received certificates
satisfactory in form and substance to it from the Obligors, signed by
the Designated Borrowing Officer, certifying as to (i) true copies of
Obligors' charter and by-laws, (ii) true copies of all corporate
action taken by the Obligors relative to the Related Documents and the
transactions contemplated thereby (which shall designate one or more
Designated Financial Officers and Designated Borrowing Officers),
(iii) the true signatures and incumbency of the Designated Borrowing
Officers and (iv) such other matters as the Lender may reasonably
request.
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(f) The liens and security interests in favor of the
Lender pursuant hereto shall be valid and perfected first priority
Liens prior (except for Permitted Liens to which such liens and
security interests are subordinate and junior) to all other Liens in
or on the Collateral intended to be subject thereto.
(g) The Obligors shall have caused all property insurance
policies to show the Lender as loss payee as its interest may appear
and, with respect to Inventory, all such policies shall name the
Lender as first payee.
(h) The Lender shall have received from the general
counsel of the Obligors, and from Shearman & Sterling, outside counsel
to the Obligors, favorable opinions substantially in the form of
Exhibits G-I and G-2 hereto respectively.
(i) The Lender shall have received certified copies of
requests for copies or information on Form UCC-11 or reports from a
reporting company satisfactory to the Lender, listing all effective
UCC financing statements, tax liens and judgment liens in each of the
jurisdictions in which any of the Obligors has any personal property
or real property, which name as debtor the Obligors, together with
copies of such financing statements, none of which shall cover any of
the Collateral.
(j) All legal proceedings in connection with the
transactions contemplated by this Agreement and the other Related
Documents shall be satisfactory to the Lender and the Lender shall
have received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to the
Lender, as the Lender may from time to time request.
(k) The Lender shall have received evidence satisfactory
to it that (i) the existing Indebtedness owing by the Obligors to the
Existing Lender pursuant to the Existing Loan Documents has been
repaid or will be repaid with the proceeds of the intial Credit
Extension and (ii) the Existing Loan Documents have been terminated.
(l) The Lender shall have received terminations of all
UCC-1 financing statements, fixture filings and mortgages which name
any of the Obligors, as debtor, and the Existing Lender, as secured
party, and which cover any portion of the Collateral and the Lender
shall otherwise have received evidence satisfactory to it that all
Liens relating to the Collateral in favor of the Existing Lender have
been released.
6.02. Conditions Precedent to Each Credit Extension. The
obligation of the Lender to make any Credit Extension hereunder (whether such
Credit Extension shall consist of the making of a Loan or assistance to the
Borrower in establishing or opening Letters of
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Credit) is subject to the accuracy as of the date hereof of the representations
and warranties herein contained, to the performance by the Borrower of its
obligations to be performed hereunder or under the Related Documents on or
before the date of such Credit Extension and to the satisfaction of the
following further conditions:
(a) The representations and warranties of the Obligors
contained in Article V hereof and in each Related Document shall be
true in all material respects and as of the date of each Credit
Extension hereunder with the same effect as though made on and as of
each such date.
(b) No Event of Default and no Potential Default shall
have occurred and be continuing or exist or shall occur or exist after
giving effect to such Credit Extension.
(c) On the date of such Credit Extension, the Interim
Bankruptcy Court Order or the Final Bankruptcy Court Order, as the
case may be, in form and substance satisfactory to the Lender shall be
in fall force and effect and shall not have been reversed, stayed,
modified or amended. Unless the Lender shall have joined in or
expressly consented in writing to the same, there shall be no motion
pending which is not being contested by the Obligors in good faith or
with respect to which the relief has been granted in an order that has
not been stayed pending appeal: (i) to reverse, modify or amend the
Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, as
the case may be, or (ii) to permit any administrative expense or
unsecured claim against the Obligors, now existing or hereafter
arising, of any kind or nature whatsoever, to have administrative
priority as to the Obligors equal or superior to the priority of the
Lender in respect of the Obligations, except for Carve-Out Expenses
having priority over the Obligations to the extent set forth in the
Agreed Administrative Expense Priorities, or (iii) to grant or permit
the grant of a Lien on any property or assets of the Obligors.
(d) The aggregate unpaid principal amount of the Loans
and the Letter of Credit Exposure shall not exceed, and after giving
effect to the requested Credit Extension will not exceed, the Current
Commitment.
(e) The Lender shall have received from the Borrower a
Notice of Borrowing from a Designated Borrowing Officer specifying the
date, which shall be a Business Day, on which such Loan is to be made,
the principal amount of such Loan and the account information where
such Loan is to be received, or a completed Letter of Credit
Application, as appropriate.
(f) All legal proceedings in connection with the
transactions contemplated by this Agreement and the other Related
Documents shall be reasonably satisfactory to
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the Lender and the Lender shall have received all such counterpart
originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and
substance reasonably satisfactory to the Lender, as the Lender may
from time to time reasonably request.
Any written request by the Borrower for any Credit Extension hereunder shall
constitute a representation and warranty by the Obligors that the conditions
set forth in this Section 6.02 have been satisfied as of the date of such
request. Failure of the Lender to receive notice from the Borrower to the
contrary before such Credit Extension is made shall constitute a further
representation and warranty by the Obligors that the conditions set forth in
this Section 6.02 (other than those set forth in clause (e)) have been
satisfied as of the date of such Credit Extension.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Obligors jointly and severally covenant to the Lender as
follows, subject to waiver by the Lender as provided herein:
7.01. Reporting and Information Requirements.
(a) Annual Reports. (i) As soon as practicable and in
any event within 90 days after the close of each fiscal year of the Borrower,
the Borrower shall furnish to the Lender a consolidated statement of operations
and cash flows of the for such fiscal year and a consolidated balance sheet of
the as of the close of such fiscal year, and notes to each, all in reasonable
detail, setting forth in comparative form the corresponding figures for the
preceding fiscal year, with such statements and balance sheet to be certified
by independent certified public accountants of recognized national standing
selected by the Obligors and reasonably satisfactory to the Lender. The
certificate or report of such accountants shall be free of exceptions or
qualifications (including, without limitation, a qualification that the
financial statements are not fairly presented but excluding a "going concern"
qualification arising solely due to the filing of the Chapter 11 cases) with
respect to such statements and balance sheets being prepared in compliance with
GAAP and shall in any event contain a written statement of such accountants
substantially to the effect that (i) such accountants examined such statements
and balance sheet in accordance with generally accepted auditing standards and
accordingly made such tests of accounting records and such other auditing
procedures as such accountants considered necessary in the circumstances and
(ii) in the opinion of such accountants such statements and balance sheets
present fairly, in all material respects, the consolidated financial position
of the Borrower as of the end of such fiscal year
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and the results of its operations and the changes in its financial position for
such fiscal year, in conformity with GAAP applied on a basis consistent with
that of the preceding fiscal year (except for changes in application in which
such accountants concur). A copy of such certificate or report shall be
delivered to the Lender and signed by such independent public accountants and,
as soon as available, a copy of any management letter received by the Obligors
from its independent public accountants, shall be delivered to the Lender.
(ii) Each set of statements and balance sheets delivered
pursuant to this Section 7.01(a) shall be accompanied by a certificate or
report dated the date of such statements and balance sheets by the accountants
who certified or reported on such statements and balance sheets stating in
substance that they have reviewed this Agreement and that in making the
examination necessary for their certification of such statements and balance
sheets they did not become aware of any Event of Default or Potential Default
based upon any financial covenant, or if they did become so aware, such
certificate or report shall state the nature and period of existence thereof,
if determinable.
(b) Quarterly Reports. (i) As soon as practicable and
in any event within 45 days after the close of each of the first three fiscal
quarters of the Borrower in each fiscal year, the Borrower shall furnish to the
Lender unaudited consolidated statements of operations and cash flows of the
Borrower and a consolidated balance sheet of the Borrower as of the close of
such fiscal quarter, all in reasonable detail setting forth in comparative form
the corresponding fiscal quarter for the preceding fiscal year, and certified
by a Designated Financial Officer of the Borrower as presenting fairly, in all
material respects, the consolidated financial position of the Borrower as of
the end of such quarter and the results of its operations and the changes in
its financial position for such quarter, in conformity with GAAP applied in a
manner consistent except as otherwise disclosed therein with that of the most
recent audited financial statements furnished to the Lender, subject to
year-end adjustments.
(ii) Each set of statements and balance sheets delivered
pursuant to Section 7.01(b) shall be accompanied by a certificate dated the
date of such statements and balance sheet by a Designated Financial Officer
stating in substance that he has reviewed this Agreement and that to the best
of his knowledge he did not become aware of any Event of Default or Potential
Default, or if he did become so aware, such certificate shall state the nature
and period of existence thereof, if determinable, and that the Borrower has
complied with the EBITDAR and Gross Revenue covenants set forth in Section 8.14
and 8.15, respectively.
(c) Monthly Reports. (i) As soon as practicable and in
any event within twenty (20) days after the end of each month (including the
month in which this Agreement is executed), the Borrower shall furnish to the
Lender unaudited consolidated statements of operations and cash flows for the
Borrower for such month and for the period from the
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beginning of such fiscal year to the end of such month, and an unaudited
consolidated balance sheet of the Borrower on a consolidated basis as of the
end of such month, all in reasonable detail, setting forth in comparative form
the corresponding figures for the same periods during the preceding fiscal year
(except for the balance sheets, which shall set forth in comparative form the
corresponding balance sheets as of the prior fiscal year end), and certified by
a Designated Financial Officer of the Borrower as presenting fairly, in all
material respects, the consolidated financial position of the Borrower as of
the end of such month and the results of its operations and cash flows for such
month, in conformity with GAAP applied in a manner consistent except as
otherwise disclosed therein with that of the most recent adjusted financial
statements furnished to the Lender, subject to year-end adjustments.
(ii) Each set of statements and balance sheets delivered
pursuant to Section 7.01(c) shall be accompanied by a certificate dated the
date of such statements and balance sheets by a Designated Financial Officer
stating in substance that he has reviewed this Agreement and that to the best
of his knowledge he did not become aware of any Event of Default or Potential
Default, or if he did become so aware, such certificate shall state the nature
and period of existence thereof, if determinable.
(d) Certain Reports. Upon the reasonable request of the
Lender, the Obligors shall provide the Lender with copies of all consultants'
reports, investment bankers' reports, accountants' management letters, final
business plans, and similar documents. The Obligors shall not be obligated to
provide copies of any documents which are subject to an evidentiary privilege
and as to which disclosure to the Lender would cause such privilege to be
waived, but if the Obligors claim that any document is so privileged, it shall
promptly provide the Lender with a letter describing the document and stating
the basis for such claim of privilege.
(e) Pleadings, Etc. The Obligors shall give or cause to
be given or served on the Lender and its counsel copies of all pleadings,
motions, applications, financial information and other papers and documents
filed or received by the Obligors in the Chapter 11 Cases.
(f) Reports to Committees. Promptly after the sending
thereof, the Obligors shall give the Lender copies of all written reports given
by the Obligors to any official or unofficial creditors' committee in the
Chapter 11 Cases, provided that Obligors shall not be obligated to provide the
Lender with any materials relating to a plan of reorganization,
postreorganization capital structure or enterprise value before such documents
are made publicly available, or materials relating to negotiations strategy
with respect to a plan of reorganization.
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(g) Other Reports and Information. Promptly upon their
becoming available, the Obligors shall deliver to the Lender a copy of (i) all
reports, financial statements or other information delivered by the Obligors to
their shareholders, (ii) all reports, proxy statements, financial statements
and other information generally distributed by the Obligors to their creditors
or the financial community in general and (iii) any audit or other reports
submitted to the Obligors by independent accountants in connection with any
annual, interim or special audit of the Obligors.
(h) Further Information. The Obligors will promptly
furnish to the Lender such other information and in such form as the Lender may
reasonably request.
(i) Projections. The Borrower shall furnish to the
Lender on or before September 30, 1996; financial projections, in form and
substance satisfactory to the Lender, for the fiscal year ending December 31,
1998, and such projections shall be prepared in accordance with the standard
set forth in the second sentence of Section 5.17 hereof.
(j) Notice of Event of Default. Promptly upon becoming
aware of any Event of Default or Potential Default, the Borrower shall give the
Lender notice thereof, together with a written statement of a Designated
Financial Officer of the Borrower setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by the Borrower.
(k) Notice of Material Adverse Change. Promptly upon
becoming aware thereof, the Obligors shall give the Lender notice of any event
which the Obligor believe in good faith is reasonably likely to have, or
actually has had, Material Adverse Effect.
(l) Visitation and Verification. Each Obligor shall
permit the Lender, or any agents or representatives thereof at any time during
normal business hours to examine and make copies of any abstracts from their
records and books of account, to visit and inspect their properties, to verify
materials, leases, notes, accounts receivable, inventory, deposit accounts and
other assets of the Obligors to conduct audits, physical counts, valuations or
examinations and to discuss their affairs, finances and accounts with any of
the directors, officers, managerial employees, independent accountants or other
representatives thereof, provided that the foregoing shall be in a manner so as
not to unreasonably disrupt the business of the Obligors.
7.02. Preservation of Existence and Franchises. Subject to
Section 8.08 hereof, each Obligor shall maintain (which may be by virtue of the
stay imposed in the Chapter 11 Cases) its corporate existence, rights and
franchise in full force and effect in its jurisdiction of incorporation. The
Obligors shall qualify and remain qualified (which may be
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by virtue of the stay imposed in the Chapter 11 Cases) as foreign corporations
in each jurisdiction in which failure to qualify would have a Material Adverse
Effect.
7.03. Insurance. The Obligors shall maintain insurance at
the levels currently in effect with financially sound and reputable insurers as
listed on Schedule 5.18 hereto (except as Schedule 5.18 may be modified in
accordance with the terms of this agreement) and promptly cause all such
policies to show the Lender as loss payee or additional insured as its interest
may appear on such policies and, with respect to the Collateral, all relevant
policies shall name the Lender as loss payee on such policies. The Obligors
shall provide to the Lender a copy of each such policy listed on Schedule 5.18.
7.04. Maintenance of Properties. Each of the Obligors
shall, (i) maintain or cause to be maintained in good repair, working order and
condition the properties now or hereafter owned by it and (ii) make or cause to
be made all needful and proper repairs, renewals, replacements and improvements
thereto to the extent required so that the business carried on in connection
therewith may be properly and advantageously conducted at all times. and (iii)
maintain all leased property in compliance with the requirements of any
applicable lease, in each case other than sales of property or rejection of
leases approved by the Bankruptcy Court and otherwise permitted by the terms of
this Agreement.
7.05. Financial Accounting Practices, etc. The Obligors
shall make and keep books, records and accounts which, in reasonable detail,
accurately and fairly reflect their transactions and dispositions of their
assets and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP and (B) to maintain accountability for assets, and (iii)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
7.06. Compliance with Laws. The Obligors shall comply with
all applicable Laws (including but not limited to compliance in respect of
products that they sell or service they perform, conduct of their businesses,
or use, maintenance or operation of real and personal properties owned or
possessed by them) with respect to which failure to comply would have a
Material Adverse Effect.
7.07. Further Assurances. The Obligors promptly shall do,
execute, acknowledge, deliver, record, file, register and perform any and all
such further acts, deeds, conveyances, security agreements, assignments,
estoppel certificates, financing statements, assurances and other instruments
as the Lender may reasonably request from time to time in order (a) to carry
out more effectively the purposes of this Agreement or any other Related
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Document, (b) to subject to valid and perfected first priority liens and
security interests all Collateral (subject, as to priority, to the Permitted
Liens), (c) to perfect and maintain the validity, effectiveness and priority of
any of the Related Documents and the liens and security interests intended to
be created thereby, and (d) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm unto the Lender the rights granted or now or
hereafter intended to be granted to the Lender under any Related Document. The
assurances contemplated by this Section 7.07 shall be given under applicable
nonbankruptcy Law as well as the Bankruptcy Code, it being the intention of the
parties that the Lender may request assurances under applicable nonbankruptcy
Law, and such request shall be complied with (if otherwise made in good faith
by the Lender) whether or not the Interim Bankruptcy Court or the Final
Bankruptcy Court Order is in force and whether or not dismissal of the Chapter
11 Cases or any other action by the Bankruptcy Court is imminent, likely or
threatened.
7.08. Cash Management System.
(a) The Obligors agree and covenant to (i) cause all
cash, other than de minimus amounts maintained at each store in the ordinary
course of business, and all proceeds from Accounts Receivable, the sale of
Inventory, and Net Sales Proceeds constituting cash to be deposited into the
Depository Accounts in the ordinary course of business of the Obligors
consistent with past practice, (ii) cause all remittances on credit card sales
to be transferred into the Cash Concentration Account or a Depository Account
on a daily basis, (iii) cause all funds in the Depository Accounts to be
transferred into the Cash Concentration Account on a daily basis, (iv) cause
all cash deposited in the Cash Concentration Account to be sent to the Lender
Account on a daily basis, (v) instruct the Lender to cause all funds
transferred to the Lender Account to be credited to the Borrower's Account and
applied to reduce the Obligations outstanding from time to time, (vi) take all
such actions as the Lender deems necessary or advisable to send all cash, all
proceeds from the sale of Inventory, all remittances or other proceeds of
Collateral to the Lender Account to be applied to the Obligations, (vii)
execute and deliver to the Lender on or before the Closing Date (A) an original
notice letter for each Depository Bank listed on Schedule 5.23, substantially
in the form of Exhibit H hereto, which will be sent to each such Depository
Bank and (B) a Cash Concentration Account Agreement, executed by the Borrower
and the Cash Concentration Account Bank, and (viii) take such actions as the
Lender deems necessary or advisable to grant to the Lender dominion and control
over the funds in the Cash Concentration Account. The Obligors shall promptly,
and in any event not later than five (5) days after the opening of any such new
account, notify the Lender in writing of the creation of any new Depository
Account and shall at the time of such notice execute and deliver to the Agent a
notice letter, substantially in the form of Exhibit H hereto.
(b) Upon receipt by the Obligors of collections of cash
and any proceeds from Accounts Receivable, the sale of Inventory and Net Sale
Proceeds, the Obligors shall
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immediately deposit all such payments into the Cash Concentration Account or
any Depository Account. The Obligors shall cause all funds in the Depository
Accounts and all remittances or other proceeds of credit card sales to be
promptly transferred from the financial institution that receives such
remittances or other proceeds or from the Depository Accounts to the Cash
Concentration Account.
(c) Notwithstanding anything in this Section 7.08 to the
contrary, the Obligors shall be permitted to retain, in any bank accounts other
than the Depository Accounts, cash at any time not to exceed $750,000 in the
aggregate.
7.09. Taxes. Each of the Obligors shall pay and discharge,
to the extent consistent with the rights and obligations of the Obligors as
debtors-in-possession under the Bankruptcy Code, all post-petition taxes,
assessments and governmental charges upon it, its income and its properties,
which arise from or relate to operations of the Obligors or other events
occurring after the Filing Date, prior to the date on which penalties are
attached thereto, unless and to the extent only that (a) such taxes,
assessments and governmental charges shall be contested in good faith and by
appropriate proceedings by the Obligors and (b) adequate reserves are
maintained by the Obligors with respect thereto.
ARTICLE VIII
NEGATIVE COVENANTS
The Obligors jointly and severally covenant to the Lender as
follows, subject to waiver by the Lender as provided herein:
8.01. Final Bankruptcy Court Order: Administrative
Priority; Lien Priority; Payment of Claims.
(a) None of the Obligors shall at any time seek, consent
to or suffer to exist any modification, stay, vacation or amendment of the
Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, as the case
may be, except for modifications and amendments agreed to by the Lender.
(b) None of the Obligors shall at any time suffer to
exist a priority for any administrative expense or unsecured claim against the
Obligors (now existing or hereafter arising of any kind or nature whatsoever,
including without limitation any administrative expenses of the kind specified
in Sections 503(b) and 507(b) of the Bankruptcy Code) equal or superior to the
priority of the Lender in respect of the Obligations, except for the Carve-Out
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Expenses having priority over the Obligations to the extent set forth in the
Agreed Administrative Expense Priorities.
(c) None of the Obligors shall at any time suffer to
exist any Lien on the Collateral having a priority equal or superior to the
Liens and security interests in favor of the Lender in respect of the
Obligations, or any Liens except for Permitted Liens.
(d) Prior to the date on which the Obligations have been
paid in full in cash and the Revolving Credit Commitment has been terminated,
none of the Obligors shall pay any administrative expense claims except (i)
Priority Expenses and (ii) other administrative expense claims incurred in the
ordinary course of the business of the Borrower, in each case to the extent and
having the order of priority set forth in the Agreed Administrative Expense
Priorities.
8.02. Liens. The Obligors shall not, at any time create,
incur, assume or suffer to exist Liens on any of their properties or assets,
tangible or intangible, now owned or hereafter acquired, or agree or become
liable to do so, except for the following ("Permitted Liens"):
(a) Liens in favor of the Lender;
(b) Liens which were in existence on the Closing Date and
are listed on Schedule 8.02 hereof;
(c) Deposits or pledges to secure utility and similar
services, to secure workmen's compensation, unemployment insurance,
old age benefits or other social security obligations, or in
connection with or to secure the performance of bids, tenders, trade
contracts or leases, or to secure statutory obligations, or stay,
surety, appeal or custom bonds, or other pledges or deposits of like
nature, and all in the ordinary course of business;
(d) Liens on property to be used by the Obligors in the
ordinary course of their business, securing payment of all or part of
the purchase price thereof, and Liens with respect to equipment leases
which equipment is used by the Obligors in the ordinary course of
their business, provided that the aggregate amount of Indebtedness at
any one time outstanding incurred after the Filing Date and secured by
such Liens shall not exceed $1,000,000, and further provided that such
Liens are confined solely to the property so purchased, leased,
improvements thereto and proceeds thereof;
(e) Zoning restrictions, rights of way, consents,
covenants, reservations, encumbrances, easements, minor restrictions
on the use of real property, minor
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irregularities in title thereto and other minor Liens, charges and
encumbrances that do not secure the payment of money or the
performance of an obligation and that do not in the aggregate
materially detract from the value of a property or asset to, or
materially impair its use in the business of, the Obligors;
(f) Nonconsensual Liens of warehousemen, materialmen,
mechanics, carriers and landlords and other like Persons, which Liens
arise in the ordinary course of the Obligors' business;
(g) Liens in connection with any taxes, assessments,
charges, levies or claims that are not yet due and payable or which
the Obligors are contesting in good faith and by appropriate
proceedings diligently conducted so long as reserves or other
appropriate provisions as may be required by GAAP have been made
therefor and so long as the failure to pay the same does not have a
Material Adverse Effect;
(h) Liens in favor of any Governmental Authority in
respect of customs or import duties; and
(i) extensions, renewals or replacements of any Lien
permitted pursuant to clauses (a)-(h) above; provided that the
principal amount of the obligation secured thereby is not increased
and that any such extension, renewal or replacement is limited to the
property originally encumbered thereby.
8.03. Indebtedness. The Obligors shall not create, incur,
assume or suffer to exist any Indebtedness, except for the following
("Permitted Indebtedness"):
(a) Indebtedness in favor of the Lender and to any Letter
of Credit Issuer under any Letter of Credit Application;
(b) Indebtedness secured by a Permitted Lien;
(c) Indebtedness in existence on the Closing Date and
listed on Schedule 8.03 hereto;
(d) Indebtedness contemplated by the Interim Bankruptcy
Court Order or Final Bankruptcy Court Order, as the case may be;
(e) accounts payable and accrued expenses arising out of
transactions (other than borrowings) in the ordinary course of
business;
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(f) Indebtedness incurred in connection with Capital
Expenditures, to the extent permitted under Section 8.12 hereof,
(g) Indebtedness to any other Obligor; and
(h) extensions, renewals or replacements of any
Indebtedness permitted pursuant to clauses (a)-(g) above, provided
that the principal amount of such Indebtedness is not increased by
such extension, renewal or replacement.
8.04. Guarantees and Contingent Liabilities. The Obligors
shall not at any time be or become liable under any Guarantee, except:
(a) Guarantees in favor of the Lender;
(b) Guarantees in existence on the Closing Date and
listed on Schedule 8.04 hereto;
(c) contingent liabilities arising from the endorsement
of negotiable or other instruments for deposit or collection or
similar transactions in the ordinary course of business;
(d) Guarantees of any Indebtedness incurred by any
Obligor hereunder; and
(e) extensions, renewals or replacements of any Guarantee
permitted pursuant to clauses (a)-(d) above; provided that the
principal amount of the obligation guaranteed thereby is not increased
by such extension, renewal or replacement.
8.05. Loans, Advances and Investments. Except as otherwise
expressly permitted by this Section 8.05, the Obligors shall not at any time
make or suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any partnership
interest (whether general or limited) in, or any other interest in, or make any
capital contribution to, any other Person. By way of illustration, and without
limitation of the foregoing, it is understood that the Obligors will be deemed
to have made an advance to a Person: (x) to the extent that any Obligor
performs any service for such Person (including but not limited to management
services), or transfers any property to such Person, and is not reimbursed for
such service or property and (y) to the extent that any Obligor pays any
obligation on behalf of such Person. The amount of such advance shall be
deemed to be the fair value of the services so performed or property so
transferred (in the case of clause (x)) or the amount so paid by such Obligor
(in the case of clause (y)).
The following are excepted from the operation of this Section
8.05:
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(a) advances to employees to meet expenses incurred by
such employees or with respect to salary advances and other similar
advances, in each case to non-Affiliates and in the ordinary course of
business;
(b) ownership of any capital stock, bonds, notes,
securities, partnership or joint venture interests on the Filing Date
and any similar items received in respect thereof; and
(c) loans or advances to any other Obligor; and
(d) the Cash Collateral Account and the other accounts
permitted or required to be maintained pursuant hereto, any investment
of funds on deposit in the foregoing to the extent expressly permitted
hereunder.
8.06. Dividends and Related Distributions. The Obligors
shall not declare, make, pay or agree to pay, any dividend or other
distribution of any nature (whether in cash, property, securities or otherwise)
on account of or in respect of shares of their capital stock or on account of
the purchase, redemption, retirement or acquisition of any shares of capital
stock (or warrants, options or rights therefor).
8.07. Merger, etc. The Obligors shall not merge with or
into or consolidate with any other Person, or sell, lease (as lessor) or
otherwise dispose of all or a substantial portion of its assets (whether in one
transaction or in a series of transactions), or agree to do any of the
foregoing; provided, however, that each Obligor shall be permitted to merge
with or into any other Obligor.
8.08. Dispositions of Assets. The Obligors shall not sell,
convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily (any of the foregoing being referred to in this Section 8.08
as a "transaction" and any series of related transactions constituting but a
single transaction), any of their properties or assets, tangible or intangible
(including but not limited to sale, assignment, discount or other disposition
of accounts, contract rights, chattel paper or general intangibles with or
without recourse), except:
(a) transactions in the ordinary course of business
(b) sales during any fiscal year of equipment or fixtures
which are worn out or obsolete, provided that the Net Sales Proceeds
of such sales in the aggregate do not exceed $150,000; or
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(c) the Obligors shall be permitted to close stores so
long as the Obligors continue to operate at least 161 stores; or
(d) sales of equipment or fixtures in connection with
store closings permitted pursuant to this Agreement.
8.09. Affiliates. The Obligors will not provide funds to
any Affiliate except:
(a) that the Obligors may pay wages, salaries, directors'
fees and related benefits and may make expense reimbursements to
Affiliates in the ordinary course of business;
(b) each Obligor may advance funds to other Obligors; and
(c) each Obligor may enter into or be a party to any
transaction with any Affiliate in the ordinary course of business in a
manner and to an extent consistent with past practice of such Obligor
which is necessary or desirable for the prudent operation of its
business for fair consideration and on terms no less favorable to such
Obligor as are available from unaffiliated third parties.
8.10. Continuation of or Change In Business. Each of the
Obligors shall continue to engage in its business substantially as conducted
and operated during the present and preceding fiscal year except as otherwise
permitted in this Agreement, and the Obligors will not engage in any other
business.
8.11. Payments. The Obligors shall not make any payment of
principal or interest or otherwise on account of any Indebtedness or trade
payable incurred prior to the Filing Date, provided that such payments may be
made: (i) to the holders of, or in respect of, wage and employee benefit
obligations (including expense reimbursements) which arose prior to the Filing
Date; (ii) to landlords in connection with the assumption of unexpired leases
under Section 365 of the Bankruptcy Code in an aggregate amount not to exceed
$6,500,000; and (iii) to other lessors and non-debtor parties to executory
contracts in connection with the assumption of such leases and contracts under
Section 365 of the Bankruptcy Code, in each case after prior written notice of
such payment has been given by the Obligors to the Lender and subject to
approval of the Bankruptcy Court.
8.12. Capital Expenditures. The Obligors shall not permit
Capital Expenditures for the Obligors to exceed $4,000,000 in the aggregate for
each fiscal year.
8.13. Lease Obligations. The Obligors shall not create,
incur or suffer to exist any obligations as lessee (i) for the payment of rent
for any real or personal property in
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connection with any sale and leaseback transaction, or (ii) for the payment of
rent for any real or personal property under leases or agreements to lease
other than obligations under Capitalized Leases which would not cause the
aggregate amount of all obligations under Capitalized Leases entered into after
the Effective Date owing by the Obligors in any fiscal year, together with all
other Capital Expenditures for such fiscal year, to exceed the amount set forth
in Section 8.12.
8.14. EBITDAR.
(a) The Obligors shall not permit EBITDAR for each fiscal
quarter of the Obligors ending on the dates listed below to be less than the
amount specified opposite each such date:
Fiscal Quarter EBITDAR
-------------- -------
September 30, 1996 $ (9,037,517)
December 31, 1996 $(10,136,964)
March 31, 1997 $ (870,212)
June 30, 1997 $ (9,761,631)
September 30, 1997 $ (9,532,688)
December 31, 1997 $(15,185,178)
(b) The Obligors shall not permit Cumulative EBITDAR for
each fiscal quarter of the Obligors ending on the dates listed below to be less
than the amount specified opposite each such date:
Fiscal Quarter Cumulative EBITDAR
-------------- ------------------
September 30, 1996 $ (9,037,517)
December 31, 1996 $(19,174,481)
March 31, 1997 $(20,044,693)
June 30, 1997 $(29,806,324)
September 30, 1997 $(39,339,012)
December 31, 1997 $(58,524,910)
8.15. Gross Revenue.
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(a) The Obligors shall not permit Gross Revenue for each
fiscal quarter of the Obligors ending on the dates listed below to be less than
the amount specified opposite each such date:
Fiscal Quarter Cumulative Gross Revenue
-------------- ------------------------
September 30, 1996 $29,296,240
December 31, 1996 $24,431,555
March 31, 1997 $38,098,610
June 30, 1997 $27,559,523
September 30, 1997 $27,743,132
December 31, 1997 $23,209,976
(b) The Obligors shall not permit Cumulative Gross
Revenue for each fiscal quarter of the Obligors ending on the dates listed
below to be less than the amount specified opposite each such date:
Fiscal Quarter Cumulative Gross Revenue
-------------- ------------------------
September 30, 1996 $ 29,296,240
December 31, 1996 $ 53,727,795
March 31, 1997 $ 91,826,405
June 30, 1997 $119,385,928
September 30, 1997 $147,129,060
December 31, 1997 $170,339,036
8.16. Fiscal Year. The Obligors shall not permit their
fiscal years to end on a day other than the Saturday closest to December 31, or
apply to the Bankruptcy Court for authority to do so.
ARTICLE IX
DEFAULTS
9.01. Events of Default. An Event of Default shall mean
the occurrence or existence of one or more of the following events or
conditions (whatever the reason for such Event of Default and whether
voluntary, involuntary or effected by operation of Law):
(a) The Obligors shall fail to make any payment of
principal under this Agreement or any Reimbursement Obligation when
due; or the Obligors shall fail to pay when due any other amount
payable under this Agreement or any other Related Document (including
but not limited to the making of deposits in the Depository
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Accounts, the Cash Concentration Account or the Cash Collateral
Account), including any interest or fee due hereunder or under any
other Related Document; or
(b) Any representation or warranty made by any of the
Obligors under this Agreement or any other Related Document or any
statement made by any of the Obligors in any financial statement,
certificate, report, or document furnished to the Lender pursuant to
or in connection with this Agreement or any other Related Document,
shall prove to have been false or misleading in any material respect
as of the time when made (including by omission of information
necessary to make such representation, warranty or statement, in light
of the circumstances under which it was made, not misleading); or
(c) The Obligors shall default in the performance or
observance of any covenant contained in Article VII (other than
Section 7.01, 7.04, 7.05 and 7.07) or Article VIII hereof; or
(d) The Obligors shall default in the performance or
observance of (i) the covenants contained in Section 7.01, 7.04, 7.05
and 7.07 and such default shall have continued unremedied for a period
of five days, or (ii) any other covenant, agreement or duty under this
Agreement or any other Related Document (to the extent not otherwise
set forth in this Section 9.01) and such default shall have continued
unremedied for a period of 30 days; or
(e) An order with respect to the Chapter 11 Cases shall
be entered by the Bankruptcy Court, or any of the Obligors shall file
an application for an order with respect to the Chapter 11 Cases, (i)
appointing a trustee in any such Case or (ii) appointing an examiner
in such Case with the authority to perform the duties of a trustee in
respect of the estate of any of the Obligors or the operation of the
business of any of the Obligors, in addition to those duties set forth
in subsections 1106(a)(3) and 1106(a)(4) of the Bankruptcy Code; or
(f) An order with respect to any of the Chapter 11 Cases
shall be entered by the Bankruptcy Court converting such chapter 11
case to a chapter 7 case; or
(g) An order or plans shall be entered by the Bankruptcy
Court confirming a plan of reorganization in the Chapter 11 Cases
which does not contain a provision for termination of the Revolving
Credit Commitment and payment in full in cash of all Obligations of
the Obligors hereunder and under the other Related Documents on or
before the effective date of such plan or plans upon entry thereof; or
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(h) An order shall be entered by the Bankruptcy Court
dismissing any of the Chapter 11 Cases which does not contain a
provision for termination of the Revolving Credit Commitment and
payment in full in cash of all Obligations of the Obligors hereunder
and under the other Related Documents upon entry thereof; or
(i) An order with respect to any of the Chapter 11 Cases
shall be entered by the Bankruptcy Court without the express prior
written consent of the Lender, (i) to revoke, reverse, stay, modify,
supplement or amend the Final Bankruptcy Court Order or (ii) to permit
any administrative expense or any claim (now existing or hereafter
arising, of any kind or nature whatsoever) to have administrative
priority as to any of the Obligors equal or superior to the priority
of the Lender in respect of the Obligations, except for allowed
administrative expenses having priority over the Obligations to the
extent set forth in the Agreed Administrative Expense Priorities, or
(iii) to grant or permit the grant of a Lien on the Collateral; or
(j) An application for any of the orders described in
clauses (e), (f), (g), (h) or (i) above shall be made (i) by a Person
other than the Obligors and such application is not contested by the
Obligors in good faith and the relief requested is granted in an order
that is not stayed pending appeal or (ii) by the Obligors; or
(k) An order shall be entered by the Bankruptcy Court
that is not stayed pending appeal granting relief from the automatic
stay to any creditor of any of the Obligors with respect to any claim
secured by any asset or assets of the Obligor having a book value
equal to or exceeding $500,000 in the aggregate; provided, however,
that it shall not be an Event of Default if relief from the automatic
stay is lifted solely for the purpose of allowing such creditor to
determine the liquidated amount of its claim against the Obligors; or
(l) Any non-monetary judgment or order shall be entered
against any Obligor which does or could reasonably be expected to have
a Material Adverse Effect, and there shall be a period of ten
consecutive days during which a stay or enforcement of such judgment
or order shall not be in effect.
9.02. Consequences of an Event of Default. If an Event of
Default shall occur and be continuing or shall exist, the Lender may, by notice
to the Borrower,
(i) declare the Revolving Credit Commitment terminated,
whereupon the Revolving Credit Commitment will terminate immediately
and any fees hereunder shall be immediately due and payable without
further order of or application to the Bankruptcy Court, presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived, and an action therefor shall immediately accrue; or
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(ii) declare the unpaid principal amount of the Note,
interest accrued thereon, the total amount of the Letter of Credit
Exposure that is not cash collateralized in accordance with this
Agreement and all other amounts owing by the Obligors hereunder or
under the Note to be immediately due and payable without further order
of or application to the Bankruptcy Court, presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived, and an action therefor shall immediately accrue; or
(iii) give notice to the Obligors of the occurrence and
continuance of an Event of Default; or
(iv) at any time when there are no Loans outstanding,
maintain cash collateral (to the extent the Obligors have or receive
cash) equal to 105% of all outstanding Letters of Credit; or
(v) apply all funds deposited in the Cash Concentration
Accounts and in the Cash Collateral Account to the payment, in whole
or in part, of the Obligations; or
(vi) upon two Business Days' written notice to the
Borrower, set-off amounts in the Cash Concentration Accounts or any
other accounts under the dominion and control of the Lender and apply
such amounts to the Obligations of the Obligors hereunder and in the
Related Documents; or
(vii) upon two Business Days' written notice to the
Borrower, exercise all rights and remedies which the Lender may have
under any other Related Document.
9.03. Certain Remedies. If an Event of Default occurs, the
Lender may exercise all rights and remedies which the Lender may have hereunder
or under any other Related Document or at law (including but not limited to the
Bankruptcy Code and the Uniform Commercial Code) or in equity or otherwise.
All such remedies shall be cumulative and not exclusive.
ARTICLE X
MISCELLANEOUS
10.01. Holidays. Except as otherwise provided herein,
whenever any payment or action to be made or taken hereunder or under the Note
shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next
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following Business Day and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
10.02. Records. The unpaid principal amount of the Note, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, the Lender's
Current Commitment, the Stated Amount of each Letter of Credit, the principal
amount of all Reimbursement Obligations, the Letter of Credit Exposure, and the
accrued and unpaid commitment fee, facility fee, administration fee and Letter
of Credit Fees shall at all times be ascertained from the records of the
Lender, which shall be conclusive absent manifest error.
10.03. Amendments and Waivers. The Lender and the Obligors
may from time to time enter into agreements amending, modifying or
supplementing this Agreement or the Note or any other Related Document, and the
Lender may from time to time grant waivers or consents to a departure from the
due performance of the obligations of the Obligors hereunder or thereunder.
Any such agreement, waiver or consent must be in writing and shall be effective
only to the extent specifically set forth in such writing. In the case of any
such waiver or consent relating to any provision hereof any Event of Default or
Potential Default so waived or consented to shall be deemed to be cured and not
continuing, but no such waiver or consent shall extend to any other or
subsequent Event of Default or Potential Default or impair any right consequent
thereto.
10.04. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Lender in exercising any right, power or
privilege under this Agreement, the Note or any other Related Document shall
affect any other or future exercise thereof or exercise of any other right,
power or privilege; nor shall any single or partial exercise of any such right,
power or privilege or any abandonment or discontinuance of steps to enforce
such a right, power or privilege preclude any further exercise thereof or of
any other right, power or privilege. The rights and remedies of the Lender
under this Agreement, the Note and the other Related Documents are cumulative
and not exclusive of any rights or remedies which the Lender has thereunder or
at law or in equity or otherwise. The Lender may exercise its rights and
remedies against the Obligors and the Collateral as the Lender may elect, and
regardless of the existence or adequacy of any other right or remedy.
10.05. Notices.
(a) All notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Agreement
or the Note shall be in writing (including telexed and telecopied
communication) unless otherwise expressly permitted hereunder and shall be sent
by first-class or first-class express mail, or by telex or telecopy with
confirmation in writing mailed first-class, or by overnight courier, or by
personal
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delivery, in all cases with charges prepaid. Any properly given notice shall
be effective when received. All notices shall be sent
(i) If to any of the Obligors, at the following address:
Discovery Zone, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx, General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and (ii) if to the Lender, at the address stated on the signature page hereof
together with, in the case of a letter of credit request and Letter of Credit
Application sent pursuant to Section 3.01 (a) a copy to the Lender at the
address for the Lender provided on the signature page hereof, or in accordance
with the last unrevoked written direction from such party to the other parties
hereto.
(b) Nothing in this Agreement or in any other Related
Document shall be construed to limit or affect the obligation of the Obligors
or any other Person to serve upon the Lender in the manner prescribed by the
Bankruptcy Code any pleading or notice required to be given to the Lender
pursuant to the Bankruptcy Code.
(c) The Lender may rely, and shall be fully protected in
relying, on any notice purportedly made by or on behalf of the Borrower, and
the Lender shall have no duty to verify the identity or authority of any Person
giving such notice. The preceding sentence shall apply to all notices whether
or not made in a manner authorized or required by this Agreement or any other
Related Document.
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10.06. Expenses; Taxes; Attorneys' Fees; Indemnification.
The Borrower agrees to pay or cause to be paid, on demand, and to save the
Lender harmless against liability for the payment of all reasonable
out-of-pocket expenses, regardless of whether the transactions contemplated
hereby are consummated, including but not limited to reasonable fees and
expenses of counsel for the Lender, accounting, due diligence, periodic field
audits, investigation, monitoring of assets, miscellaneous disbursements,
examination, reasonable travel, reasonable lodging and meals, incurred by the
Lender from time to time arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Related Documents, (b) any requested amendments,
waivers or consents to this Agreement or the other Related Documents whether or
not such documents become effective or are given, (c) the administration,
preservation and protection of any of the Lender's rights under this Agreement
or the other Related Documents, (d) the defense of any claim or action asserted
or brought against the Lender by any Person that arises from or relates to this
Agreement, any other Related Document, the Lender's claims against the
Obligors, or any and all matters in connection therewith, (e) the commencement
or defense of, or intervention in, any court proceeding arising from or related
to this Agreement or any other Related Document, (f) the filing of any
petition, complaint, answer, motion or other pleading by the Lender, or the
taking of any action in respect to Collateral or other security, in connection
with this Agreement or any other Related Document, (g) the protection,
collection, lease, sale, taking possession of or liquidation of, any Collateral
or other security in connection with this Agreement or any other Related
Document, (h) any attempt to enforce any lien or security interest in any
Collateral or other security in connection with this Agreement or any other
Related Document, (i) any attempt to collect from the Obligors, (j) the receipt
of any advice with respect to any of the foregoing, (k) all Environmental
Liabilities and Costs arising from or connection with the past, present or
future operations of the Obligors involving any damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Contaminants on, upon or into such property; (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Contaminant present or arising out of the operations
of any facility of the Obligors; or (m) any costs or liabilities incurred in
connection with any Environmental Lien. Notwithstanding the foregoing, the
Borrower shall not be obligated to pay on behalf of the Lender, or to reimburse
the Lender for, out-of-pocket expenses incurred on or prior to the Closing
Date to the extent such out-of-pocket expenses exceed $50,000. Without
limitation of the foregoing or any other provision of any Related Document: (x)
the Borrower agrees to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter determined by the Lender
to be payable in connection with this Agreement or any other Related Document,
and the Borrower agrees to save the Lender harmless from and against any and
all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions, and (y) if the Borrower fails to perform any covenant or agreement
contained herein or in any other Related Document, the Lender may itself
perform or cause
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performance of such covenant or agreement, and the expenses of the Lender
incurred in connection therewith shall be reimbursed on demand by the Borrower.
The Borrower agrees to indemnify and defend the Lender and its directors,
officers, agents, employees and affiliates (collectively the "Indemnified
Parties") from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, costs or expenses of any nature whatsoever
(including reasonable attorneys' fees and amounts paid in settlement) incurred
by, imposed upon or asserted against any of them arising out of or by reason of
any investigation, litigation or other proceeding brought or threatened
relating to, or otherwise arising out of or relating to, the execution of this
Agreement or any other Related Document, the transactions contemplated hereby
or thereby or any Loan or proposed Loan or Letter of Credit or proposed Letter
of Credit hereunder (including, but without limitation, any use made or
proposed to be made by the Borrower of the proceeds of any thereof, or the
delivery or use or transfer of or the payment or failure to pay under any Loan
or Letter of Credit) but excluding any such losses, liabilities, claims,
damages, costs or expenses to the extent finally judicially determined to have
resulted from the gross negligence or willful misconduct of the Indemnified
Parties.
10.07. Application. Except to the extent, if any, expressly
set forth in the Related Documents, the Lender shall have the right to apply
any payment received or applied by it in connection with the Obligations to
such of the Obligations then due and payable as it may elect.
10.08. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
10.09. Governing Law. This Agreement and the Note shall be
deemed to be contracts under the laws of the State of New York, without regard
to choice of law principles, and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State except as the
law is governed by the Bankruptcy Code.
10.10. Prior Understandings. This Agreement supersedes all
prior understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein.
10.11. Duration; Survival. All representations and
warranties of the Obligors contained herein or made in connection herewith
shall survive the making of and shall not be waived by the execution and
delivery of this Agreement, the Note or any other Related Document, any
investigation by or knowledge of the Lender, the making of any Loan
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hereunder, or any other event whatever. All covenants and agreements of the
Obligors contained herein shall continue in full force and effect from and
after the date hereof so long as the Borrower may borrow hereunder and until
the Obligations have been paid in full and no Letters of Credit remain
outstanding. Without limitation, it is understood that all obligations of the
Obligors to make payments to or indemnify the Lender (including, without
limitation, obligations arising under Section 10.06 hereof) shall survive the
payment in full of the Note and all Reimbursement Obligations and of all other
obligations of the Obligors thereunder and hereunder, termination of this
Agreement and all other events whatsoever and whether or not any Loans are made
or Letters of Credit issued hereunder.
10.12. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
10.13. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of the Lender, the Obligors and their respective successors and assigns
(including, except for the right to request Loans or Letters of Credit, any
trustee succeeding to the rights of the Borrower pursuant to chapter 11 of the
Bankruptcy Code or pursuant to any conversion to a case under chapter 7 of the
Bankruptcy Code), except that the Borrower may not assign or transfer any of
its rights hereunder without the prior written consent of the Lender.
(b) The Lender may at any time sell, assign or
participate any portion or portions, without the consent of the Borrower, to up
to ten assignees and/or participants; provided, however, that the Lender agrees
to act as the agent on behalf of any transferees or assignees of any interest
in this Agreement. The Borrower shall provide Notes and agree to any amendment
and/or restatement of this Agreement and the Related Documents as may be
requested by the Lender to reflect any such sales or assignments.
10.14. The Lender as Party in Interest. The Obligors hereby
stipulate and agree that the Lender is and shall remain a party in interest in
the Chapter 11 Cases and shall have the right to participate, object and be
heard in any motion or proceeding in connection therewith. Nothing in this
Agreement or any other Related Document shall be deemed to be a waiver of any
of the Lender's rights or remedies under applicable law or documentation.
Without limitation of the foregoing, the Lender shall have the right to make
any motion or raise any objection it deems to be in its interest (specifically
including but not limited to objections to use of proceeds of the Loans, use of
Letters of Credit, to payment of professional fees and expenses or the amount
thereof, to sales or other transactions outside the ordinary course of business
or to assumption or rejection of any executory contract or lease), whether
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or not the action or inaction by the Obligors which is the subject of such
motion or objection violates or is expressly permitted by any covenant or
provision of this Agreement or any other Related Document.
10.15. Confidentiality. Upon the Borrower or any Obligor
delivering to the Lender, or permitting the Lender to inspect, any written
information pursuant to this Agreement, the Lender shall treat such information
as confidential in accordance with its customary practices to the extent such
information is conspicuously marked confidential or to the extent that the
Borrower otherwise advises the Lender that such information is confidential.
The Lender agrees to hold such information in confidence from the date of
disclosure thereof. Subject to the other provisions of this Section 10.15, the
Lender may disclose confidential information to its officers, directors,
employees, attorneys, accountants or other professionals engaged by the Lender
and then only after such third party has agreed to hold such information in
confidence to the same extent as if it were the Lender. Notwithstanding the
foregoing, the provisions of this Section 10.15 shall not apply to information
within any one of the following categories or any combination thereof: (i)
information the substance of which, at the time of disclosure by the Lender,
has been disclosed to or is known to any creditor or official or unofficial
creditors' committee (other than information as to which such creditor or
creditor's committee is then under an obligation of nondisclosure), or any
Person other than (A) a director, officer, employee or agent of the Borrower or
a professional engaged by the Borrower and (B) a Person who is then under an
obligation of nondisclosure (otherwise than as a consequence of a wrongful act
of the Lender), (ii) information which the Lender had in its possession prior
to receipt thereof from the disclosing party, or (iii) information received by
the Lender from a third party having no obligations of nondisclosure with
respect thereto. Nothing contained in this Section 10.15 shall prevent any
disclosure: (x) believed in good faith by the Lender to be required by any Law
or guideline or interpretation or application thereof by any Governmental
Authority, arbitrator or grand jury charged with the interpretation or
administration thereof or compliance with any request or directive of any
Governmental Authority, arbitrator or grand jury (whether or not having the
force of law), (y) determined by counsel for the Lender to be necessary or
advisable in connection with its obligations to any Governmental Authority or
the enforcement or preservation of rights under or in connection with this
Agreement or any other Related Document or (z) of any information which has
been made public by a Person other than the Lender. The Lender shall have the
right to disclose any confidential information described in this Section 10.15
to a Letter of Credit Issuer and to a participant or assignee or prospective
participant or assignee in Loans hereunder, provided that the Lender shall have
obtained from such participant or assignee or prospective participant or
assignee an agreement to hold such information in confidence to the same extent
as if it were the Lender.
10.16. Releases of Collateral.
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(a) Upon the request of the Borrower made in connection
with any sale, transfer or other disposition permitted pursuant to Section 8.08
of this Agreement (a "Permitted Disposition") and provided that the Net Sale
Proceeds of any such Permitted Disposition are paid or pledged, as the case may
be, to the Lender pursuant to Section 8.08 of this Agreement, the Lender shall,
at the expense of the Obligors, release, without recourse, representation or
warranty, its Lien on any such Collateral. Notwithstanding anything to the
contrary, the Lender shall not have any obligation to release its Lien on any
such Collateral if the Lender determines, in its sole discretion exercised
reasonably, that the conditions of this Section 10.16 have not been satisfied.
(b) The Borrower may exercise its rights under this
Section 10.16 at any time during the term of this Agreement in connection with
a Permitted Disposition by delivering to the Lender, not less than ten (10)
Business Days prior to the date of the proposed Permitted Disposition and
release, a certificate substantially in the form of Exhibit I hereto (the
"Release Certificate") of the Chief Executive Officer or Designated Financial
Officer of the Borrower which shall (i) refer to this Section 10.16, (ii)
identify the assets proposed to be sold and any documents that the Borrower is
requesting the Lender to sign in connection with any such proposed release, and
be accompanied by a counterpart of any such documents executed and acknowledged
by all parties thereto (if any) other than the Lender (and in form for
execution by the Lender), (iii) certify, as of the date of the Release
Certificate, that, (A) both immediately before and immediately after giving
effect to such requested release no Event of Default or Potential Default has
occurred and is continuing, and (B) the Net Sale Proceeds of such Permitted
Disposition has been paid or will be paid to the Lender pursuant to the terms
of Section 2.04(a)(ii) of this Agreement, and (iv) certify that the Lender
shall receive a payment of the cash Net Sale Proceeds and a pledge of the
non-cash Net Sale Proceeds in accordance with the terms of Section 2.04(a)(ii)
of this Agreement.
10.17. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH OF THE OBLIGORS HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION AGAINST THE LENDER, ANY PARTICIPANT, ASSIGNEE, INDEMNIFIED PARTY
OR LETTER OF CREDIT ISSUER, BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY OTHER RELATED DOCUMENT, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
LENDER OR THE OBLIGORS IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT.
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ARTICLE XI
GUARANTY
11.01. Guaranty. In consideration of financial
accommodations given or to be given or continued to the Borrower by the Lender
pursuant to this Agreement, each of the Guarantors irrevocably and
unconditionally guarantees to the Lender payment when due, whether by
acceleration or otherwise, of any and all of the Obligations, together with all
interest thereon and all attorneys' fees, costs and expenses of collection
incurred by the Lender in enforcing any of such liabilities.
11.02. Waiver. (a) Each of the Guarantors waives notice of
acceptance of this guaranty and notice of any liability to which it may apply,
and waives presentment, demand of payment, protest, notice of dishonor or
nonpayment of any such liabilities, suit or taking other action by the Lender
against, and any other notice to, any party liable thereon (including the
Guarantors). The Lender may at any time and from time to time (whether or not
after revocation or termination of this guaranty) without the consent of, or
notice to the Guarantors (except as shall be required by applicable statutes
and cannot be waived), without incurring responsibility to the Guarantors,
without impairing or releasing the obligations of the Guarantors hereunder,
upon or without any terms or conditions and in whole or in part:
(i) change the manner, place or terms of payment, and/or
change or extend the time of payment of, renew or alter, any
Obligations, any security therefor, or any liability incurred directly
or indirectly with respect thereto, and the guaranty herein made shall
apply to the Obligations as so changed, extended, renewed or altered;
(ii) modify in any manner whatsoever any of the Related
Documents notwithstanding that such amendments or modifications may
result in the Obligations exceeding the aggregate principal sums set
forth in this Agreement and the other Related Documents;
(iii) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Obligations hereby guaranteed or any Obligations and/or
any offset there against;
(iv) fail to perfect, or continue the perfection of, any
lien or security interest in any such property, or delay in the
perfection of any such lien or security interest;
(v) exercise or refrain from exercising any rights
against the Borrower or others (including the Guarantors) or otherwise
act or refrain from acting;
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(vi) settle or compromise any Obligation hereby guaranteed
or any security therefor, and may subordinate the payment of all or
any part thereof to the payment of any liability (whether due or not)
of the Borrower to creditors of the Borrower other than the Lender and
the Guarantors; and
(vii) apply any sums by whomsoever paid or howsoever
realized to any Obligations to the Lender regardless of what
Obligations remain unpaid.
No invalidity, irregularity or unenforceability of all or any part of the
Obligations, or of any security therefor shall affect, impair or be a defense
to this guaranty, and this guaranty is a primary obligation of the undersigned.
(b) This guaranty is a continuing one and all Obligations
to which it now or hereafter applies or may apply under the terms hereof shall
be conclusively presumed to have been created in reliance hereon. As to the
Guarantors, this guaranty shall continue until all Obligations shall have been
indefeasibly repaid in full, notwithstanding a revocation by, or complete or
partial release for any cause of, any other guarantor, the Borrower or anyone
liable in any manner for the Obligations.
(c) Upon the occurrence and during the continuance of an
Event of Default and the Lender's exercise for its rights under Sections
9.02(i) or (ii) hereof, and at any time thereafter, the Lender may, without
notice to the Borrower or any other Person, make the Obligations to the Lender,
whether or not then due, immediately due and payable hereunder as to the
Guarantors, and the Lender shall be entitled to enforce the Obligations
hereunder.
(d) No delay on the part of the Lender in exercising any
of its options, powers or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this guaranty, shall be deemed to be effective
unless the same shall be in writing, signed by a duly authorized officer of the
Lender, and the same shall be effective only for the period, on the condition
and for the specific instances and purposes specified therein and the same
shall in no way impair the rights of the Lender or the obligations of the
Guarantors to the Lender in any other respect at any other time.
(e) The Guarantors agree that, should the Lender bring
any judicial proceedings in relation to this guaranty and the Related
Documents, the Guarantors will not interpose any counterclaim or setoff of any
nature other than mandatory counterclaims.
11.03. Subordination. Any and all rights and claims of the
Guarantors against the Borrower or any of its property, arising by reason of
any payment by the undersigned to the Lender pursuant to the provisions of this
guaranty, shall be subordinate and subject in right
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of payment to the prior indefeasible payment in full in cash of all liabilities
of the Borrower to the Lender.
11.04. Covenants. The Guarantors will ensure that each
financial statement of the Guarantors, including without limitation, any
audited or unaudited financial statement or balance sheet and any condensed
balance sheet, which is delivered by or on behalf of the Guarantors or any of
its Subsidiaries to any Person other than a shareholder of the Guarantors,
shall contain, or shall be accompanied by, an accurate written disclosure of
the existence and amount of this guaranty.
11.05. Costs of Collection. In the case of any proceedings
to collect any liabilities of the Guarantors to the Lender, the Guarantors
shall pay all reasonable costs and expenses of every kind for collection,
including reasonable attorneys' fees, and after deducting such costs and
expenses from the proceeds of collection, the Lender shall apply any residue to
any of such liabilities of the Guarantors, who shall continue to be liable for
any deficiency, all such amounts payable on demand. As used herein "attorneys'
fees" shall include, without limitation, all fees of counsel (including,
without limitation, those incurred on appeals) arising from such services and
all reasonably incurred expenses, costs, charges and other fees of such
counsel, and all such fees shall constitute liabilities of the Guarantors to
the Lender.
11.06. Claims. If claim is ever made upon the Lender for
repayment or recovery of any amount or amounts received by the Lender in
payment or on account of any Obligations and the Lender repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over the Lender or any of its property,
or (b) any settlement or compromise of any such claim effected by the Lender
with any such claimant (including the Borrower), then and in such event the
Guarantors agree that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantors, notwithstanding any revocation
hereof or the cancellation of any note or other instrument evidencing any
liability of the Borrower, and the Guarantors shall be and remain liable to the
Lender hereunder for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by the Lender.
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IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of the
date first above written.
BORROWER
DISCOVERY ZONE, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
GUARANTORS
BEAVERTON FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DJM MANAGEMENT, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
DZ OF CONNECTICUT, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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DZ OF GEORGIA, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZ OF MASSACHUSETTS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZ OF MISSOURI, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZ OF NEW YORK, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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DZ OF PENNSYLVANIA, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZ OF WISCONSIN, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
PORTLAND FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
VANCOUVER FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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DISCOVERY ZONE (PUERTO RICO), INC.,
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
LEAPS & BOUNDS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
SEMBORG CORP.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZGP, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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DISCOVERY ZONE CHILDREN'S
AMUSEMENT CORPORATION
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DZ PARTY, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DISCOVERY ZONE L.P.
as debtor and debtor-in-possession
By: DZGP, Inc. its general partner
as debtor and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
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TUMBLE FOR FUN LIMITED PARTNERSHIP
as debtor and debtor-in-possession
By: Discovery Zone Children's
Amusement Corporation,
its general partner as debtor
and debtor-in-possession
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
LENDER
PERRY PARTNERS L.P.
By:
------------------------------------
Name:
Title:
Address for Notices:
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone:
Telecopy:
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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EXHIBIT A
NOTE
$25,000,000 New York, New York
September __, 1996
FOR VALUE RECEIVED, the undersigned, DISCOVERY ZONE, INC., as
debtor and debtor-in-possession under Chapter 11 of Title 11 of the United
States Code (the "Code"), a New York corporation, (the "Borrower") hereby
promises to pay to the order of PERRY PARTNERS L.P. (the "Lender") on or before
the Termination Date (as defined in the Credit Agreement referred to below),
and at such earlier dates as may be required by the Credit Agreement, the
lesser of (i) the principal amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000)
and (ii) the aggregate unpaid principal amount of all Loans (as defined in the
Credit Agreement) made by the Lender to the Borrower pursuant to the Credit
Agreement. The Borrower further promises to pay to the order of the Lender
interest on the unpaid principal amount hereof from time to time outstanding at
the rate or rates per annum determined pursuant to the Credit Agreement,
payable on the dates set forth in the Credit Agreement. Payments of principal
and interest on this Note shall be made in lawful money of the United States of
America in the manner set forth in the Credit Agreement.
This Note is the "Note" referred to in, and is entitled to the
benefits of, the Revolving Credit Agreement, dated as of September __, 1996 (as
the same may be amended, restated, modified or supplemented from time to time,
the "Credit Agreement"; capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement), among the
Borrower, certain of its affiliates as Guarantors and the Lender, which among
other things, provides for the acceleration of the maturity hereof upon the
occurrence of certain events and for prepayments in certain circumstances, all
upon certain terms and conditions specified therein. Notwithstanding any other
provision of this Note, interest paid or becoming due hereunder shall in no
event exceed the maximum rate permitted by applicable law.
This Note is secured by and is entitled to the benefits of the
security interests granted by the Credit Agreement and the other Related
Documents referred to in the Credit Agreement, and is further entitled to the
benefits of the security agreement, guarantees and other Related Documents
referred to in the Credit Agreement. Except as provided in the Credit
Agreement, the Borrower hereby expressly waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Credit
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
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The obligations of the Borrower hereunder constitute allowed
administrative expense claims in the Chapter 11 Case entitled to priority over
all administrative expenses and unsecured claims against the Borrower, now
existing or hereafter arising, of any kind or nature whatsoever, including
without limitation all administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Code, subject to certain exceptions set forth
in the Credit Agreement, and provided that Avoidance Action Proceeds shall not
constitute Collateral of, or be used to pay the superpriority administrative
expense claims granted to, the Lender under the Credit Agreement and Related
Document, provided that the Lender shall be entitled to receive Avoidance
Action Proceeds ratably with other holders of administrative claims to the
extent the superpriority administrative claims granted to the Lender are not
paid from the proceeds of other assets of Discovery Zone and the Guarantors.
This Note and interests herein may only be transferred to the
extent and in the manner set forth in the Credit Agreement.
This Note shall be governed by, construed and enforced in
accordance with, the internal laws of the State of New York, without regard to
choice of law principles, except to the extent governed by the Bankruptcy Code.
DISCOVERY ZONE, INC., as debtor and
debtor-in-possession
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Name:
Title:
