EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
by and among
XXXXXXX FABRICS, INC.
HF MERCHANDISING, INC.
XXXXXXX FABRICS OF MI, INC.
XXXXXXXXXXXXXX.XXX, INC.
XXXXXXX FABRICS, LLC
as Borrowers
and
HF ENTERPRISES, INC.
HF RESOURCES, INC.
as Guarantors
THE LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO
WACHOVIA BANK, NATIONAL ASSOCIATION
as Administrative Agent
THE CIT GROUP/BUSINESS CREDIT, INC.
as Syndication Agent
WACHOVIA CAPITAL MARKETS, LLC
as Sole Lead Arranger, Manager and Bookrunner
Dated: June 29, 2005
SECTION 1. DEFINITIONS......................................................................... 1
SECTION 2. CREDIT FACILITIES................................................................... 33
2.1 Revolving Loans......................................................................... 33
2.2 Letters of Credit....................................................................... 33
2.3 Increase or Decrease in Maximum Credit.................................................. 38
SECTION 3. INTEREST AND FEES................................................................... 40
3.1 Interest................................................................................ 40
3.2 Fees.................................................................................... 41
3.3 Changes in Laws and Increased Costs of Loans............................................ 42
SECTION 4. CONDITIONS PRECEDENT................................................................ 44
4.1 Conditions Precedent to Initial Loans and Letters of Credit............................. 44
4.2 Conditions Precedent to All Loans and Letters of Credit ................................ 46
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST........................................... 47
5.1 Grant of Security Interest.............................................................. 47
5.2 Perfection of Security Interests........................................................ 48
SECTION 6. COLLECTION AND ADMINISTRATION....................................................... 52
6.1 Borrowers' Loan Accounts................................................................ 52
6.2 Statements.............................................................................. 52
6.3 Cash Management; Collection of Collateral Proceeds...................................... 52
6.4 Payments................................................................................ 54
6.5 Taxes................................................................................... 55
6.6 Authorization to Make Loans............................................................. 57
6.7 Use of Proceeds......................................................................... 58
6.8 Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of
Loans and Statements.................................................................... 58
6.9 Pro Rata Treatment...................................................................... 59
6.10 Sharing of Payments, Etc............................................................... 59
6.11 Settlement Procedures.................................................................. 60
6.12 Obligations Several; Independent Nature of Lenders' Rights............................. 62
6.13 Bank Products.......................................................................... 62
SECTION 7. COLLATERAL REPORTING AND COVENANTS.................................................. 63
7.1 Collateral Reporting.................................................................... 63
7.2 Accounts Covenants...................................................................... 64
7.3 Inventory Covenants..................................................................... 65
7.4 Equipment and Real Property Covenants................................................... 66
7.5 Power of Attorney....................................................................... 66
7.6 Right to Cure........................................................................... 67
(ii)
7.7 Access to Premises...................................................................... 68
SECTION 8. REPRESENTATIONS AND WARRANTIES...................................................... 68
8.1 Existence, Power and Authority.......................................................... 68
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations............... 68
8.3 Financial Statements; No Material Adverse Change........................................ 69
8.4 Priority of Liens; Title to Properties.................................................. 69
8.5 Tax Returns............................................................................. 70
8.6 Litigation.............................................................................. 70
8.7 Compliance with Other Agreements and Applicable Laws.................................... 70
8.8 Environmental Compliance................................................................ 71
8.9 Employee Benefits....................................................................... 71
8.10 Bank Accounts.......................................................................... 72
8.11 Intellectual Property.................................................................. 72
8.12 Subsidiaries; Affiliates; Capitalization; Solvency..................................... 73
8.13 Labor Disputes......................................................................... 73
8.14 Restrictions on Subsidiaries........................................................... 74
8.15 Material Contracts..................................................................... 74
8.16 Credit Card Agreements................................................................. 74
8.17 Interrelated Businesses................................................................ 74
8.18 Payable Practices...................................................................... 75
8.19 Accuracy and Completeness of Information............................................... 75
8.20 Survival of Warranties; Cumulative..................................................... 75
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.................................................. 75
9.1 Maintenance of Existence................................................................ 75
9.2 New Collateral Locations................................................................ 76
9.3 Compliance with Laws, Regulations, Etc.................................................. 76
9.4 Payment of Taxes and Claims............................................................. 77
9.5 Insurance............................................................................... 77
9.6 Financial Statements and Other Information.............................................. 78
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc................................. 80
9.8 Encumbrances............................................................................ 82
9.9 Indebtedness............................................................................ 84
9.10 Loans, Investments, Etc................................................................ 86
9.11 Restricted Payments.................................................................... 88
9.12 Transactions with Affiliates........................................................... 90
9.13 Compliance with ERISA.................................................................. 90
9.14 End of Fiscal Years; Fiscal Quarters................................................... 90
9.15 Change in Business..................................................................... 90
9.16 Limitation of Restrictions Affecting Subsidiaries...................................... 90
9.17 License Agreements..................................................................... 91
9.18 Credit Card Agreements................................................................. 92
9.19 Minimum Excess Availability............................................................ 92
9.20 After Acquired Real Property........................................................... 92
9.21 Foreign Assets Control Regulations, Etc................................................ 93
(iii)
9.22 Costs and Expenses.................................................................... 93
9.23 Further Assurances.................................................................... 94
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................... 95
10.1 Events of Default..................................................................... 95
10.2 Remedies.............................................................................. 98
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS.................................................. 101
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver................. 101
11.2 Waiver of Notices..................................................................... 103
11.3 Amendments and Waivers................................................................ 103
11.4 Waiver of Counterclaims............................................................... 105
11.5 Indemnification....................................................................... 105
SECTION 12. THE AGENT......................................................................... 106
12.1 Appointment, Powers and Immunities.................................................... 106
12.2 Reliance by Agent..................................................................... 106
12.3 Events of Default..................................................................... 107
12.4 Wachovia in its Individual Capacity................................................... 107
12.5 Indemnification....................................................................... 107
12.6 Non-Reliance on Agent and Other Lenders............................................... 108
12.7 Failure to Act........................................................................ 108
12.8 Additional Loans...................................................................... 108
12.9 Concerning the Collateral and the Related Financing Agreements........................ 109
12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders........ 109
12.11 Collateral Matters................................................................... 110
12.12 Agency for Perfection................................................................ 111
12.13 Successor Agent...................................................................... 112
12.14 Other Agent Designations............................................................. 112
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS.................................................. 112
13.1 Term.................................................................................. 112
13.2 Interpretative Provisions............................................................. 114
13.3 Notices............................................................................... 115
13.4 Partial Invalidity.................................................................... 117
13.5 Confidentiality....................................................................... 117
13.6 Successors............................................................................ 118
13.7 Assignments; Participations........................................................... 118
13.8 Entire Agreement...................................................................... 120
13.9 USA Patriot Act....................................................................... 121
13.10 Counterparts, Etc.................................................................... 121
(iv)
INDEX
TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Borrowing Base Certificate
Exhibit D Form of Compliance Certificate
Schedule 1.27 Commitments
Schedule 1.35 Customs Brokers
Schedule 1.55 Existing Lenders
Schedule 1.95 Owned Store Real Properties
Schedule 8.16 Credit Card Agreements
(v)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated June 29, 2005 is entered into by
and among Xxxxxxx Fabrics, Inc, a Delaware corporation ("Parent"), HF
Merchandising, Inc., a Delaware corporation ("Merchandising"), Xxxxxxx Fabrics
of MI, Inc., a Delaware corporation ("Fabrics MI"), xxxxxxxxxxxxxx.xxx, Inc., a
Delaware corporation ("Xxxxxxx.xxx"), Xxxxxxx Fabrics, LLC, a Delaware limited
liability company ("Fabrics LLC", and together with Parent, Merchandising,
Fabrics MI and Xxxxxxx.xxx, each individually a "Borrower" and collectively,
"Borrowers" as hereinafter further defined), HF Enterprises, Inc., a Delaware
corporation ("Enterprises"), HF Resources, Inc., a Delaware corporation
("Resources", and together with Enterprises, each individually a "Guarantor" and
collectively, "Guarantors" as hereinafter further defined), the parties hereto
from time to time as lenders, whether by execution of this Agreement or an
Assignment and Acceptance (each individually, a "Lender" and collectively,
"Lenders" as hereinafter further defined) and Wachovia Bank, National
Association , a national banking association, in its capacity as agent for
Lenders (in such capacity, "Agent" as hereinafter further defined).
W I T N E S S E T H:
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
enter into financing arrangements with Borrowers pursuant to which Lenders may
make loans and provide other financial accommodations to Borrowers; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all present
and future rights of such Borrower and Guarantor to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan comprising part of the same borrowing
(including conversions,
extensions and renewals), the rate per annum determined by dividing (a) the
London Interbank Offered Rate for such Interest Period by (b) a percentage equal
to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, "Reserve
Percentage" shall mean for any day, that percentage (expressed as a decimal)
which is in effect from time to time under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as such regulation
may be amended from time to time or any successor regulation, as the maximum
reserve requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Loans is determined), whether or not any Lender has
any Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as
such shall be deemed subject to reserve requirements without benefits of credits
for proration, exceptions or offsets that may be available from time to time to
a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Reserve Percentage.
1.3 "Administrative Borrower" shall mean Xxxxxxx Fabrics, Inc., a Delaware
corporation in its capacity as Administrative Borrower on behalf of itself and
the other Borrowers pursuant to Section 6.8 hereof and it successors and assigns
in such capacity.
1.4 "Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds ten (10%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds ten
(10%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.5 "Agent" shall mean Wachovia Bank, National Association, in its
capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.
1.6 "Agent Payment Account" shall mean account no. 5000000030295 of Agent
at Wachovia, or such other account of Agent as Agent may from time to time
designate to Administrative Borrower as the Agent Payment Account for purposes
of this Agreement and the other Financing Agreements.
1.7 "Applicable Margin" shall mean, at any time, as to the interest rate
for Prime Rate Loans and the interest rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if the Quarterly
Average Excess Availability for the immediately
2
preceding fiscal quarter is at or within the amounts indicated for such
percentage as of the last day of the immediately preceding fiscal quarter:
Applicable Applicable
Quarterly Average Eurodollar Rate Prime Rate
Tier Excess Availability Margin Margin
---- ---------------------------- --------------- ----------
1 Greater than $35,000,000 1.25% 0%
2 Less than or equal to
$35,000,000 and greater than 1.50% 0%
$15,000,000
3 Less than or equal to
$15,000,000 1.75% .25%
provided, that, (i) the Applicable Margin shall be calculated and established
once each fiscal quarter and shall remain in effect until adjusted thereafter
after the end of the next fiscal quarter, (ii) the Applicable Margin through
December 31, 2005 shall be the amount for Tier 2 set forth above, and (iii) in
the event that the level of Quarterly Average Excess Availability falls within
Tier 1, the EBITDA of the Parent and its Subsidiaries for the immediately
preceding four (4) fiscal quarters (based on the most recent financial
statements then received by Agent) shall not be less than $20,000,000 in order
for the Applicable Margins set forth for Tier 1 to apply (it being understood
that, if the level of Quarterly Average Excess Availability falls within Tier 1
but such EBITDA of Parent and its Subsidiaries is less than $20,000,000 then the
Applicable Margin shall be the amount for Tier 2 set forth above).
1.8 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.7
hereof.
1.9 "Baldwyn Real Property" shall mean the Real Property of Parent located
in Baldwyn, Mississippi.
1.10 "Bank Product Provider" shall mean any Lender, Affiliate of any
Lender or other financial institution (in each case as to any Lender, Affiliate
or other financial institution to the extent approved by Agent) that provides
any Bank Products to Borrowers or Guarantors.
1.11 "Bank Products" shall mean any one or more of the following types or
services or facilities provided to a Borrower by Agent, any Lender or any
Affiliate of any Lender or any other financial institution acceptable to Agent:
(a) credit cards or stored value cards or (b) cash management or related
services, including (i) the automated clearinghouse transfer of funds for the
account of a Borrower pursuant to agreement or overdraft for any accounts of
Borrowers maintained at Agent, any Lender or any Affiliate of any Lender (in
each case to the extent approved by Agent) that are subject to the control of
Agent pursuant to any Deposit Account
3
Control Agreement to which Agent, such Affiliate of Agent, Lender or Affiliate
of Lender is a party, as applicable, and (ii) controlled disbursement services
and (iii) Hedge Agreements if and to the extent permitted hereunder. Any of the
foregoing shall only be included in the definition of the term "Bank Products"
to the extent that the Lender, its Affiliate or the other financial institution
has been approved by Agent.
1.12 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.13 "Borrowers" shall mean, collectively, the following (together with
their respective successors and assigns): (a) Xxxxxxx Fabrics, Inc., a Delaware
corporation; (b) HF Merchandising, Inc, a Delaware corporation; (c) Xxxxxxx
Fabrics of MI, Inc., a Delaware corporation; (d) xxxxxxxxxxxxxx.xxx, Inc., a
Delaware corporation; (e) Xxxxxxx Fabrics, LLC, a Delaware limited liability
company, and (f) any other Person that at any time after the date hereof becomes
a Borrower; each sometimes being referred to herein individually as a
"Borrower".
1.14 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) the sum of: (i) the amount equal to eighty-five (85%) percent of
Eligible Credit Card Receivables, plus (ii) the amount equal to the lesser of
(A) sixty-five (65%) percent multiplied by the Value of Eligible Inventory or
(B) eighty-five (85%) percent of the Net Recovery Percentage multiplied by the
Value of such Eligible Inventory, plus (iii) the amount equal to the lesser of
(A) sixty-five (65%) percent multiplied by the Value of Eligible In-Transit
Inventory, (B) eighty-five (85%) percent of the Net Recovery Percentage
multiplied by the Value of such Eligible In-Transit Inventory or (C) $2,500,000,
plus (iv) Real Property Availability, minus
(b) Reserves.
The amounts of Eligible Inventory of any Borrower shall, at Agent's option, be
determined based on the lesser of the amount of Inventory set forth in the
general ledger of such Borrower or the perpetual inventory record maintained by
such Borrower.
1.15 "Borrowing Base Certificate" shall mean a certificate substantially
in the form of Exhibit C hereto, as such form may from time to time be modified
by Agent, which is duly completed (including all schedules thereto) and executed
by the chief financial officer or other appropriate financial officer of
Borrowers acceptable to Agent and delivered to Agent.
1.16 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Texas or the State of North Carolina, and a day on
which Agent is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.17 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such
4
Person as lessee which in accordance with GAAP, is required to be reflected as a
liability on the balance sheet of such Person.
1.18 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.19 "Cash Dominion Event" shall mean either (a) an Event of Default shall
exist or have occurred and be continuing or (b) Excess Availability shall at any
time have fallen below the Cash Dominion Trigger Amount.
1.20 Cash Dominion Trigger Amount" shall mean $27,500,000; provided, that,
the Cash Dominion Trigger Amount shall be reduced to $20,000,000 commencing on
the date (if any) that Agent shall have received evidence that Borrowers have
implemented and tested a management information system with respect to inventory
which is satisfactory to Agent; provided, further, that, if the Maximum Credit
exceeds $110,000,000, the Cash Dominion Trigger Amount shall mean such greater
amount as Agent may determine.
1.21 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$1,000,000,000; (c) commercial paper (including variable rate demand notes) with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx Companies,
Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial institution having combined capital and surplus and undivided profits
of not less than $1,000,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (a) through (e) above.
1.22 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person
5
or group (as such term is used in Section 13(d)(3) of the Exchange Act), other
than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of
any Borrower or Guarantor or the adoption of a plan by the stockholders of any
Borrower or Guarantor relating to the dissolution or liquidation of such
Borrower or Guarantor, other than as permitted in Section 9.7 hereof; (c) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act) of more than thirty (30%) percent of beneficial ownership,
directly or indirectly, of the voting power of the total outstanding Voting
Stock of Parent or the Board of Directors of Parent; (d) during any period of
two (2) consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (or similar governing body) of any Borrower
or Guarantor (together with any new directors whose nomination for election by
the stockholders of such Borrower or Guarantor was approved by a vote of at
least a majority of the directors (or similar persons) then still in office who
were either directors (or similar persons) at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors (or similar
governing body) of any Borrower or Guarantor then still in office; or (e) the
failure of Parent to own and control, directly or indirectly, one hundred (100%)
percent of the voting power of the total outstanding Voting Stock of any other
Borrower or Guarantor.
1.23 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.24 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.25 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor (other than lessors of retail store locations, except as
otherwise agreed to by Administrative Borrower and Agent), or any other person
to whom any Collateral is consigned or who has custody, control or possession of
any such Collateral or is otherwise the owner or operator of any premises on
which any of such Collateral is located, in favor of Agent with respect to the
Collateral at such premises or otherwise in the custody, control or possession
of such lessor, consignee or other person.
1.26 "Commercial Letter of Credit" shall mean any Letter of Credit issued
for the purpose of providing the primary manner of payment for the purchase
price of goods or services by a Borrower in the ordinary course of the business
of such Borrower.
1.27 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth opposite such Lender's name on Schedule 1.27 hereto
or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of
Section 2.3 or 13.7 hereof, as the same may be adjusted from time to time in
accordance with the terms hereof; sometimes being collectively referred to
herein as "Commitments".
1.28 "Consolidated Net Income" shall mean, with respect to any Person for
any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (and as to Borrowers and
Guarantors, excluding to the extent included
6
therein (i) any extraordinary, one-time or non-recurring gains, (ii)
extraordinary, one-time or non-recurring non-cash losses or charges, and (iii)
operations that have been discontinued on or before the date hereof) after
deducting all charges which should be deducted before arriving at the net income
(loss) for such period (but without regard to operations that have been
discontinued on or before the date hereof) and after deducting the Provision for
Taxes for such period, all as determined in accordance with GAAP; provided,
that, (a) the net income of any Person that is not a wholly-owned Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid or payable to
such Person or a wholly-owned Subsidiary of such Person; (b) except to the
extent included pursuant to the foregoing clause, the net income of any Person
accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or
is merged into or consolidated with such Person or any of its wholly-owned
Subsidiaries or that Person's assets are acquired by such Person or by any of
its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change in
accounting principles adopted by such Person or its Subsidiaries after the date
hereof shall be excluded; (d) net income shall exclude interest accruing, but
not paid, on indebtedness owing to a Subsidiary or parent corporation of such
Person; and (e) the net income (if positive) of any wholly-owned Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such wholly-owned Subsidiary to such Person or to any other wholly-owned
Subsidiary of such Person is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such wholly-owned Subsidiary shall
be excluded . For the purposes of this definition, net income excludes any gain
and non-cash loss together with any related Provision for Taxes for such gain
and non-cash loss realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions and for this purpose
sales or other dispositions of retail store locations shall not be deemed to be
in the ordinary course of the business of Borrowers and Guarantors) or of any
Capital Stock of such Person or a Subsidiary of such Person and any net income
or non-cash loss realized as a result of changes in accounting principles or the
application thereof to such Person.
1.29 "Credit Card Acknowledgments" shall mean, collectively, the
agreements by Credit Card Issuers or Credit Card Processors who are parties to
Credit Card Agreements in favor of Agent acknowledging Agent's first priority
security interest, for and on behalf of Lenders, in the monies due and to become
due to a Borrower or Guarantor (including, without limitation, credits and
reserves) under the Credit Card Agreements, and agreeing to transfer all such
amounts to the Blocked Accounts, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced,
sometimes being referred to herein individually as a "Credit Card
Acknowledgment".
1.30 "Credit Card Agreements" shall mean all agreements now or hereafter
entered into by any Borrower or any Guarantor for the benefit of any Borrower,
in each case with any Credit Card Issuer or any Credit Card Processor, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, including, but not limited to, the agreements set
forth on Schedule 8.16 hereto.
1.31 "Credit Card Issuer" shall mean any person (other than a Borrower)
who issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank
7
credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and
American Express, Discover, Diners Club, Xxxxx Xxxxxxx and other non-bank credit
or debit cards, including, without limitation, credit or debit cards issued by
or through American Express Travel Related Services Company, Inc., and Discover
Financial Services, Inc.
1.32 "Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any Borrower's or Guarantor's sales transactions involving
credit card or debit card purchases by customers using credit cards or debit
cards issued by any Credit Card Issuer.
1.33 "Credit Card Receivables" shall mean, collectively, (a) all present
and future rights of any Borrower or Guarantor to payment from any Credit Card
Issuer, Credit Card Processor or other third party arising from sales of goods
or rendition of services to customers who have purchased such goods or services
using a credit or debit card and (b) all present and future rights of any
Borrower or Guarantor to payment from any Credit Card Issuer, Credit Card
Processor or other third party in connection with the sale or transfer of
Accounts arising pursuant to the sale of goods or rendition of services to
customers who have purchased such goods or services using a credit card or a
debit card, including, but not limited to, all amounts at any time due or to
become due from any Credit Card Issuer or Credit Card Processor under the Credit
Card Agreements or otherwise.
1.34 "Credit Facility" shall mean the Loans and Letters of Credit provided
to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.
1.35 "Customs Broker" shall mean the persons listed on Schedule 1.35
hereto or such other person selected by any Borrower after written notice by
such Borrower to Agent who are reasonably acceptable to Agent to perform port of
entry services to process Inventory imported by such Borrower from outside the
United States of America and to supply facilities, labor and materials to such
Borrower in connection therewith.
1.36 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.37 "Defaulting Lender" shall have the meaning set forth in Section 6.11
hereof.
1.38 Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, the
Borrower or Guarantor with a deposit account at any bank and the bank at which
such deposit account is at any time maintained which provides that such bank
will comply with instructions originated by Agent directing disposition of the
funds in the deposit account without further consent by such Borrower or
Guarantor and has such other terms and conditions as Agent may require.
1.39 "EBITDA" shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) depreciation, amortization, LIFO
adjustments consisting of non-cash charges, and other non-cash charges,
including imputed interest, deferred compensation and in the case of
8
Borrowers and Guarantors, non-cash costs associated with the closing of retail
store locations, in each case for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), all in accordance with
GAAP, plus (c) Interest Expense for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), plus (d) the Provision
for Taxes for such period (to the extent deducted in the computation of
Consolidated Net Income of such Person).
1.40 "Eligible Credit Card Receivables" shall mean, as to each Borrower,
Credit Card Receivables of such Borrower which are and continue to be acceptable
to Agent based on the criteria set forth below. Credit Card Receivables shall be
Eligible Credit Card Receivables if:
(a) such Credit Card Receivables arise from the actual and bona fide
sale and delivery of goods or rendition of services by such Borrower in the
ordinary course of the business of such Borrower which transactions are
completed in accordance with the terms and provisions contained in any
agreements binding on such Borrower or the other party or parties related
thereto;
(b) such Credit Card Receivables are not past due (beyond any stated
applicable grace period, if any, therefor) pursuant to the terms set forth in
the Credit Card Agreements with the Credit Card Issuer or Credit Card Processor
of the credit card or debit card used in the purchase which give rise to such
Credit Card Receivables;
(c) such Credit Card Receivables are not unpaid more than five (5)
Business Days after the date of the sale of Inventory giving rise to such Credit
Card Receivables;
(d) all material procedures required by the Credit Card Issuer or
the Credit Card Processor of the credit card or debit card used in the purchase
which gave rise to such Credit Card Receivables shall have been followed by such
Borrower and all documents required for the authorization and approval by such
Credit Card Issuer or Credit Card Processor shall have been obtained in
connection with the sale giving rise to such Credit Card Receivables;
(e) the required authorization and approval by such Credit Card
Issuer or Credit Card Processor shall have been obtained for the sale giving
rise to such Credit Card Receivables;
(f) such Borrower shall have submitted all materials required by the
Credit Card Issuer or Credit Card Processor obligated in respect of such Credit
Card Receivables in order for such Borrower to be entitled to payment in respect
thereof;
(g) the Credit Card Issuer or Credit Card Processor obligated in
respect of such Credit Card Receivable has not failed to remit any monthly
payment in respect of such Credit Card Receivable;
(h) such Credit Card Receivables comply with the applicable terms
and conditions contained in Section 7.2 of this Agreement;
(i) the Credit Card Issuer or Credit Card Processor with respect to
such Credit Card Receivables has not asserted a counterclaim, defense or dispute
and does not have, and
9
does not engage in transactions which may give rise to, any right of setoff
against such Credit Card Receivables (other than setoffs to fees and chargebacks
consistent with the practices of such Credit Card Issuer or Credit Card
Processor with such Borrower as of the date hereof or as such practices may
change as a result of changes to the policies of such Credit Card Issuer or
Credit Card Processor applicable to its customers generally and unrelated to the
circumstance of such Borrower), but the portion of the Credit Card Receivables
owing by such Credit Card Issuer or Credit Card Processor in excess of the
amount owing by such Borrower to such Credit Card Issuer or Credit Card
Processor pursuant to such fees and chargebacks may be deemed Eligible Credit
Card Receivables;
(j) the Credit Card Issuer or Credit Card Processor with respect to
such Credit Card Receivables has not setoff against amounts otherwise payable by
such Credit Card Issuer or Credit Card Processor to such Borrower for the
purpose of establishing a reserve or collateral for obligations of such Borrower
to such Credit Card Issuer or Credit Card Processor (notwithstanding that the
Credit Card Issuer or Credit Card Processor may have setoffs for fees and
chargebacks consistent with the practices of such Credit Card Issuer or Credit
Card Processor with such Borrower as of the date hereof or as such practices may
hereafter change as a result of changes to the policies of such Credit Card
Issuer or Credit Card Processor applicable to its customers generally and
unrelated to the circumstances of such Borrower);
(k) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Credit Card Receivables or
reduce the amount payable or delay payment thereunder (other than for setoffs
for fees and chargebacks consistent with the practices of such Credit Card
Issuer or Credit Card Processor with such Borrower as of the date hereof or as
such practices may hereafter change as a result of changes to the policies of
such Credit Card Issuer or Credit Card Processor applicable to its customers
generally and unrelated to the circumstances of such Borrower or any Guarantor);
(l) such Credit Card Receivables are subject to the first priority,
valid and perfected security interest and lien of Agent, for and on behalf of
itself and Lenders, and any goods giving rise thereto are not, and were not at
the time of the sale thereof, subject to any security interest or lien in favor
of any person other than Agent except as otherwise permitted in this Agreement,
in each case subject to and in accordance with the terms and conditions
applicable hereunder to any such permitted security interest or lien;
(m) there are no proceedings or actions which are pending or, to the
best of any Borrower's knowledge, threatened against the Credit Card Issuers or
Credit Card Processors with respect to such Credit Card Receivables which would
reasonably be expected to result in any material adverse change in the financial
condition of any such Credit Card Issuer or Credit Card Processor;
(n) such Credit Card Receivables are owed by Credit Card Issuers or
Credit Card Processors deemed creditworthy at all times by Agent in good faith;
(o) no event of default has occurred under the Credit Card Agreement
of such Borrower with the Credit Card Issuer or Credit Card Processor who has
issued the credit card or debit card or handles payments under the credit card
or debit card used in the sale which gave
10
rise to such Credit Card Receivables which event of default gives such Credit
Card Issuer or Credit Card Processor the right to cease or suspend payments to
such Borrower or any Guarantor and no event shall have occurred which gives such
Credit Card Issuer or Credit Card Processor the right to setoff against amounts
otherwise payable to such Borrower, including on behalf of a Guarantor (other
than for then current fees and chargebacks consistent with the current practices
of such Credit Card Issuer or Credit Card Processor as of the date hereof or as
such practices may hereafter change as a result of changes to the policies of
such Credit Card Issuer or Credit Card Processor applicable to its customers
generally and unrelated to the circumstances of such Borrower or any Guarantor),
except as may have been waived in writing on terms and conditions reasonably
satisfactory to Agent pursuant to the Credit Card Acknowledgment by such Credit
Card Issuer or Credit Card Processor), or the right to establish reserves or
establish or demand collateral, and the Credit Card Issuer or Credit Card
Processor has not sent any written notice of default and/or notice of its
intention to cease or suspend payments to such Borrower in respect of such
Credit Card Receivables or to establish reserves or cash collateral for
obligations of such Borrower to such Credit Card Issuer or Credit Card
Processor, and such Credit Card Agreements are otherwise in full force and
effect and constitute the legal, valid, binding and enforceable obligations of
the parties thereto;
(p) the terms of the sale giving rise to such Credit Card
Receivables and all practices of such Borrower and Guarantors with respect to
such Credit Card Receivables comply in all material respects with applicable
Federal, State, and local laws and regulations; and
(q) the customer using the credit card or debit card giving rise to
such Credit Card Receivable shall not have returned the merchandise purchased
giving rise to such Credit Card Receivable.
Credit Card Receivables which would otherwise constitute Eligible Credit Card
Receivables pursuant to this Section will not be deemed ineligible solely by
virtue of the Credit Card Agreements with respect thereto having been entered
into by any Guarantor, for the benefit of Borrowers. General criteria for
Eligible Credit Card Receivables may only be changed and any new criteria for
Eligible Credit Card Receivables may only be established by Agent in good faith,
upon notice to Administrative Borrower, based on either: (i) an event, condition
or other circumstance arising after the date hereof, or (ii) existing on the
date hereof to the extent Agent has no written notice thereof from a Borrower
prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the Credit
Card Receivables in the good faith determination of Agent. Any Credit Card
Receivables which are not Eligible Credit Card Receivables shall nevertheless be
part of the Collateral.
1.41 "Eligible In-Transit Inventory" shall mean Inventory that would
otherwise be Eligible Inventory (other than for its location) that as to which:
(i) the Inventory is not purchased with and subject to a Letter of Credit, (ii)
the Inventory is then in transit (whether by vessel, air or land) from a
location outside of the continental United States of America to a location
permitted hereunder and for which Agent shall have received such evidence
thereof as Agent may require, (iii) the title of the Inventory has passed to,
and such Inventory is owned by, a Borrower and for which Agent shall have
received such evidence thereof as Agent may require, (iv) Agent has received
each of the following: (A) a Collateral Access Agreement, duly authorized,
executed and delivered by the customs broker, freight forwarder or other third
party
11
handling the shipping and delivery of such Inventory, (B) a copy of the
certificate of marine cargo insurance in connection therewith in which Agent has
been named as an additional insured and loss payee in a manner acceptable to
Agent and (C) a copy of the invoice, packing slip and manifest with respect
thereto, (v) the Inventory is either (A) subject to a negotiable xxxx of lading:
(1) that is consigned to Agent, (2) that was issued by the carrier in respect of
such Inventory and (3) is either in the possession of the customs broker,
freight forwarder or other third party handling the shipping and delivery of
such Inventory acting on behalf of Agent or the subject of a telefacsimile or
other electronic copy which also confirms that such document is in transit to
Agent or the customs broker, freight forwarder or other third party handling the
shipping and delivery of such Inventory acting on behalf of Agent or (B) subject
to a negotiable cargo receipt and is not the subject of a xxxx of lading (other
than a negotiable xxxx of lading consigned to, and in the possession of a
carrier or Agent, or their respective agents) and such negotiable cargo receipt
is (1) consigned to Agent, (2) issued by a carrier in respect of such Inventory
and (3) either in the possession of Agent or the customs broker, freight
forwarder or other third party handling the shipping and delivery of such
Inventory acting on behalf of Agent or the subject of a telefacsimile or other
electronic copy which also confirms that such document is in transit to Agent or
the customs broker, freight forwarder or other third party handling the shipping
and delivery of such Inventory, (vi) such Inventory is insured against types of
loss, damage, hazards, and risks, and in amounts, satisfactory to Agent, and
(vii) such Inventory shall not have been in transit for more than forty-five
(45) days.
1.42 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods held for resale in the ordinary
course of the business of such Borrower that satisfy the criteria set forth
below as determined by Agent. In general, Eligible Inventory shall not include:
(a) raw materials and work-in-process; (b) spare parts for equipment; (c)
packaging and shipping materials; (d) supplies used or consumed in such
Borrower's business; (e) Inventory at premises other than those owned or leased
and controlled by any Borrower except any Inventory (other than Eligible
In-Transit Inventory and Eligible LC Inventory) which would otherwise be deemed
Eligible Inventory that is not located at premises owned and operated by such
Borrower may nevertheless be considered Eligible Inventory: (i) as to retail
store locations which are leased by such Borrower, Agent may, at its option,
establish such Reserves in respect of amounts at any time payable by such
Borrower to the lessor thereof as Agent shall determine in accordance with the
definition of Reserves, (ii) as to locations which are leased by such Borrower
(other than retail store locations which are leased), if Agent shall have
received a Collateral Access Agreement from the lessor of such location, duly
authorized, executed and delivered by such lessor, or if Agent shall not have
received such Collateral Access Agreement (or Agent shall determine to accept a
Collateral Access Agreement that does not include all required provisions or
provisions in the form otherwise required by Agent), Agent may, at its option,
nevertheless consider Inventory at such location to be Eligible Inventory to the
extent
12
Agent shall have established such Reserves in respect of amounts at any time
payable by such Borrower to the lessor thereof as Agent shall determine in good
faith, and (iii) as to locations operated by a third person, (A) if Agent shall
have received a Collateral Access Agreement from such owner with respect to such
location, duly authorized, executed and delivered by such operator or if Agent
shall not have received such Collateral Access Agreement (or Agent shall
determine to accept a Collateral Access Agreement that does not include all
required provisions or provisions in the form otherwise required by Agent),
Agent may, at its option, nevertheless consider Inventory at such location to be
Eligible Inventory to the extent Agent shall have established such Reserves in
respect of amounts at any time payable by such Borrower to the owner and
operator thereof as Agent shall determine, and (B) in addition, if required by
Agent, if Agent shall have received: (1) UCC financing statements between the
owner and operator, as consignee or bailee and such Borrower, as consignor or
xxxxxx, in form and substance satisfactory to Agent, which are duly assigned to
Agent and (2) a written notice to any lender to the owner and operator of the
first priority security interest in such Inventory of Agent; (f) Inventory
subject to a security interest or lien in favor of any Person other than Agent
except those permitted in this Agreement that are subject to an intercreditor
agreement in form and substance satisfactory to Agent between the holder of such
security interest or lien and Agent; (g) xxxx and hold goods; (h) unserviceable,
obsolete or slow moving Inventory; (i) Inventory that is not subject to the
first priority, valid and perfected security interest of Agent; (j) returned
Inventory that is not saleable and held for sale in the ordinary course of
business; (k) damaged and/or defective Inventory; (l) Inventory purchased or
sold on consignment; (m) Inventory located outside the United States of America;
and (n) Inventory of a Borrower sold under a licensed trademark or trade name or
which contains or uses a medium subject to a licensed copyright, unless, on or
prior to the forty-fifth (45th) day after the date of this Agreement, either (i)
Agent shall be satisfied that it has the right to sell or otherwise dispose of
such Inventory without further action or (ii) Agent shall have received a letter
agreement, in form and substance satisfactory to Agent, duly authorized,
executed and delivered by such Borrower and the applicable licensor. The
criteria for Eligible Inventory set forth above may only be changed and any new
criteria for Eligible Inventory may only be established by Agent in good faith
based on either: (i) an event, condition or other circumstance arising after the
date hereof, or (ii) an event, condition or other circumstance existing on the
date hereof to the extent Agent has no written notice thereof from a Borrower
prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the
Inventory in the good faith determination of Agent. Any Inventory that is not
Eligible Inventory shall nevertheless be part of the Collateral.
1.43 "Eligible LC Inventory" shall mean Inventory that would otherwise be
Eligible Inventory (other than for its location) that as to which: (i) the
Inventory is purchased with and subject to a Letter of Credit, (ii) the
Inventory is then in transit (whether by vessel, air or land) from a location
outside of the continental United States of America to a location permitted
hereunder and for which Agent shall have received such evidence thereof as Agent
may require, (iii) the title of the Inventory has passed to, and such Inventory
is owned by, a Borrower and for which Agent shall have received such evidence
thereof as Agent may require, (iv) Agent has received each of the following: (A)
a Collateral Access Agreement, duly authorized, executed and delivered by the
customs broker, freight forwarder or other third party handling the shipping and
delivery of such Inventory, (B) a copy of the certificate of marine cargo
insurance in connection therewith in which Agent has been named as an additional
insured and loss payee in a manner acceptable to Agent and (C) a copy of the
invoice, packing slip and manifest with respect thereto, (v) the Inventory is
either (A) subject to a negotiable xxxx of lading: (1) that is consigned to
Agent, (2) that was issued by the carrier in respect of such Inventory and (3)
is either in the possession of the customs broker, freight forwarder or other
third party handling the shipping and delivery of such Inventory acting on
behalf of Agent or the subject of a telefacsimile or other electronic copy which
also confirms that such document is in transit to Agent or the customs broker,
freight forwarder or other third party handling the shipping and delivery of
such Inventory acting on behalf of Agent or (B) subject to a negotiable cargo
receipt and is not the
13
subject of a xxxx of lading (other than a negotiable xxxx of lading consigned
to, and in the possession of a carrier or Agent, or their respective agents) and
such negotiable cargo receipt is (1) consigned to Agent, (2) issued by a carrier
in respect of such Inventory and (3) either in the possession of Agent or the
customs broker, freight forwarder or other third party handling the shipping and
delivery of such Inventory acting on behalf of Agent or the subject of a
telefacsimile or other electronic copy which also confirms that such document is
in transit to Agent or the customs broker, freight forwarder or other third
party handling the shipping and delivery of such Inventory, (vi) such Inventory
is insured against types of loss, damage, hazards, and risks, and in amounts,
satisfactory to Agent, and (vii) such Inventory shall not have been in transit
for more than forty-five (45) days.
1.44 "Eligible Real Property" shall mean, as to any Borrower, Real
Property owned by such Borrower in fee simple in each case which are acceptable
to Agent in good faith based on the criteria set forth below. In general,
Eligible Real Property shall not include: (i) Real Property which is not
operated by a Borrower except as Agent may otherwise agree; (ii) Real Property
subject to a security interest, lien, mortgage or other encumbrance in favor of
any person other than Agent (and other than those permitted under Section
9.8(b), 9.8(c) or 9.8(d) hereof or are subject to an intercreditor agreement in
form and substance satisfactory to Agent between the holder of such lien and
Agent); (iii) Real Property that is not located in the continental United States
of America; (iv) Real Property that is not subject to the valid and enforceable,
first priority, perfected security interest, lien and mortgage of Agent; (v)
Real Property where Agent determines that issues relating to compliance with
Environmental Laws adversely affect such Real Property in such manner that such
Real Property would not be acceptable for purposes of including it in the
calculation of the Borrowing Base based on the customary practices, procedures
and policies of Agent and its Affiliates; provided, that, if the Real Property
is acceptable for such purposes in accordance with such practices, procedures
and policies, subject to the satisfaction of the other conditions set forth
herein and any requirements arising pursuant to such practices, procedures and
policies, such Real Property will be considered Eligible Real Property but
subject to the right of Agent to establish Reserves to reflect the adverse
affect of any environmental conditions or events with respect thereto on its
value or the ability of Agent to sell or otherwise realize on such Collateral;
(vi) Real Property improved with residential housing; (vii) Real Property that
is not subject to a then current final written appraisal by an appraiser
reasonably acceptable to Agent (which shall be one of the appraisers selected by
Agent from its list of approved appraisers), on which Agent and Lenders are
expressly permitted to rely, and that is in form, scope and methodology
reasonably satisfactory to Agent; (viii) if requested by Agent, Real Property
for which Agent shall not have received a then current environmental audit
conducted by an independent environmental engineering firm reasonably acceptable
to Agent (based on Agent's list of approved firms and in form, scope, substance
and methodology reasonably satisfactory to Agent, the results of which are
satisfactory to Agent; (ix) if requested by Agent, Real Property for which Agent
shall not have received, in form and substance reasonably satisfactory to Agent,
a valid and effective title insurance policy (whether in the form of a pro form
policy or a marked up title policy commitment) issued by a company and agent
reasonably acceptable to Agent: (A) insuring the priority, amount and
sufficiency of the Mortgage with respect to such Real Property, (B) insuring
against matters that would be disclosed by surveys and (C) containing any
legally available endorsements, assurances or affirmative coverage requested by
Agent for protection of its interests; and (x) any Real Property
14
other than the Baldwyn Real Property, except as Agent may otherwise agree. Any
Real Property that is not Eligible Real Property shall nevertheless be part of
the Collateral.
1.45 "Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Agent; and (d) any other commercial
bank, financial institution or "accredited investor" (as defined in Regulation D
under the Securities Act of 1933) approved by Agent, provided, that, (i) neither
any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor
shall qualify as an Eligible Transferee and (ii) no Person to whom any
Indebtedness which is in any way subordinated in right of payment to any other
Indebtedness of any Borrower or Guarantor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree.
1.46 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower or
Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.47 "Equipment" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
(whether owned or licensed and including embedded software), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
15
1.48 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.49 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.50 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Pension Plan, other than events as to which the requirement of notice has been
waived in regulations by the Pension Benefit Guaranty Corporation; (b) the
adoption of any amendment to a Pension Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
a complete or partial withdrawal by any Borrower, Guarantor or any ERISA
Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment
of a Pension Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Pension Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (f) the
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of
$750,000 and (g) any other event or condition with respect to a Plan including
any Pension Plan subject to Title IV of ERISA maintained, or contributed to, by
any ERISA Affiliate that could reasonably be expected to result in liability of
any Borrower in excess of $750,000.
1.51 "Eurodollar Rate Loans" shall mean any Revolving Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.52 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.53 "Excess Availability" shall mean the amount, as determined by Agent,
calculated at any time, equal to:
(a) the lesser of (i) the Borrowing Base or (ii) the Maximum Credit
(in each case under (i) or (ii) after giving effect to any Reserves other than
any Reserves in respect of Letters of Credit), minus
(b) the sum of (i) the amount of the then outstanding Loans, plus
(ii) the amount of all Reserves then established in respect of Letters of
Credit, plus (iii) the aggregate amount of all then outstanding and unpaid trade
payables and other obligations of Borrowers which are outstanding more than
sixty (60) days past due as of the end of the immediately preceding month or at
Agent's option, as of a more recent date based on such reports as Agent
16
may from time to time specify (other than trade payables or other obligations
being contested or disputed by a Borrower in good faith).
1.54 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.55 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.55 hereto and their respective predecessors, successors and assigns.
1.56 "Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.
1.57 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers and Agent, setting forth certain fees payable
by Borrowers in connection with the Credit Facility, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.58 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or Guarantor in connection with this Agreement;
provided, that, the Financing Agreements shall not include Hedge Agreements.
1.59 "Foreign Lender" shall mean any Lender that is organized under the
laws of a jurisdiction other than that in which a Borrower is resident for tax
purposes. For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
1.60 "Funding Bank" shall have the meaning given to such term in Section
3.3 hereof.
1.61 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.
1.62 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
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1.63 "Guarantors" shall mean, collectively, the following (together with
their respective successors and assigns): (a) HF Enterprises, Inc., a Delaware
corporation; (b) HF Resources, Inc., a Delaware corporation; and (c) any other
Person that at any time after the date hereof becomes party to a guarantee in
favor of Agent or any Lender or otherwise liable on or with respect to the
Obligations or who is the owner of any property which is security for the
Obligations (other than Borrowers); each sometimes being referred to herein
individually as a "Guarantor".
1.64 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.65 "Hedge Agreement" shall mean an agreement between any Borrower or
Guarantor and a Bank Product Provider that is a rate swap agreement, basis swap,
forward rate agreement, commodity swap, interest rate option, forward foreign
exchange agreement, spot foreign exchange agreement, rate cap agreement, rate
floor agreement, rate collar agreement, currency swap agreement, cross-currency
rate swap agreement, currency option, any other similar agreement (including any
option to enter into any of the foregoing or a master agreement for any the
foregoing together with all supplements thereto) for the purpose of protecting
against or managing exposure to fluctuations in interest or exchange rates,
currency valuations or commodity prices; sometimes being collectively referred
to herein as "Hedge Agreements".
1.66 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (other than an account payable to a trade
creditor (whether or not an Affiliate) incurred in the ordinary course of
business of such Person and payable in accordance with customary trade
practices); (c) all obligations as lessee under leases which have been, or
should be, in accordance with GAAP recorded as Capital Leases; (d) any
contractual obligation, contingent or otherwise, of such Person to pay or be
liable for the payment of any indebtedness described in this definition of
another Person, including, without limitation, any such indebtedness, directly
or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof, or to maintain solvency,
assets, level of income, or other financial condition; (e) all obligations with
respect to redeemable stock and redemption or repurchase obligations under any
Capital Stock or other equity securities issued by such Person; (f) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker's acceptances, drafts or similar documents or instruments issued for such
Person's account; (g) all indebtedness of such Person in respect of indebtedness
of another Person for
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borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such person against fluctuations in interest rates or currency or commodity
values; (i) all obligations owed by such Person under License Agreements with
respect to non-refundable, advance or minimum guarantee royalty payments; (j)
indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer to the extent such Person is liable therefor
as a result of such Person's ownership interest in such entity, except to the
extent that the terms of such indebtedness expressly provide that such Person is
not liable therefor or such Person has no liability therefor as a matter of law
and (k) the principal and interest portions of all rental obligations of such
Person under any synthetic lease or similar off-balance sheet financing where
such transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.
1.67 "Information Certificate" shall mean, collectively, the Information
Certificates of Borrowers and Guarantors constituting Exhibit B hereto
containing material information with respect to Borrowers and Guarantors, their
respective businesses and assets provided by or on behalf of Borrowers and
Guarantors to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.68 "Intellectual Property" shall mean, as to each Borrower and
Guarantor, such Borrower's and Guarantor's now owned and hereafter arising or
acquired: patents, patent rights, patent applications, copyrights, works which
are the subject matter of copyrights, copyright applications, copyright
registrations, trademarks, servicemarks, trade names, trade styles, trademark
and service xxxx applications, and licenses and rights to use any of the
foregoing and all applications, registrations and recordings relating to any of
the foregoing as may be filed in the United States Copyright Office, the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof, any political subdivision thereof or in any
other country or jurisdiction, together with all rights and privileges arising
under applicable law with respect to any Borrower's or Guarantor's use of any of
the foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or servicemark, or the license of any trademark or
servicemark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
1.69 "Intercompany Royalty Accounts" shall mean, collectively, the
following bank accounts maintained at PNC Bank: (a) the bank account of
Resources bearing account number 0000000000 and (b) the bank account of
Enterprises bearing account number 0000000000
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1.70 "Interest Expense" shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during such period (including the interest component of
Capital Leases for such period), including, without limitation, discounts in
connection with the sale of any Accounts and bank fees, commissions, discounts
and other fees and charges owed with respect to letters of credit, banker's
acceptances or similar instruments.
1.71 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as any Borrower
(or Administrative Borrower on behalf of such Borrower) may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, such Borrower (or
Administrative Borrower on behalf of such Borrower) may not elect an Interest
Period which will end after the last day of the then-current term of this
Agreement.
1.72 "Interest Rate" shall mean,
(a) Subject to clause (b) of this definition below:
(i) as to Prime Rate Loans, a rate equal to the then
Applicable Margin for Prime Rate Loans on a per annum basis plus the Prime Rate,
and
(ii) as to Eurodollar Rate Loans, a rate equal to the then
Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the
Adjusted Eurodollar Rate.
(b) Notwithstanding anything to the contrary contained herein, Agent
may, at its option, and Agent shall, at the direction of the Required Lenders,
increase the Applicable Margin otherwise used to calculate the Interest Rate for
Prime Rate Loans and Eurodollar Rate Loans in each case to the highest
percentage set forth in the definition of the term Applicable Margin for each
category of Revolving Loans (without regard to the amount of Quarterly Average
Excess Availability) plus two (2%) percent per annum: (i) for the period (A)
from and after the effective date of termination or non-renewal hereof until
Agent and Lenders have received full and final payment of all outstanding and
unpaid Obligations which are not contingent and cash collateral or letter of
credit, as Agent may specify, in the amounts and on the terms required under
Section 13.1 hereof for contingent Obligations (notwithstanding entry of a
judgment against any Borrower or Guarantor) and (B) from and after the date of
the occurrence of an Event of Default and for so long as such Event of Default
is continuing and (ii) on Revolving Loans at any time outstanding in excess of
the Borrowing Base (whether or not such excess(es) arise or are made with or
without the knowledge or consent of Agent or any Lender and whether made before
or after an Event of Default).
1.73 "Inventory" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by such Borrower or Guarantor as
lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be
furnished under a contract of service; (c) are furnished by such Borrower or
Guarantor under a contract of service; or (d) consist of raw materials, work in
process, finished goods or materials used or consumed in its business.
1.74 "Investment" shall have the meaning set forth in Section 9.10 hereof.
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1.75 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or Guarantor (as the case may be) and any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody,
control or possession of such investment property on behalf of Agent, that it
will comply with entitlement orders originated by Agent with respect to such
investment property, or other instructions of Agent, and has such other terms
and conditions as Agent may require.
1.76 "Issuing Bank" shall mean Wachovia.
1.77 "Lenders" shall mean the financial institutions who are signatories
hereto as Lenders and other persons made a party to this Agreement as a Lender
in accordance with Section 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a "Lender".
1.78 "Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, such Letter of Credit, any amendments thereto, any documents
delivered in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for i) the
rights and obligations of the parties concerned or at risk or ii) any collateral
security for such obligations.
1.79 "Letter of Credit Limit" shall mean $25,000,000.
1.80 "Letter of Credit Obligations" shall mean, at any time, the sum of i)
the aggregate undrawn amount of all Letters of Credit outstanding at such time,
plus ii) the aggregate amount of all drawings under Letters of Credit for which
Issuing Bank has not at such time been reimbursed, plus iii) without
duplication, the aggregate amount of all payments made by each Lender to Issuing
Bank with respect to such Lender's participation in Letters of Credit as
provided in Section 2.2 for which Borrowers have not at such time reimbursed the
Lenders, whether by way of a Revolving Loan or otherwise.
1.81 "Letters of Credit" shall mean all letters of credit (whether
documentary or stand-by and whether for the purchase of inventory, equipment or
otherwise) issued by an Issuing Bank for the account of any Borrower pursuant to
this Agreement, and all amendments, renewals, extensions or replacements
thereof.
1.82 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.83 "Loans" shall mean the Revolving Loans.
1.84 "London Interbank Offered Rate" shall mean, with respect to any
Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London
time) two (2) Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, that, if more than one rate
is specified on
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Telerate Page 3750, the applicable rate shall be the arithmetic average of all
such rates. If, for any reason, such rate is not available, the term "London
Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the
Interest Period applicable thereto, the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic average of all such rates.
1.85 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operations of Borrowers; (b)
the legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (c) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent upon the Collateral; (d)
the Collateral or its value; (e) the ability of any Borrower to repay the
Obligations or of any Borrower to perform its obligations under this Agreement
or any of the other Financing Agreements as and when to be performed; or (f) the
ability of Agent or any Lender to enforce the Obligations or realize upon the
Collateral or otherwise with respect to the rights and remedies of Agent and
Lenders under this Agreement or any of the other Financing Agreements.
1.86 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower or
Guarantor involving monetary liability of or to any Person in an amount in
excess of $5,000,000 in any fiscal year and (b) any other contract or other
agreement (other than the Financing Agreements), whether written or oral, to
which any Borrower or Guarantor is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto would have
a Material Adverse Effect.
1.87 "Maturity Date" shall mean shall have the meaning set forth in
Section 13.1 hereof.
1.88 "Maximum Credit" shall mean the amount of $110,000,000, as such
amount may be increased or decreased in accordance with the terms of Section 2.3
hereof.
1.89 "Mortgage" shall mean the Deed of Trust, Security Agreement,
Assignment of Rents and Leases and Fixture Filing, dated even date herewith by
Parent in favor of Agent with respect to the Real Property and related assets of
such Borrower located in Baldwyn, Mississippi, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.90 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate or with respect to which any Borrower,
Guarantor or any ERISA Affiliate may incur any liability.
1.91 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the recovery on
the aggregate amount of the Inventory at such time on a "going out of business
sale" basis as set forth in the most recent
22
appraisal of Inventory received by Agent in accordance with Section 7.3, net of
operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the applicable original cost of the aggregate amount of
the Inventory subject to appraisal.
1.92 "Obligations" shall mean (a) any and all Loans, Letter of Credit
Obligations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to such Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated, or
secured or unsecured and (b) for purposes only of Section 5.1 hereof and the
Security Provisions and subject to the priority in right of payment set forth in
Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind,
nature and description owing by any or all of Borrowers or Guarantors to Agent
or any Bank Product Provider arising under or pursuant to any Bank Products,
whether now existing or hereafter arising, provided, that, (i) as to any such
obligations, liabilities and indebtedness arising under or pursuant to a Hedge
Agreement, the same shall only be included within the Obligations if upon
Agent's request, Agent shall have entered into an agreement, in form and
substance satisfactory to Agent, with the Bank Product Provider that is a
counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers
and Guarantors, providing for the delivery to Agent by such counterparty of
information with respect to the amount of such obligations and providing for the
other rights of Agent and such Bank Product Provider in connection with such
arrangements, (ii) any Bank Product Provider, other than Wachovia and its
Affiliates, shall have delivered written notice to Agent that (A) such Bank
Product Provider has entered into a transaction to provide Bank Products to a
Borrower and Guarantor and (B) the obligations arising pursuant to such Bank
Products provided to Borrowers and Guarantors constitute Obligations entitled to
the benefits of the security interest of Agent granted hereunder, and Agent
shall have accepted such notice in writing and (iii) in no event shall any Bank
Product Provider to whom such obligations, liabilities or indebtedness are owing
be deemed a Lender for purposes hereof to the extent of and as to such
obligations, liabilities or indebtedness other than for purposes of Section 5.1
hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7,
12.9, 12.12 and 13.6 hereof and in no event shall such obligations be included
in the Obligations to the extent that the effect is that the value of the
Collateral (as determined by Agent) is less than the Obligations and in no event
shall the approval of any such person be required in connection with the release
or termination of any security interest or lien of Agent.
1.93 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantors), other than Borrowers.
1.94 "Other Taxes" shall have the meaning given to such term in Section
6.5 hereof.
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1.95 "Owned Store Real Properties" shall mean, collectively, the Real
Properties of Parent listed on Schedule 1.95 hereto.
1.96 "Parent" shall mean Xxxxxxx Fabrics, Inc., a Delaware corporation,
and its successors and assigns.
1.97 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans and
Letters of Credit in conformity with the provisions of Section 13.7 of this
Agreement governing participations.
1.98 "Permitted Acquisitions" shall mean the purchase by a Borrower or
Guarantor after the date hereof of all or substantially all of the assets of any
Person or a business or division of such Person (including pursuant to a merger
with such Person or the formation of a wholly owned Subsidiary solely for such
purpose that is merged with such Person) or of all or a majority of the Capital
Stock (such assets or Person being referred to herein as the "Acquired
Business") and in one or a series of transaction that satisfies each of the
following conditions as determined by Agent:
(a) Agent shall have received not less than ten (10) Business Days'
prior written notice of the proposed acquisition and such information with
respect thereto as Agent may request, including (i) the proposed date and amount
of the acquisition, (ii) a list and description of the assets or shares to be
acquired, (iii) the total purchase price for the assets to be purchased (and the
terms of payment of such purchase price), and (iv) a summary of the due
diligence undertaken by Borrowers in connection with such acquisition,
(b) the Acquired Business shall be an operating company that engages
in a line of business substantially similar to the business that Borrowers are
engaged in on date hereof,
(c) the consideration paid for or in connection with the assets or
shares of the Acquired Business shall not exceed $10,000,000 and after giving
effect to all payments or other consideration paid in respect of such
acquisition, the aggregate amount of all payments made or other consideration
delivered in connection with all Permitted Acquisitions shall not exceed
$20,000,000,
(d) if requested by Agent, Agent shall have received: (i) the most
recent annual and interim financial statements with respect to the Acquired
Business and related statements of income and cash flows, (ii) detailed
forecasts of cash flows for the Acquired Business, (iii) detailed projections
for Parent and its Subsidiaries through the Maturity Date, on a monthly basis
for the first year after the acquisition and on a quarterly basis thereafter,
giving pro forma effect to such acquisition, based on assumptions satisfactory
to Agent and demonstrating pro forma compliance with all financial covenants set
forth in this Agreement, prepared in good faith an in a manner and using such
methodology as is consistent with the most recent financial statements delivered
to Agent pursuant to Section 9.6 hereof and in form and substance satisfactory
to Agent and (iv) current, updated projections of the amount of the Borrowing
Base and Excess Availability for the six month period after the date of such
acquisition, in a form reasonably satisfactory to Agent, representing Borrowers'
reasonable best estimate of the future
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Borrowing Base and Excess Availability for the period set forth therein as of
the date not more than ten (10) days prior to the date of such acquisition,
which projections shall have been prepared on the basis of the assumptions set
forth therein which Borrowers believe are fair and reasonable as of the date of
preparation in light of current and reasonably foreseeable business conditions,
(e) if Agent so elects, Agent shall have received an appraisal of
the inventory of the Acquired Business and such other assets of the Acquired
Business as Agent may specify, in each case in form and containing assumptions
and appraisal methods satisfactory to Agent by an appraiser acceptable to Agent,
on which Agent and Lenders are expressly permitted to rely,
(f) if Agent so elects, Agent shall have completed a field
examination with respect to the business and assets of the Acquired Business in
accordance with Agent's customary procedures and practices and as otherwise
required by the nature and circumstances of the business of the Acquired
Business, the scope and results of which shall be satisfactory to Agent and any
inventory of the Acquired Business shall only be Eligible Inventory to the
extent the criteria for Eligible Inventory set forth herein are satisfied with
respect thereto in accordance with this Agreement (or such other or additional
criteria as Agent may, at its option, establish with respect thereto in
accordance with this Agreement and subject to such Reserves as Agent may
establish in connection with the Acquired Business),
(g) Agent shall have received all items required by Sections 5.2 and
9.23 in connection with the Acquired Business,
(h) in the case of the acquisition of the Capital Stock of another
Person, the board of directors (or other comparable governing body) of such
other Person shall have duly approved such acquisition and such Person shall not
have announced that it will oppose such acquisition or shall not have commenced
any action which alleges that such acquisition will violate applicable law,
(i) Excess Availability shall have been not less than $30,000,000
(or, if the Maximum Credit has been increased pursuant to Section 2.3 hereof,
such higher amount as Agent shall determine) for each of the two consecutive
months immediately prior to the date of any such acquisition based on the
Borrowing Base as of the end of each of such months and after giving effect to
the acquisition and all payments and other consideration in respect thereof, on
a pro forma basis using the Excess Availability as of the end of the month
immediately prior to the date of such acquisition and payments or other
consideration, Excess Availability shall be not less than $30,000,000 (or, if
the Maximum Credit has been increased pursuant to Section 2.3 hereof, such
higher amount as Agent shall determine),
(j) no Default or Event of Default shall exist or have occurred as
of the date of the acquisition or any payment in respect thereof and after
giving effect to the acquisition or such payment,
(k) Agent shall have received true, correct and complete copies of
all agreements, documents and instruments relating to such acquisition, which
documents shall be satisfactory to Agent, and
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(l) if required by Agent, Agent shall have received a certificate of
the chief financial officer or chief executive officer of Administrative
Borrower certifying to Agent and Lenders as to the matters set forth above in
this definition.
1.99 "Permitted Dispositions" shall mean each of the following:
(a) sales of Inventory in the ordinary course of business,
(b) the sale or other disposition of Equipment (including worn-out
or obsolete Equipment or Equipment no longer used or useful in the business of
any Borrower or Guarantor) so long as such sales or other dispositions do not
involve Equipment having an aggregate fair market value in excess of $500,000
for all such Equipment disposed of in any fiscal year of Borrowers or as Agent
may otherwise agree,
(c) sales or other dispositions by any Borrower of assets in
connection with the closing or sale of a retail store location of such Borrower
in the ordinary course of such Borrower's business which consist of leasehold
interests in the premises of such store, the Equipment and fixtures located at
such premises and the books and records relating exclusively and directly to the
operations of such store; provided, that, as to each and all such sales and
closings, (i) after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing, and (ii) such sale shall be on
commercially reasonable prices and terms in a bona fide arm's length
transaction,
(d) the sale of the Tupelo Real Property, any of the Owned Store
Real Properties, the Equipment and fixtures located at the Tupelo Real Property
and the Owned Store Real Properties and the books and records relating
exclusively and directly to the operations of the Tupelo Real Property or any of
the Owned Store Real Properties; provided, that, as to such sale and closing,
(i) Agent shall have received not less than ten (10) Business Days prior written
notice of such sale or closing, which notice shall set forth in reasonable
detail satisfactory to Agent, the parties to such sale, the purchase price and
the manner of payment thereof and such other information with respect thereto as
Agent may request, (ii) after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing, (iii) such sale shall be
on commercially reasonable prices and terms in a bona fide arm's length
transaction,
(e) the grant by any Borrower or Guarantor after the date hereof of
a non-exclusive license to any person for the use of any Intellectual Property
consisting of trademarks owned by such Borrower or Guarantor; provided, that, as
to any such license, each of the following conditions is satisfied, (i) such
licenses shall be on commercially reasonable prices and terms in a bona fide
arms' length transactions, (ii) the rights of the licensee shall be subject to
the rights of Agent, and shall not adversely affect, limit or restrict the
rights of Agent to use any Intellectual Property of a Borrower or Guarantor to
sell or otherwise dispose of any Inventory or other Collateral, (iii) Agent
shall have received, true, correct and complete copies of the executed license
agreement, promptly upon the execution thereof and (iv) as of the date of the
grant of any such license, and after giving effect thereto, no Default or Event
of Default shall exist or have occurred,
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(f) sales, transfers and dispositions of assets of a Borrower to
another Borrower or by a Guarantor or other Subsidiary of Parent to a Borrower
or Guarantor, in each case to the extent permitted under Section 9.12 hereof.
1.100 "Permitted Investments" shall mean each of the following:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) Investments in cash or Cash Equivalents, provided, that, (i) at
any time on and after a Cash Dominion Event and for so long as the same is
continuing, no Loans are then outstanding and (ii) the terms and conditions of
Section 5.2 hereof shall have been satisfied with respect to the deposit
account, investment account or other account in which such cash or Cash
Equivalents are held;
(c) the existing Investments of each Borrower and Guarantor as of
the date hereof in its Subsidiaries, provided, that, no Borrower or Guarantor
shall have any further obligations or liabilities to make any capital
contributions or other additional investments or other payments to or in or for
the benefit of any of such Subsidiaries;
(d) loans and advances by any Borrower or Guarantor to employees of
such Borrower or Guarantor not to exceed the principal amount of $250,000 in the
aggregate at any time outstanding for: (i) reasonably and necessary work-related
travel or other ordinary business expenses to be incurred by such employee in
connection with their work for such Borrower or Guarantor and (ii) reasonable
and necessary relocation expenses of such employees (including home mortgage
financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by any
Person (or the representative of such Person) in respect of Indebtedness of such
Person owing to such Borrower or Guarantor in connection with the insolvency,
bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; provided, that, the original of any
such stock or instrument evidencing such obligations shall be promptly delivered
to Agent, upon Agent's request, together with such stock power, assignment or
endorsement by such Borrower or Guarantor as Agent may request; and
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed.
1.101 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
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1.102 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or, in the case of a
Multiemployer Plan, has made contributions at any time during the immediately
preceding six (6) plan years or with respect to which any Borrower or Guarantor
may incur liability.
1.103 "Prime Rate" shall mean, on any date, the greater of (a) the rate
from time to time publicly announced by Wachovia, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank or (b) the Federal Funds Rate in effect on such day plus one-half
(1/2%) percent.
1.104 "Prime Rate Loans" shall mean any Revolving Loans or portion thereof
on which interest is payable based on the Prime Rate in accordance with the
terms thereof.
1.105 "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments
of Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letters of Credit and the denominator shall be the aggregate amount of
all unpaid Loans and Letters of Credit.
1.106 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, county or local,
and whether foreign or domestic, that are paid or payable by any Person in
respect of any period in accordance with GAAP.
1.107 "Quarterly Average Excess Availability" shall mean, at any time, the
daily average of the aggregate amount of the Excess Availability for the
immediately preceding fiscal quarter.
1.108 "Real Property" shall mean all now owned and hereafter acquired real
property of each Borrower and Guarantor, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located,
including the real property and related assets more particularly described in
the Mortgage.
1.109 "Real Property Availability" shall mean the amount equal to the
lesser of:
(a) $10,000,000; or
(b) fifty (50%) percent of the fair market value of Eligible Real
Property as set forth in the most recent acceptable appraisal (or acceptable
updates of existing appraisals) of such Real Property received by Agent in
accordance with Section 4.1 or 7.4 hereof.
1.110 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower and Guarantor: (a) all Accounts;
(b) all interest, fees, late charges, penalties, collection fees and other
amounts due or to become due or otherwise payable
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in connection with any Account; (c) all payment intangibles of such Borrower or
Guarantor; (d) letters of credit, indemnities, guarantees, security or other
deposits and proceeds thereof issued payable to any Borrower or Guarantor or
otherwise in favor of or delivered to any Borrower or Guarantor in connection
with any Account; or (e) all other accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
any Borrower or Guarantor, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by any
Borrower or Guarantor or to or for the benefit of any third person (including
loans or advances to any Affiliates or Subsidiaries of any Borrower or
Guarantor) or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower or Guarantor (including, without limitation, choses
in action, causes of action, tax refunds, tax refund claims, any funds which may
become payable to any Borrower or Guarantor in connection with the termination
of any Plan or other employee benefit plan and any other amounts payable to any
Borrower or Guarantor from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which any Borrower or Guarantor is a beneficiary).
1.111 "Records" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).
1.112 "Register" shall have the meaning set forth in Section 13.7 hereof.
1.113 "Required Lenders" shall mean, at any time, those Lenders whose Pro
Rata Shares aggregate more than fifty (50%) percent of the aggregate of the
Commitments of all Lenders, or if the Commitments shall have been terminated,
Lenders to whom more than fifty (50%) percent of the then outstanding
Obligations are owing; provided, that, if the Pro Rata Share of any Lender
exceeds fifty (50%) percent at a time when more than one Lender exists, then
Required Lenders shall mean such Lender and at least one other Lender.
1.114 "Reserves" shall mean as of any date of determination, such amounts
as Agent may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letters of Credit which would otherwise be
available to any Borrower under the lending formula(s) provided for herein: (a)
to reflect events, conditions, contingencies or risks which, as determined by
Agent in good faith, adversely affect, or would have a reasonable likelihood of
adversely affecting, either (i) the Collateral or any other property which is
security for the Obligations, its value or the amount that might be received by
Agent from the sale or other disposition or realization upon such Collateral, or
(ii) the assets, business or prospects of any Borrower or Guarantor or (iii) the
security interests and other rights of Agent or any Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect
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Agent's good faith belief that any collateral report or financial information
furnished by or on behalf of any Borrower or Guarantor to Agent is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to
reflect outstanding Letters of Credit as provided in Section 2.2 hereof or (d)
in respect of any state of facts which Agent determines in good faith
constitutes a Default or an Event of Default. Without limiting the generality of
the foregoing, Reserves may be established to reflect any of the following:
(i)that dilution with respect to the Credit Card Receivables (based on the ratio
of the aggregate amount of non-cash reductions in Credit Card Receivables for
any period to the aggregate dollar amount of the sales of Borrowers giving rise
to Credit Card Receivables for such period) as calculated by Agent for any
period is or is reasonably anticipated to be greater than five (5%) percent of
such appraised fair market value, (ii) to the extent that the fair market value
of the Real Property subject to the Mortgage as set forth in the most recent
acceptable appraisals received by Agent with respect thereto has declined so
that the amount of Real Property Availability is greater than fifty (50%)
percent of such appraised fair market value, (iii)inventory shrinkage, (iv)
reserves in respect of markdowns and cost variances (pursuant to discrepancies
between the purchase order price of Inventory and the actual cost thereof), (v)
amounts due or to become due in respect of sales, use and/or withholding taxes,
(vi) any rental payments, service charges or other amounts to become due to
lessors of real property to the extent Inventory or Records are located in or on
such property or such Records are needed to monitor or otherwise deal with the
Collateral, provided, that, the Reserves established pursuant to this clause
(vi) as to retail store locations that are leased shall not exceed at any time
the aggregate of amounts payable for the next three (3) months to the lessors of
such retail store locations located in those States where any right of the
lessor to Collateral may have priority over the security interest and lien of
Agent therein, provided, that, such limitation on the amount of the Reserves
pursuant to this clause (vi) shall only apply so long as: (A) no Event of
Default shall exist or have occurred, (B) neither a Borrower, Guarantor nor
Agent shall have received notice of any event of default under the lease with
respect to such location and (C) no Borrower has granted to the lessor a
security interest or lien upon any assets of such Borrower, (vii) any rental
payments, service charges or other amounts due or to become due to lessors of
personal property; (viii) amounts owing by Borrowers to Credit Card Issuers or
Credit Card Processors in connection with the Credit Card Agreements, (ix) up to
fifty (50%) percent of the aggregate amount of merchandise gift certificates and
coupons, (x) an increase in the number of days of the turnover of Inventory or a
change in the mix of the Inventory that results in an overall decrease in the
value thereof or a deterioration in its nature or quality (but only to the
extent not addressed by the lending formulas in a manner satisfactory to Agent),
(xi) variances between the perpetual inventory records of Borrowers and the
results of the test counts of Inventory conducted by Agent with respect thereto
in excess of the percentage acceptable to Agent, (xii) the aggregate amount of
deposits, if any, received by any Borrower from its retail customers in respect
of unfilled orders for merchandise and the purchase price of layaway goods and
(xiii) obligations, liabilities or indebtedness (contingent or otherwise) of
Borrowers or Guarantors to any Bank Product Provider arising under or in
connection with any Bank Products of any Borrower or Guarantor with a Bank
Product Provider or as such Bank Product Provider may otherwise require in
connection therewith to the extent that such obligation, liabilities or
indebtedness constitute Obligations as such term is defined herein or otherwise
receive the benefit of the security interest of Agent in any Collateral. The
amount of any Reserve established by Agent shall have a reasonable relationship
to the event, condition or other matter which is the basis for such Reserve as
determined by Agent
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1.115 "Restricted Payment" shall mean (a) any cash dividend or other cash
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of Parent or any of its Subsidiaries, as the case may be, now or
hereafter outstanding, (b) any redemption, retirement, sinking fund or similar
payment on account of, or purchase or other acquisition for value, direct or
indirect, of any shares of any class of Capital Stock of Parent or any of its
Subsidiaries, except for any redemption, retirement, sinking funds or similar
payment payable solely in such shares of that class of stock or in any class of
stock junior to that class, (c) any cash payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire any shares of any class of Capital Stock of
Parent or any of its Subsidiaries now or hereafter outstanding, or (d) any
payment to any Affiliate of any Borrower except to the extent expressly
permitted in this Agreement.
1.116 "Revolving Loans" shall mean the loans now or hereafter made by or
on behalf of any Lender or by Agent for the account of any Lender on a revolving
basis pursuant to the Credit Facility (involving advances, repayments and
readvances) as set forth in Section 2.1 hereof.
1.117 "Secured Parties" shall mean, collectively, (i) Agent, (ii) Lenders,
(iii) the Issuing Bank and (iv) any Bank Product Provider; provided, that, (i)
as to any Bank Product Provider, only to the extent of the Obligations owing to
such Bank Product Provider and (ii) such parties are sometimes referred to
herein individually as a "Secured Party".
1.118 "Security Provisions" shall mean the following provisions of the
Financing Agreements (as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced): (a) Section
2.01 of the Mortgage; (b) Section 1 of the Trademark Collateral Assignment and
Security Agreement, dated of even date herewith, by and between Enterprises and
Agent; (c) Section 1 of the Pledge and Security Agreement, dated of even date
herewith, by Parent in favor of Agent; (d) Section 1 of the Pledge and Security
Agreement, dated of even date herewith, by Resources in favor of Agent; (e)
Section 1 of the Pledge and Security Agreement, dated of even date herewith, by
Enterprises in favor of Agent; and (f) such other sections of such other
Financing Agreements as Agent may from time to time designate as a "Security
Provision" in a writing delivered by Agent to Administrative Borrower.
1.119 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a
fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.120 "Special Agent Advances" shall have the meaning set forth in Section
12.11 hereof.
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1.121 "Specified Amount" shall mean $25,000,000; provided, that, the
Specified Amount shall be reduced to $17,500,000 commencing on the date (if any)
that Agent shall have received evidence that Borrowers have implemented and
tested a management information system with respect to inventory which is
satisfactory to Agent.
1.122 "Standby Letters of Credit" shall mean all Letters of Credit other
than Commercial Letters of Credit.
1.123 "Store Accounts" shall have the meaning set forth in Section 6.3.
1.124 "Subordinated Debt Documents" shall mean, collectively, any and all
agreements, documents and instruments evidencing or otherwise related to
Indebtedness permitted under Section 9.9(f) hereof.
1.125 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.126 "Tupelo Real Property" shall mean all Real Property of Parent
located in Tupelo, Mississippi.
1.127 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise determine).
1.128 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Borrower or Guarantor on the sale thereof to any other Borrower or
(B) write-ups or write-downs in value with respect to currency exchange rates
and (ii) notwithstanding anything to the contrary contained herein, the cost of
the Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
1.129 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
32
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.130 "Wachovia" shall mean Wachovia Bank, National Association, in its
individual capacity, and its successors and assigns.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
each Lender severally (and not jointly) agrees to make its Pro Rata Share of
Revolving Loans to Borrowers from time to time in amounts requested by any
Borrower (or Administrative Borrower on behalf of Borrowers) up to the aggregate
amount outstanding for all Lenders at any time equal to the Borrowing Base at
such time.
(b) Except in Agent's discretion, with the consent of all Lenders,
or as otherwise provided herein, (i) the aggregate principal amount of the
Revolving Loans and the Letter of Credit Obligations outstanding at any time
shall not exceed the Maximum Credit and (ii) the aggregate principal amount of
the Revolving Loans and Letter of Credit Obligations outstanding at any time
shall not exceed the Borrowing Base.
(c) In the event that (i) the aggregate principal amount of the
Revolving Loans and the Letter of Credit Obligations outstanding at any time
exceed the Maximum Credit, or (ii) except as otherwise provided herein, the
aggregate principal amount of the Revolving Loans and Letter of Credit
Obligations outstanding at any time exceed the Borrowing Base, such event shall
not limit, waive or otherwise affect any rights of Agent or Lenders in such
circumstances or on any future occasions and Borrowers shall, upon demand by
Agent, which may be made at any time or from time to time, immediately repay to
Agent the entire amount of any such excess(es) for which payment is demanded.
2.2 Letters of Credit.
(a) Subject to and upon the terms and conditions contained herein
and in the Letter of Credit Documents, at the request of a Borrower (or
Administrative Borrower on behalf of such Borrower), Agent agrees to cause
Issuing Bank to issue, and Issuing Bank agrees to issue, for the account of such
Borrower one or more Letters of Credit, for the ratable risk of each Lender
according to its Pro Rata Share, containing terms and conditions acceptable to
Agent and Issuing Bank.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letters of Credit, Borrowers shall pay to
Agent, for the benefit of Lenders, monthly a letter of credit fee at a rate
equal to the percentage (on a per annum basis) set forth below on the daily
outstanding balance of the Commercial Letters of Credit and Standby Letters of
Credit during the immediately preceding month (or part thereof), payable in
arrears as of the first of each succeeding month, provided, that, such
percentage shall be increased or decreased, as the case may be, to the
percentage (on a per annum basis) set forth below based on
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the Quarterly Average Excess Availability for the immediately preceding fiscal
quarter being at or within the amounts indicated for such percentage:
Commercial Standby
Quarterly Average Excess Letter of Letter of
Tier Availability Credit Rate Credit Rate
---- ------------------- ----------- -----------
1 Greater than $35,000,000 .750% 1.25%
2 Less than or equal to $35,000,000
and greater than $15,000,000 .875% 1.50%
3 Less than or equal to $15,000,000 1.000% 1.75%
provided, that, (i) the applicable percentage shall be calculated and
established once each fiscal quarter and shall remain in effect until adjusted
thereafter after the end of the next fiscal quarter, (ii) if the Excess
Availability is greater than $15,000,000 as of the date hereof, the applicable
percentage through December 31, 2005 shall be the amount for Tier 2 set forth
above (otherwise the applicable percentage through December 31, 2005 shall be
the amount for Tier 3 above), (iii) in the event that the level of Quarterly
Average Excess Availability falls within Tier 1, the EBITDA of the Parent and
its Subsidiaries for the immediately preceding four (4) fiscal quarters (based
on the most recent financial statements then received by Agent) shall not be
less than $20,000,000 in order for the applicable percentage set forth for Tier
1 to apply (it being understood that, if the level of Quarterly Average Excess
Availability falls within Tier 1 but such EBITDA of Parent and its Subsidiaries
is less than $20,000,000, then the applicable percentage shall be the amount for
Tier 2), and (iv) notwithstanding anything to the contrary contained herein,
Agent may, and upon the written direction of Required Lenders shall, require
Borrowers to pay to Agent for the benefit of Lenders, such letter of credit fee
at a rate equal to two (2%) percent per annum on such daily outstanding balance
higher than the rate set forth in Tier 3: (A) for the period (1) from and after
the effective date of termination or non-renewal hereof until Agent and Lenders
have received full and final payment of all outstanding and unpaid Obligations
which are not contingent and cash collateral or a letter of credit, as Agent may
specify, in the amounts and on the terms required under Section 13.1 hereof for
contingent Obligations (notwithstanding entry of a judgment against any Borrower
or Guarantor) and (2) from and after the date of the occurrence of an Event of
Default and for so long as such Event of Default is continuing and (B) on the
Letters of Credit at any time outstanding in excess of the Letter of Credit
Limit (whether or not such excess(es) arise or are issued with or without the
knowledge or consent of Agent or any Lender and whether issued before or after
an Event of Default).
(c) The Borrower requesting such Letter of Credit (or Administrative
Borrower on behalf of such Borrower) shall give Agent and Issuing Bank three (3)
Business Days' prior written notice of such Borrower's request for the issuance
of a Letter of Credit. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the effective date
(which date shall be a Business Day and in no event shall be a date
34
less than ten (10) days prior to the end of the then current term of this
Agreement) of issuance of such requested Letter of Credit, whether such Letter
of Credit may be drawn in a single or in partial draws, the date on which such
requested Letter of Credit is to expire (which date shall be a Business Day and
shall not be more than one year from the date of issuance), the purpose for
which such Letter of Credit is to be issued, and the beneficiary of the
requested Letter of Credit. The Borrower requesting the Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall attach to such notice
the proposed terms of the Letter of Credit. The renewal or extension of any
Letter of Credit shall, for purposes hereof be treated in all respects the same
as the issuance of a new Letter of Credit hereunder.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit shall be available
unless each of the following conditions precedent have been satisfied in a
manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit
(or Administrative Borrower on behalf of such Borrower) shall have delivered to
Issuing Bank at such times and in such manner as Issuing Bank may require, an
application, in form and substance satisfactory to Issuing Bank and Agent, for
the issuance of the Letter of Credit and such other Letter of Credit Documents
as may be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank, (ii)
as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
Issuing Bank refrain from, the issuance of letters of credit generally or the
issuance of such Letter of Credit, (iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations shall not exceed the
Letter of Credit Limit, and (iv) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit, on the date of the
proposed issuance of any Letter of Credit shall be equal to or greater than: (A)
if the proposed Letter of Credit is a Commercial Letter of Credit for the
purpose of purchasing Eligible LC Inventory and the documents of title with
respect thereto are consigned to the Issuing Bank or delivered to and in the
possession of a Customs Broker (provided, that, as to such Customs Broker, Agent
shall have received a Collateral Access Agreement duly authorized, executed and
delivered by such person, such agreement shall be in full force and effect and
such person shall be in compliance in all material respects with the terms
thereof), the sum of: (1) the percentage equal to one hundred (100%) percent
minus the then applicable percentage with respect to Eligible Inventory set
forth in the definition of Borrowing Base multiplied by the Value of such
Eligible LC Inventory plus (2) the amount of the Reserve to be established based
on freight, taxes, duty and other amounts which Agent estimates must be paid in
connection with such Inventory being purchased with such Letter of Credit
calculated as described below and (B) if the proposed Letter of Credit is a
Standby Letter of Credit or for any other purpose or the documents of title are
not consigned to the Issuing Bank or are not delivered to and in the possession
of a Customs Broker (or if delivered to and in the possession of a Customs
Broker, any of the conditions set forth in clause (A) are not satisfied as to
such Customs Broker) in connection with a Letter of Credit for the purpose of
purchasing Inventory, an amount equal to one hundred (100%) percent of the face
amount thereof and all other commitments and obligations made or incurred by
Agent with respect thereto. Effective on the issuance of each
35
Letter of Credit, a Reserve shall be established in the applicable amount set
forth in Section 2.2(d)(iv)(A) or Section 2.2(d)(iv)(B).
(e) The amount of the Reserve based on freight, taxes, duty and
other amounts referred to above shall be calculated from time to time as
follows: (i) the amount equal to (A) the most recent determination by Agent of
the average of the freight, taxes, duty and other amounts referred to above as a
percentage of the outstanding Letters of Credit consisting of Commercial Letters
of Credit used to purchase Inventory as of the date of such calculation in
accordance with the current practices and procedures of Agent as of the date
hereof, multiplied by (B) the then outstanding amount of such Letters of Credit
multiplied by (ii) the percentage equal to (A) the percentage of one hundred
(100%) percent minus (B) the average of the percentages used for Inventory at
such time in the calculation of the Borrowing Base.
(f) Except in Agent's discretion, with the consent of all Lenders
(except as otherwise provided herein), the amount of all outstanding Letters of
Credit and all other commitments and obligations made or incurred by Agent or
any Lender in a connection therewith shall not at any time exceed the Maximum
Credit less any Revolving Loans outstanding.
(g) Each Borrower shall reimburse immediately Issuing Bank for any
draw under any Letter of Credit issued for the account of such Borrower and pay
Issuing Bank the amount of all other charges and fees payable to Issuing Bank in
connection with any Letter of Credit issued for the account of such Borrower
immediately when due, irrespective of any claim, setoff, defense or other right
which such Borrower may have at any time against Issuing Bank or any other
Person. Each drawing under any Letter of Credit or other amount payable in
connection therewith when due shall constitute a request by the Borrower for
whose account such Letter of Credit was issued to Agent for a Prime Rate Loan in
the amount of such drawing or other amount then due, and shall be made by Agent
on behalf of Lenders as a Revolving Loan (or Special Agent Advance, as the case
may be). The date of such Loan shall be the date of the drawing or as to other
amounts, the due date therefor. Any payments made by or on behalf of Agent or
any Lender to Issuing Bank and/or related parties in connection with any Letter
of Credit shall constitute additional Revolving Loans to such Borrower pursuant
to this Section 2 (or Special Agent Advances as the case may be).
(h) Borrowers and Guarantors shall indemnify and hold Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit and any documents, drafts or acceptances
relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent with respect to
any Letter of Credit, except for such losses, claims, damages, liabilities,
costs or expenses that are a direct result of the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final
non-appealable order of a court of competent jurisdiction. Each Borrower and
Guarantor assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit and for such purposes the drawer or
beneficiary shall be deemed such Borrower's agent. Each Borrower and Guarantor
assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit
or any documents, drafts or acceptances thereunder. Each
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Borrower and Guarantor hereby releases and holds Agent and Lenders harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, Guarantor, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit, except for the gross negligence
or willful misconduct of Agent or any Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(h) shall survive the payment of Obligations and the termination
of this Agreement.
(i) In connection with Inventory purchased pursuant to any Letter of
Credit, Borrowers and Guarantors shall, at Agent's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Agent
holds a security interest that, upon Agent's request, such items shall be
delivered to Agent and/or subject to Agent's order, and if they shall come into
such Borrower's or Guarantor's possession, to deliver them, upon Agent's
request, to Agent in their original form; provided, that, Agent shall not
exercise the rights under this clause (i) to have such persons deliver any cash,
checks, Inventory, documents or instruments (but as to such documents and
instruments, Agent shall not exercise such rights only so long as the same are
held by a Customs Broker and the conditions set forth in Section 2.2(d)(iv)(A)
hereof as to such Customs Broker are satisfied), unless an Event of Default
shall exist or have occurred and be continuing. Borrowers and Guarantors shall
also, at Agent's request, designate Agent as the consignee on all bills of
lading and other negotiable and non-negotiable documents.
(j) Each Borrower and Guarantor hereby irrevocably authorizes and
directs Issuing Bank to name such Borrower or Guarantor as the account party
therein and to deliver to Agent all instruments, documents and other writings
and property received by Issuing Bank pursuant to any Letter of Credit and to
accept and rely upon Agent's instructions and agreements with respect to all
matters arising in connection with any Letter of Credit or the Letter of Credit
Documents with respect thereto. Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge
the credit of Agent or any Lender in any manner. Borrowers and Guarantors shall
be bound by any reasonable interpretation made in good faith by Agent, or
Issuing Bank under or in connection with any Letter of Credit or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of any Borrower or Guarantor.
(k) Immediately upon the issuance or amendment of any Letter of
Credit, each Lender shall be deemed to have irrevocably and unconditionally
purchased and received, without recourse or warranty, an undivided interest and
participation to the extent of such Lender's Pro Rata Share of the liability
with respect to such Letter of Credit and the obligations of Borrowers with
respect thereto (including all Letter of Credit Obligations with respect
thereto). Each Lender shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and be obligated to pay to Issuing Bank
therefor and discharge when due, its Pro Rata Share of all of such obligations
arising under such Letter of Credit. Without limiting the scope and nature of
each Lender's participation in any Letter of Credit, to the extent that Issuing
Bank has not been reimbursed or otherwise paid as required hereunder or under
any such Letter of Credit, each such Lender shall pay to Issuing Bank its Pro
Rata Share of such unreimbursed drawing or other amounts then due to Issuing
Bank in connection therewith.
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(l) The obligations of Borrowers to pay each Letter of Credit
Obligations and the obligations of Lenders to make payments to Agent for the
account of Issuing Bank with respect to Letters of Credit shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under any and all circumstances, whatsoever,
notwithstanding the occurrence or continuance of any Default, Event of Default,
the failure to satisfy any other condition set forth in Section 4 or any other
event or circumstance. If such amount is not made available by a Lender when
due, Agent shall be entitled to recover such amount on demand from such Lender
with interest thereon, for each day from the date such amount was due until the
date such amount is paid to Agent at the interest rate then payable by any
Borrower in respect of Loans that are Prime Rate Loans. Any such reimbursement
shall not relieve or otherwise impair the obligation of Borrowers to reimburse
Issuing Bank under any Letter of Credit or make any other payment in connection
therewith.
2.3 Increase or Decrease in Maximum Credit.
(a) Administrative Borrower may, at any time, deliver a written
request to Agent to increase or decrease the Maximum Credit. Any such written
request shall specify the amount of the increase or decrease, as the case may
be, in the Maximum Credit that Borrowers are requesting, provided, that, (i) in
no event shall the aggregate amount of any increase in the Maximum Credit cause
the Maximum Credit to exceed $130,000,000, (ii) in no event shall the aggregate
amount of any decrease in the Maximum Credit cause the Maximum Credit to be less
than $90,000,000, (ii) any such request for an increase or decrease shall be for
an increase or decrease, as the case may be, of not less than $10,000,000, (iv)
any such request shall be irrevocable, and (v) in no event shall more than one
such written request be delivered to Agent in any calendar year.
(b) Upon the receipt by Agent of a written request to increase the
Maximum Credit, Agent shall notify each of the Lenders of such request and each
Lender shall have the option (but not the obligation) to increase the amount of
its Commitment by an amount up to its Pro Rata Share of the amount of the
increase in the Maximum Credit requested by Administrative Borrower as set forth
in the notice from Agent to such Lender. Each Lender shall notify Agent within
thirty (30) days after the receipt of such notice of a request for such increase
from Agent whether it is willing to so increase its Commitment, and if so, the
amount of such increase; provided, that, no Lender shall be obligated to provide
such increase in its Commitment and the determination to increase the Commitment
of a Lender shall be within the sole and absolute discretion of such Lender. If
the aggregate amount of the increases in the Commitments received from the
Lenders does not equal or exceed the amount of the increase in the Maximum
Credit requested by Administrative Borrower, Agent may seek additional increases
from Lenders or Commitments from such Eligible Transferees as it may determine,
after consultation with Administrative Borrower. In the event Lenders (or
Lenders and any such Eligible Transferees, as the case may be) have committed in
writing to provide increases in their Commitments or new Commitments in an
aggregate amount in excess of the increase in the Maximum Credit requested by
Borrowers or permitted hereunder, Agent shall then have the right to allocate
such commitments, first to Lenders and then to Eligible Transferees, in such
amounts and manner as Agent may determine, after consultation with
Administrative Borrower.
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(c) In the event of a request to increase the Maximum Credit, the
Maximum Credit shall be increased by the amount of the increase in Commitments
from Lenders or new Commitments from Eligible Transferees, in each case selected
in accordance with Section 2.3(b), for which Agent has received Assignment and
Acceptances sixty (60) days after the date of the request by Administrative
Borrower for the increase or such earlier date as Agent and Administrative
Borrower may agree (but subject to the satisfaction of the conditions set forth
below), whether or not the aggregate amount of the increase in Commitments and
new Commitments, as the case may be, equal or exceed the amount of the increase
in the Maximum Credit requested by Administrative Borrower in accordance with
the terms hereof, effective on the date that each of the following conditions
have been satisfied:
(i) Agent shall have received from each Lender or Eligible
Transferee that is providing an additional Commitment as part of the increase in
the Maximum Credit, an Assignment and Acceptance duly executed by such Lender or
Eligible Transferee and Administrative Borrower;
(ii) the conditions precedent to the making of Revolving Loans
set forth in Section 4.2 hereof shall be satisfied as of the date of the
increase in the Maximum Credit, both before and after giving effect to such
increase;
(iii) Agent shall have received an opinion of counsel to
Borrowers and Guarantors in form and substance and from counsel reasonably
satisfactory to Agent, addressing such matters as Agent may reasonably request
(including an opinion as to no conflicts with other Indebtedness);
(iv) such increase in the Maximum Credit on the date of the
effectiveness thereof shall not violate any applicable law, regulation or order
or decree of any court or other Governmental Authority and shall not be
enjoined, temporarily, preliminarily or permanently;
(v) there shall have been paid to each Lender and Eligible
Transferee providing an additional Commitment in connection with such increase
in the Maximum Credit all fees and expenses due and payable to such Person on or
before the effectiveness of such increase; and
(vi) there shall have been paid to Agent, for the account of
the Agent and Lenders (in accordance with any agreement among them), all fees
and expenses (including reasonable fees and expenses of counsel) due and payable
pursuant to any of the Financing Agreements on or before the effectiveness of
such increase.
(d) Upon the receipt by Agent of a written request to decrease the
Maximum Credit, Agent shall notify each of the Lenders of such request and,
subject to the terms of Section 2.3(e) hereof, the Commitments of each Lender
shall be decreased on the date determined by Administrative Borrower and Agent
by an amount equal to such Lender's Pro Rata Share of the amount of the decrease
in the Maximum Credit requested by Administrative Borrower as set forth in the
notice from Agent to such Lender.
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(e) In the event of a request to decrease the Maximum Credit, the
Maximum Credit shall be decreased by the amount of the decrease in Commitments
requested by Administrative Borrower in accordance with the terms hereof,
subject to the satisfaction of each of the following conditions:
(i) the Maximum Credit, after giving effect to such decrease,
shall not be less than the aggregate amount of the Loans and Letter of Credit
Obligations outstanding at such time; and
(ii) Borrowers shall be in compliance with the terms of
Section 9.19 hereof, before and after giving effect to such decrease.
(f) As of the effective date of any such increase or decrease, as
the case may be, in the Maximum Credit, each reference to the term Maximum
Credit herein and in any of the other Financing Agreements shall be deemed
amended to mean the amount of the Maximum Credit specified in the most recent
written notice from Agent to Administrative Borrower of the increase or
decrease, as the case may be, in the Maximum Credit.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination hereof shall be payable on demand.
(b) Each Borrower (or Administrative Borrower on behalf of such
Borrower) may from time to time request Eurodollar Rate Loans or may request
that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from a Borrower (or Administrative Borrower on behalf of such Borrower) shall
specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate
Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar
Rate Loans to be continued (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Agent of such a request from a Borrower (or Administrative Borrower on behalf of
such Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided, that, (i) no Default or Event of Default
shall exist or have occurred and be continuing, (ii) no party hereto shall have
sent any notice of termination of this Agreement, (iii) such Borrower (or
Administrative Borrower on behalf of such Borrower) shall have complied with
such customary procedures as are established by Agent and specified by Agent to
Administrative Borrower from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (vi) Agent and each Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Agent and such Lender and can be readily determined as of the date of the
request for such
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Eurodollar Rate Loan by such Borrower. Any request by or on behalf of a Borrower
for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate
Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Agent and Lenders
shall not be required to purchase United States Dollar deposits in the London
interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent
to Parent, be subsequently converted to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrowers shall pay to Agent, for
the benefit of Lenders, upon demand by Agent (or Agent may, at its option,
charge any loan account of any Borrower) any amounts required to compensate any
Lender or Participant for any loss (including loss of anticipated profits), cost
or expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the account
of Lenders, monthly in arrears not later than the first day of each calendar
month and shall be calculated on the basis of a three hundred sixty (360) day
year (or, in the case of Prime Rate Loans, a 365 or 366 day year, as the case
may be) and actual days elapsed. The interest rate on non-contingent Obligations
(other than Eurodollar Rate Loans) shall increase or decrease by an amount equal
to each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrowers to Agent and
Lenders exceed the maximum amount or the rate permitted under any applicable law
or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Fees.
(a) Borrowers shall pay to Agent, for the account of Lenders,
monthly an unused line fee at a rate equal to the percentage (on a per annum
basis) set forth below calculated upon the amount by which the Maximum Credit
exceeds the average daily principal balance of the outstanding Revolving Loans
and Letters of Credit during the immediately preceding month (or part thereof)
while the Loan Agreement is in effect and for so long thereafter as any
Obligations are outstanding. Such fee shall be payable on the first day of each
month in arrears and shall be calculated based on a three hundred sixty (360)
day year and actual days elapsed. The percentage used for determining the unused
line fee shall be as set forth below if the Quarterly Average Excess
Availability for the immediately preceding fiscal quarter is at or within the
amounts indicated for such percentage:
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Quarterly Average Unused Line
Tier Excess Availability Fee Percentage
---- ------------------- --------------
1 Greater than $35,000,000 .35%
2 Less than or equal to $35,000,000
and greater than $15,000,000 .30%
3 Less than or equal to $15,000,000 .25%
provided, that, (i) the unused line fee percentage shall be calculated and
established based on the foregoing once each fiscal quarter, and (ii) the
applicable percentage through December 31, 2005 shall be the amount for Tier 2
set forth above.
(b) Borrowers agree to pay to Agent the other fees and amounts set
forth in the Fee Letter in the amounts and at all times specified therein.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to any Lender or
any banking or financial institution from whom any Lender borrows funds or
obtains credit (a "Funding Bank"), or (ii) a Funding Bank or any Lender complies
with any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank, any Lender or Issuing Bank determines that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or a Funding Bank, any Lender or Issuing Bank
complies with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, and in the case of any event set forth in this clause (iii), such
adoption, change or compliance has or would have the direct or indirect effect
of reducing the rate of return on any Lender's or Issuing Bank's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or Issuing Bank could have achieved but for such adoption, change or compliance
(taking into consideration the Funding Bank's or Lender's or Issuing Bank's
policies with respect to capital adequacy) by an amount deemed by such Lender or
Issuing Bank to be material, and the result of any of the foregoing events
described in clauses (i), (ii) or (iii) is or results in an increase in the cost
to any Lender or Issuing Bank of funding or maintaining the Loans, the Letters
of Credit or its Commitment, then Borrowers and Guarantors shall from time to
time upon demand by Agent pay to Agent additional amounts sufficient to
indemnify such Lender, as the case may be, against such increased cost on an
after-tax basis (after taking into account applicable deductions and credits in
respect of the amount indemnified). A certificate as to the amount of such
increased cost shall be submitted to Administrative Borrower by Agent or the
applicable Lender and shall be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i) Agent
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and
42
reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for
such Interest Period, (ii) Agent has received notice from the Required Lenders
that the Adjusted Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to Lenders of
making or maintaining Eurodollar Rate Loans during such Interest Period, or
(iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to
which such Interest Period is to be applicable are not generally available in
the London interbank market, Agent shall give telecopy or telephonic notice
thereof to Administrative Borrower as soon as practicable thereafter, and will
also give prompt written notice to Administrative Borrower when such conditions
no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested
to be made on the first day of such Interest Period shall be made as Prime Rate
Loans, (B) any Loans that were to have been converted on the first day of such
Interest Period to or continued as Eurodollar Rate Loans shall be converted to
or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan
shall be converted, on the last day of the then-current Interest Period thereof,
to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further
Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower
(or Administrative Borrower on behalf of any Borrower) have the right to convert
Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of
or any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly
give written notice of such circumstances to Administrative Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (ii) the
commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender
shall then have a commitment only to make a Prime Rate Loan when a Eurodollar
Rate Loan is requested and (iii) such Lender's Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, Borrowers and
Guarantors shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.3(d) below.
(d) Borrowers and Guarantors shall indemnify Agent and each Lender
and to hold Agent and each Lender harmless from any loss or expense which Agent
or such Lender may sustain or incur as a consequence of (i) default by any
Borrower in making a borrowing of, conversion into or extension of Eurodollar
Rate Loans after such Borrower (or Administrative Borrower on behalf of such
Borrower) has given a notice requesting the same in accordance with the
provisions of this Agreement, (ii) default by any Borrower in making any
prepayment of a Eurodollar Rate Loan after such Borrower has given a notice
thereof in accordance with the provisions of this Agreement, and (iii) the
making of a prepayment of Eurodollar Rate Loans on a day which is not the last
day of an Interest Period with respect thereto. With respect to Eurodollar Rate
Loans, such indemnification may include an amount equal to the excess, if any,
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of (A) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Rate Loans provided for herein over (B) the amount of interest (as determined by
such Agent or such Lender) which would have accrued to Agent or such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. This covenant shall survive
the termination or non-renewal of this Agreement and the payment of the
Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letters of Credit. The
obligation of Agent and Lenders to make the initial Loans or of Issuing Bank to
issue the initial Letters of Credit hereunder is subject to the satisfaction of,
or waiver of, immediately prior to or concurrently with the making of such Loan
or the issuance of such Letter of Credit of each of the following conditions
precedent:.
(a) Agent shall have received, in form and substance satisfactory to
Agent, all releases, terminations and such other documents as Agent may request
to evidence and effectuate the termination by the Existing Lenders of their
respective financing arrangements with Borrowers and Guarantors;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
certificate of incorporation or formation of each Borrower and Guarantor
certified by the Secretary of State (or equivalent Governmental Authority) which
shall set forth the same complete name of such Borrower or Guarantor as is set
forth herein and such document as shall set forth the organizational
identification number of each Borrower or Guarantor, if one is issued in its
jurisdiction of incorporation or formation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrowers since the date of Agent's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of any Borrower or Guarantor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Agent
or any Lender to enforce the Obligations or realize upon the Collateral;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records with respect to the distribution
center of Borrowers and/or roll-forwards of Accounts and
44
Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Agent, together with such supporting documentation as may
be necessary or appropriate, and other documents and information that will
enable Agent to accurately identify and verify the Collateral), the results of
which in each case shall be satisfactory to Agent, not more than seven (7)
Business Days prior to the date hereof or such earlier date as Agent may agree;
(e) Agent shall have received, in form and substance satisfactory to
Agent, (i) an opening pro-forma balance sheet of Parent and its Subsidiaries (on
a consolidated basis), reflecting the transactions contemplated hereby and (ii)
projected income statements, balance sheets and statements of cash flow for
Parent and its Subsidiaries (on a consolidated basis) prepared on a monthly
basis for the period through the end of the 2006 fiscal year and thereafter, on
an annual basis for each fiscal year through the end of the 2009 fiscal year, in
each case with the results and assumptions set forth in all of such projections
in form and substance satisfactory to Agent;
(f) Agent shall have received, in form and substance satisfactory to
Agent, all consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements (other
than from the lessors of retail store locations) and Credit Card
Acknowledgments;
(g) the Excess Availability as determined by Agent, as of the date
hereof, shall be not less than $25,000,000 after giving effect to the initial
Loans made or to be made and Letters of Credit issued or to be issued in
connection with the initial transactions hereunder;
(h) Agent shall have received, in form and substance satisfactory to
Agent, a Deposit Account Control Agreement by and among Agent, duly authorized,
executed and delivered by Parent and BancorpSouth Bank;
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral;
(j) Agent shall have received and reviewed lien search results for
each Borrower and Guarantor in such jurisdictions as Agent shall request, which
search results shall be in form and substance satisfactory to Agent;
(k) Agent shall have received environmental audits of the Real
Property to be subject to the Mortgage conducted by an independent environmental
engineering firm acceptable to Agent, and in form, scope and methodology
satisfactory to Agent, the results of which shall be satisfactory to Agent;
(l) Agent shall have received, in form and substance satisfactory to
Agent, a valid and effective title insurance policy issued by a company and
agent acceptable to Agent: (i) insuring the priority, amount and sufficiency of
the Mortgage, (ii) insuring against matters that would be disclosed by surveys
and (iii) containing any legally available endorsements, assurances or
affirmative coverage requested by Agent for protection of its interests;
45
(m) Agent shall have received originals of the shares of the stock
certificates (if any) representing all of the issued and outstanding shares of
the Capital Stock of each Borrower and Guarantor (other than Parent) and owned
by any Borrower or Guarantor, in each case together with stock powers duly
executed in blank with respect thereto;
(n) Agent shall have received a Borrowing Base Certificate setting
forth the Loans and Letters of Credit available to Borrowers as of the date
hereof as completed in a manner satisfactory to Agent and duly authorized,
executed and delivered on behalf of Borrowers;
(o) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
(p) Agent shall have received a written appraisal as to the
Inventory of Borrowers and Guarantors and the Baldwyn Real Property, in each
case by an appraiser acceptable to Agent, in form, scope and methodology
reasonably acceptable to Agent, addressed to Agent and upon which Agent and
Lenders are expressly permitted to rely;
(q) no material pending or threatened, litigation, proceeding,
bankruptcy or insolvency, injunction, order or claims with respect to Borrowers
and Guarantors shall exist;
(r) as of the date hereof and after giving effect to the
transactions contemplated hereby, no defaults or events of default on any
material Indebtedness or any other Material Contracts of Borrowers or Guarantors
shall exist or have occurred and be continuing;
(s) Agent shall have received, in form and substance satisfactory to
Agent, such opinion letters of counsel to Borrowers and Guarantors with respect
to the Financing Agreements and such other matters as Agent may request; and
(t) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Agent,
in form and substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letters of Credit . The
obligation of Lenders to make the Loans, including the initial Loans, or of the
Issuing Bank to issue any Letter of Credit, including the initial Letters of
Credit and any further Loans and Letters of Credit, is subject to the further
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of each such Loan or the issuance of such Letter of Credit of each of the
following conditions precedent:.
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit and after giving effect thereto, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
46
which case such representations and warranties shall have been true and accurate
in all material respects on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letters of Credit, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
has a reasonable likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and
be continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and
the benefit of the Secured Parties, a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Agent, for itself
and the benefit of the Lenders, as security, all of the following personal
property, and interests in personal property, of each Borrower and Guarantor,
whether now owned or hereafter acquired or existing, and wherever located
(together with all other collateral security for the Obligations at any time
granted to or held or acquired by Agent or any Lender, collectively, the
"Collateral"), including:.
(a) all Accounts;
(b) all general intangibles, including, without limitation,
Intellectual Property;
(c) all goods, including without limitation, Inventory and
Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper, including without limitation, all tangible
and electronic chattel paper;
(f) all instruments. including without limitation, all promissory
notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter of credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other
47
Collateral, including (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral; (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party; (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing, other
Collateral, including returned, repossessed and reclaimed goods; and (iv)
deposits by and property of account debtors and other persons securing the
obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any Borrower or Guarantor now or hereafter held
or received by or in transit to Agent or any Lender or its Affiliates at any
other depository or other institution from or for the account of any Borrower or
Guarantor, whether for safekeeping, pledge, custody transmission, collection or
otherwise;
(l) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(m) to the extent not described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial
Code of such jurisdiction as Agent may determine, together with any amendment
and continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming Agent
or its designee as secured party and such Borrower or Guarantor, as the case may
be, as debtor with respect to the Collateral (and any amendments with respect to
such financing statements) filed by or on behalf of Agent prior to the date
hereof and ratifies and confirms the authorization of Agent to file such
financing statements (and amendments, if any). Each Borrower and Guarantor
hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any
symbol required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming Agent or its
designee as the secured party and any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to
48
the extent of the Collateral included in such description and it shall not
render the financing statement ineffective as to any of the Collateral or
otherwise affect the financing statement as it applies to any of the Collateral.
In no event shall any Borrower or Guarantor at any time file, or permit or cause
to be filed, any correction statement or termination statement with respect to
any financing statement (or amendment or continuation with respect thereto)
naming Agent or its designee as secured party and such Borrower or Guarantor as
debtor.
(b) Each Borrower and Guarantor does not have any chattel paper
(whether tangible or electronic) or instruments as of the date hereof, except as
set forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify Agent
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Agent, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent's option, each Borrower and Guarantor shall,
or Agent may at any time on behalf of any Borrower or Guarantor, cause the
original of any such instrument or chattel paper to be conspicuously marked in a
form and manner acceptable to Agent with the following legend referring to
chattel paper or instruments as applicable: "This [chattel paper][instrument] is
subject to the security interest of Wachovia Bank, National Association and any
sale, transfer, assignment or encumbrance of this [chattel paper][instrument]
violates the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any time
hold or acquire an interest in any electronic chattel paper or any "transferable
record" (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction), such
Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly
upon Agent's request, such Borrower or Guarantor shall take, or cause to be
taken, such actions as Agent may request to give Agent control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) Each Borrower and Guarantor does not have any deposit accounts
as of the date hereof, except as set forth in the Information Certificate.
Borrowers and Guarantors shall not, directly or indirectly, after the date
hereof open, establish or maintain any deposit account unless each of the
following conditions is satisfied: (i) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of any Borrower or
Guarantor to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Agent the name of the account,
the owner of the account, the name and address of the bank at which such account
is to be opened or established, the individual at such bank with whom such
Borrower or Guarantor is dealing and the purpose of the account, except as to
any Store Account opened or established after the date hereof, so long as no
Event of Default shall exist or have occurred and be continuing, Agent shall
only have received such information as to such Store Account on the next monthly
report with respect to deposit accounts
49
in accordance with Section 7.1(a) hereof, (ii) the bank where such account is
opened or maintained shall be acceptable to Agent, and (iii) on or before the
opening of such deposit account (other than as to a Store Account so long as no
Event of Default shall exist or have occurred and be continuing), such Borrower
or Guarantor shall as Agent may specify either (A) deliver to Agent a Deposit
Account Control Agreement with respect to such deposit account duly authorized,
executed and delivered by such Borrower or Guarantor and the bank at which such
deposit account is opened and maintained or (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Agent. The terms of this subsection (d) shall not apply to deposit
accounts specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of any Borrower's or
Guarantor's salaried employees.
(e) No Borrower or Guarantor owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(f) In the event that any Borrower or Guarantor shall be entitled to
or shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower or Guarantor shall promptly endorse, assign and
deliver the same to Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify. If any
securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Agent thereof and shall as Agent may specify, either (A) cause the issuer
to agree to comply with instructions from Agent as to such securities, without
further consent of any Borrower or Guarantor or such nominee, or (B) arrange for
Agent to become the registered owner of the securities.
(g) Borrowers and Guarantors shall not, directly or indirectly,
after the date hereof open, establish or maintain any investment account,
securities account, commodity account or any other similar account (other than a
deposit account) with any securities intermediary or commodity intermediary
unless each of the following conditions is satisfied: (A) Agent shall have
received not less than five (5) Business Days prior written notice of the
intention of such Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity acceptable to Agent
the name of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom such
Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Agent, and (C) on or
before the opening of such investment account, securities account or other
similar account with a securities intermediary or commodity intermediary, such
Borrower or Guarantor shall as Agent may specify either (i) execute and deliver,
and cause to be executed and delivered to Agent, an Investment Property Control
Agreement with respect thereto duly authorized, executed and delivered by such
Borrower or Guarantor and such securities intermediary or commodity
50
intermediary or (ii) arrange for Agent to become the entitlement holder with
respect to such investment property on terms and conditions acceptable to Agent.
(h) Borrowers and Guarantors are not the beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker's acceptance
or similar instrument as of the date hereof, except as set forth in the
Information Certificate. In the event that any Borrower or Guarantor shall be
entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing. Such Borrower or Guarantor shall immediately,
as Agent may specify, either (i) deliver, or cause to be delivered to Agent,
with respect to any such letter of credit, banker's acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Agent, consenting to
the assignment of the proceeds of the letter of credit to Agent by such Borrower
or Guarantor and agreeing to make all payments thereon directly to Agent or as
Agent may otherwise direct or (ii) cause Agent to become, at Borrowers' expense,
the transferee beneficiary of the letter of credit, banker's acceptance or
similar instrument (as the case may be).
(i) Borrowers and Guarantors do not have any commercial tort claims
as of the date hereof, except as set forth in the Information Certificate. In
the event that any Borrower or Guarantor shall at any time after the date hereof
have any commercial tort claims, such Borrower or Guarantor shall promptly
notify Agent thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such commercial tort claim and (ii) include
the express grant by such Borrower or Guarantor to Agent of a security interest
in such commercial tort claim (and the proceeds thereof). In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower or Guarantor to Agent shall be deemed to constitute such grant
to Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Agent provided in Section 5.2(a)
hereof or otherwise arising by the execution by such Borrower or Guarantor of
this Agreement or any of the other Financing Agreements, Agent is hereby
irrevocably authorized from time to time and at any time to file such financing
statements naming Agent or its designee as secured party and such Borrower or
Guarantor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower and
Guarantor shall promptly upon Agent's request, execute and deliver, or cause to
be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.
(j) Borrowers and Guarantors do not have any goods, documents of
title or other Collateral in the custody, control or possession of a third party
as of the date hereof, except as set forth in the Information Certificate and
except for goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of business of
such Borrower or Guarantor in the possession of the carrier transporting such
goods. In the event that any goods, documents of title or other Collateral are
at any time after the date hereof in the custody, control or possession of any
other person not referred to in the Information Certificate or such carriers,
Borrowers and Guarantors shall promptly notify Agent thereof in
51
writing. Promptly upon Agent's request, Borrowers and Guarantors shall deliver
to Agent a Collateral Access Agreement duly authorized, executed and delivered
by such person and the Borrower or Guarantor that is the owner of such
Collateral.
(k) Borrowers and Guarantors shall take any other actions reasonably
requested by Agent from time to time to cause the attachment, perfection and
first priority of, and the ability of Agent to enforce, the security interest of
Agent in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that any Borrower's or Guarantor's signature thereon is required
therefor, (ii) causing Agent's name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letters of
Credit and other Obligations and the Collateral, (b) all payments made by or on
behalf of any Borrower or Guarantor and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Administrative Borrower each month a
statement setting forth the balance in the Borrowers' loan account(s) maintained
by Agent for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and Guarantors
and conclusively binding upon Borrowers and Guarantors as an account stated
except to the extent that Agent receives a written notice from Administrative
Borrower of any specific exceptions of Administrative Borrower thereto within
thirty (30) days after the date such statement has been received by Parent.
Until such time as Agent shall have rendered to Administrative Borrower a
written statement as provided above, the balance in any Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Agent
and Lenders by Borrowers and Guarantors.
6.3 Cash Management; Collection of Collateral Proceeds.
(a) Each Borrower and Guarantor shall establish and maintain, at its
expense, deposit account arrangements and merchant payment arrangements with the
banks set forth on Schedule 8.10 to the Information Certificate and subject to
Section 5.2(d) hereof such other
52
banks as such Borrower or Guarantor may hereafter select. The banks set forth on
Schedule 8.10 to the Information Certificate constitute all of the banks with
which Borrowers and Guarantors have deposit account arrangements and merchant
payment arrangements as of the date hereof and identifies each of the deposit
accounts at such banks that are used solely for receiving store receipts from a
retail store location of a Borrower (together with any other deposit accounts at
any time established or used by any Borrower for receiving such store receipts
from any retail store location, collectively, the "Store Accounts" and each
individually, a "Store Account") or otherwise describes the nature of the use of
such deposit account by such Borrower.
(b) Each Borrower shall deposit all proceeds from sales of Inventory
in every form, including, without limitation, cash, checks, credit card sales
drafts, credit card sales or charge slips or receipts and other forms of daily
store receipts, from each retail store location of such Borrower on each
Business Day into the Store Account of such Borrower used solely for such
purpose; provided, that, each retail store of a Borrower shall be permitted to
retain cash on hand in an amount not to exceed $1,000 immediately after giving
effect to the deposit of funds from such store into the applicable Store
Account. All such funds deposited into the Store Accounts shall be sent by wire
transfer or other electronic funds transfer on each Business Day to the Blocked
Accounts as provided in Section 6.3(c), except for nominal amounts required to
be maintained in such Store Accounts under the terms of such Borrower's
arrangements with the bank at which such Store Accounts are maintained (which
nominal amounts shall not at any time exceed $3,000 as to each Store Account).
All amounts in each Intercompany Royalty Account shall be sent by wire transfer
or other electronic funds transfer on each Business Day to the Blocked Accounts.
(c) Each Borrower shall establish and maintain, at its expense,
deposit accounts with such banks as are reasonably acceptable to Agent (the
"Blocked Accounts") into which each Borrower shall promptly either cause all
amounts on deposit in the Store Accounts of such Borrower to be sent as provided
in Section 6.3(a)(i) above (except as expressly provided in Section 6.3(b)
hereof) or shall itself deposit or cause to be deposited all proceeds of
Collateral, including all proceeds from sales of Inventory, all amounts payable
to each Borrower from Credit Card Issuers and Credit Card Processors and all
other proceeds of Collateral. Borrowers and Guarantors shall deliver, or cause
to be delivered to Agent a Deposit Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as
provided in Section 5.2 hereof. At any time a Default or an Event of Default
shall exist or have occurred and be continuing, promptly upon Agent's request,
Borrowers and Guarantors shall deliver, or cause to be delivered, to Agent a
Deposit Account Control Agreement duly authorized, executed and delivered by
such banks where a Store Account is maintained as Agent shall specify. Without
limiting any other rights or remedies of Agent or Lenders, Agent may, at its
option, instruct the depository banks at which the Blocked Accounts are
maintained to transfer all available funds received or deposited into the
Blocked Accounts to the Agent Payment Account at any time that a Cash Dominion
Event occurs. Without limiting any other rights or remedies of Agent or Lenders,
in the event that a Deposit Account Control Agreement is in effect for a Store
Account, then Agent may, at its option, instruct the depository bank at which
the Store Account is maintained to transfer all available funds received or
deposited into the Store Account to the
53
Agent Payment Account at any time that an Event of Default shall exist or have
occurred and be continuing. At all times that Agent shall have notified any
depository bank to transfer funds from a Blocked Account or Store Account to the
Agent Payment Account, all payments made to such Blocked Accounts or Store
Accounts, whether in respect of the Receivables, as proceeds of Inventory or
other Collateral or otherwise shall be treated as payments to Agent in respect
of the Obligations and therefore shall constitute the property of Agent and
Lenders to the extent of the then outstanding Obligations.
(d) For purposes of calculating the amount of the Loans available to
each Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Agent of immediately
available funds in the Agent Payment Account provided such payments and notice
thereof are received in accordance with Agent's usual and customary practices as
in effect from time to time and within sufficient time to credit the applicable
loan account on such day, and if not, then on the next Business Day.
(e) Each Borrower and Guarantor and their respective employees,
agents and Subsidiaries shall, acting as trustee for Agent, receive, as the
property of Agent, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and promptly upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit the
same or cause the same to be remitted, in kind, to Agent. Borrowers agree to
reimburse Agent on demand for any amounts owed or paid to any bank or other
financial institution at which a Blocked Account or any other deposit account or
investment account is established or any other bank, financial institution or
other person involved in the transfer of funds to or from the Blocked Accounts
arising out of Agent's payments to or indemnification of such bank, financial
institution or other person. The obligations of Borrowers to reimburse Agent for
such amounts pursuant to this Section 6.3 shall survive the termination of this
Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Agent Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Subject to the other terms and conditions contained herein, Agent shall
apply payments received or collected from any Borrower or Guarantor or for the
account of any Borrower or Guarantor (including the monetary proceeds of
collections or of realization upon any Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Agent, Lenders and
Issuing Bank from any Borrower or Guarantor; second, to pay interest due in
respect of any Loans (and including any Special Agent Advances) or Letter of
Credit Obligations; third, to pay principal in respect of Special Agent
Advances; fourth, to pay principal in respect of the Revolving Loans; fifth, to
pay Obligations then due arising under or pursuant to any Hedge Agreement of a
Borrower or Guarantor with a Bank Product Provider (up to the amount of any then
effective Reserve established in respect of such Obligations), on a pro rata
basis; sixth, to pay or prepay any other Obligations whether or not then due, in
such order and manner as Agent determines and, at any time an Event of Default
exists or has occurred and is continuing, to be held as cash collateral in
connection with any Letter of Credit; and seventh, to pay Obligations arising
under or pursuant to any Bank Product (other than to the extent provided for
above) on a pro rata basis. Notwithstanding anything to the contrary contained
in this Agreement, (i) unless so directed by Agent, or unless a Default or an
Event of Default shall exist or have occurred and be continuing, Agent shall not
apply any payments which it receives to any Eurodollar Rate Loans, except (A) on
the expiration date of the Interest Period applicable to any such Eurodollar
54
Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans
and (ii) to the extent any Borrower uses any proceeds of the Loans or Letters of
Credit to acquire rights in or the use of any Collateral or to repay any
Indebtedness used to acquire rights in or the use of any Collateral, payments in
respect of the Obligations shall be deemed applied first to the Obligations
arising from Loans and Letter of Credit Obligations that were not used for such
purposes and second to the Obligations arising from Loans and Letter of Credit
Obligations the proceeds of which were used to acquire rights in or the use of
any Collateral in the chronological order in which such Borrower acquired such
rights in or the use of such Collateral.
(b) At Agent's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower
maintained by Agent. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Agent, any Lender
or Issuing Bank is required to surrender or return such payment or proceeds to
any Person for any reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not been
received by Agent or such Lender. Borrowers and Guarantors shall be liable to
pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for
the amount of any payments or proceeds surrendered or returned. This Section
6.4(b) shall remain effective notwithstanding any contrary action which may be
taken by Agent or any Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination of
this Agreement.
6.5 Taxes.
(a) Any and all payments by or on account of any of the Obligations
shall be made free and clear of and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, charges, withholdings, liabilities, restrictions or conditions
of any kind, excluding (i) in the case of each Lender, Issuing Bank and Agent
(A) taxes measured by its net income, and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Lender, Issuing Bank or Agent (as the case may be) is organized and (B) any
United States withholding taxes payable with respect to payments under the
Financing Agreements under laws (including any statute, treaty or regulation) in
effect on the date hereof (or, in the case of an Eligible Transferee, the date
of the Assignment and Acceptance) applicable to such Lender, Issuing Bank or
Agent, as the case may be, but not excluding any United States withholding taxes
payable as a result of any change in such laws occurring after the date hereof
(or the date of such Assignment and Acceptance) and (ii) in the case of each
Lender, taxes measured by its net income, and franchise taxes imposed on it as a
result of a connection between such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any taxing authority thereof or
therein (all such non-excluded taxes, levies, imposts, fees, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
(b) If any Taxes shall be required by law to be deducted from or in
respect of any sum payable in respect of the Obligations to any Lender, Issuing
Bank or Agent (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 6.5), such Lender
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or Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the relevant Borrower or
Guarantor shall make such deductions, (iii) the relevant Borrower or Guarantor
shall pay the full amount deducted to the relevant taxing authority or other
authority in accordance with applicable law and (iv) the relevant Borrower or
Guarantor shall deliver to Agent evidence of such payment.
(c) In addition, each Borrower and Guarantor agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies of the United States or any political
subdivision thereof or any applicable foreign jurisdiction, and all liabilities
with respect thereto, in each case arising from any payment made hereunder or
under any of the other Financing Agreements or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any of the
other Financing Agreements (collectively, "Other Taxes").
(d) Each Borrower and Guarantor shall indemnify each Lender, Issuing
Bank and Agent for the full amount of Taxes and Other Taxes (including any Taxes
and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 6.5) paid by such Lender, Issuing Bank or Agent (as the case may be) and
any liability (including for penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted, unless the payment thereof by such Lender, Issuing Bank or
Agent (as the case may be) resulted from the gross negligence or willful
misconduct of such Lender, Issuing Bank or Agent (as the case may be) as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. This indemnification shall be made within thirty (30) days from
the date such Lender, Issuing Bank or Agent (as the case may be) makes written
demand therefor. A certificate as to the amount of such payment or liability
delivered to Administrative Borrower by a Lender or Issuing Bank (in each case
with a copy to Agent) or by Agent on its own behalf or on behalf of a Lender or
Issuing Bank, shall be conclusive absent manifest error.
(e) If Agent, Issuing Bank or any Lender receives a refund or credit
in respect of any Taxes or Other Taxes for which Agent, Issuing Bank or such
Lender has received payment from any Borrower or Guarantor hereunder, so long as
no Event of Default shall exist or have occurred and be continuing, Agent,
Issuing Bank or such Lender (as the case may be) shall credit to the loan
account of Borrowers the amount of such refund or the amount of any tax savings
(if any) realized by Agent, Issuing Bank or such Lender directly attributable to
such credit.
(f) As soon as practicable after any payment of Taxes or Other Taxes
by any Borrower or Guarantor, such Borrower or Guarantor shall furnish to Agent,
at its address referred to herein, the original or a certified copy of a receipt
evidencing payment thereof.
(g) Without prejudice to the survival of any other agreements of any
Borrower or Guarantor hereunder or under any of the other Financing Agreements,
the agreements and obligations of such Borrower or Guarantor contained in this
Section 6.5 shall survive the termination of this Agreement and the payment in
full of the Obligations.
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(h) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
applicable Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any of the
other Financing Agreements shall deliver to Administrative Borrower (with a copy
to Agent), at the time or times prescribed by applicable law or reasonably
requested by Administrative Borrower or Agent (in such number of copies as is
reasonably requested by the recipient), whichever of the following is applicable
(but only if such Foreign Lender is legally entitled to do so): (i) duly
completed copies of Internal Revenue Service Form W-8BEN claiming exemption
from, or a reduction to, withholding tax under an income tax treaty, or any
successor form, (ii) duly completed copies of Internal Revenue Service Form
8-8ECI claiming exemption from withholding because the income is effectively
connection with a U.S. trade or business or any successor form, (iii) in the
case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the
Lender to the effect that such Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of a Borrower
within the meaning of Section 881(c)(3)(B) of the Code or a "controlled foreign
corporation" described and Section 881(c)(3)(C) of the Code and (B) duly
completed copies of Internal Revenue Service Form W-8BEN claiming exemption from
withholding under the portfolio interest exemption or any successor form or (iv)
any other applicable form, certificate or document prescribed by applicable law
as a basis for claiming exemption from or a reduction in United States
withholding tax duly completed together with such supplementary documentation as
may be prescribed by applicable law to permit a Borrower to determine the
withholding or deduction required to be made. Unless Administrative Borrower and
Agent have received forms or other documents satisfactory to them indicating
that payments hereunder or under any of the other Financing Agreements to or for
a Foreign Lender are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, Borrowers or Agent
shall withhold amounts required to be withheld by applicable requirements of law
from such payments at the applicable statutory rate.
(i) Any Lender claiming any additional amounts payable pursuant to
this Section 6.5 shall use its reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
applicable lending office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that would be payable
or may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.
6.6 Authorization to Make Loans. Agent and Lenders are authorized to make
the Loans based upon telephonic or other instructions received from anyone
purporting to be an officer of Administrative Borrower or any Borrower or other
authorized person or, at the discretion of Agent, if such Loans are necessary to
satisfy any Obligations. All requests for Loans or Letters of Credit hereunder
shall specify the date on which the requested advance is to be made (which day
shall be a Business Day) and the amount of the requested Loan. Requests received
after 11:00 a.m. Dallas, Texas time on any day shall be deemed to have been made
as of the opening of business on the immediately following Business Day. All
Loans and Letters of Credit under this Agreement shall be conclusively presumed
to have been made to, and at the request of and for the benefit of, any Borrower
or Guarantor when deposited to the credit of any Borrower or
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Guarantor or otherwise disbursed or established in accordance with the
instructions of any Borrower or Guarantor or in accordance with the terms and
conditions of this Agreement.
6.7 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
and Letters of Credit hereunder only for: (a) payments to each of the persons
listed in the disbursement direction letter furnished by Borrowers to Agent on
or about the date hereof and (b) costs, expenses and fees in connection with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing Agreements. All other Loans made or Letters of Credit provided to or
for the benefit of any Borrower pursuant to the provisions hereof shall be used
only for general operating purposes, working capital purposes and other proper
corporate purposes of Borrowers and Guarantors not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
6.8 Appointment of Administrative Borrower as Agent for Requesting Loans
and Receipts of Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Administrative Borrower as its agent and attorney-in-fact to request and receive
Loans and Letters of Credit pursuant to this Agreement and the other Financing
Agreements from Agent or any Lender in the name or on behalf of such Borrower.
Agent and Lenders may disburse the Loans to such bank account of Administrative
Borrower or a Borrower or otherwise make such Loans to a Borrower and provide
such Letters of Credit to a Borrower as Administrative Borrower may designate or
direct, without notice to any other Borrower or Guarantor. Notwithstanding
anything to the contrary contained herein, Agent may at any time and from time
to time require that Loans to or for the account of any Borrower be disbursed
directly to an operating account of such Borrower.
(b) Administrative Borrower hereby accepts the appointment by
Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this
Section 6.8. Administrative Borrower shall ensure that the disbursement of any
Loans to each Borrower requested by or paid to or for the account of Parent, or
the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to
or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably appoints
and constitutes Administrative Borrower as its agent to receive statements on
account and all other notices from Agent and Lenders with respect to the
Obligations or otherwise under or in connection with this Agreement and the
other Financing Agreements.
(d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by
Administrative Borrower shall be deemed for all purposes to have been made by
such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower or Guarantor.
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(e) No purported termination of the appointment of Administrative
Borrower as agent as aforesaid shall be effective, except after ten (10) days'
prior written notice to Agent.
6.9 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement or as otherwise agreed by Lenders: (a) the making and conversion of
Loans shall be made among the Lenders based on their respective Pro Rata Shares
as to the Loans and (b) each payment on account of any Obligations to or for the
account of one or more of Lenders in respect of any Obligations due on a
particular day shall be allocated among the Lenders entitled to such payments
based on their respective Pro Rata Shares and shall be distributed accordingly.
6.10 Sharing of Payments, Etc.
(a) Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim Agent
or any Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of such Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against
any principal of or interest on any Loans owed to such Lender or any other
amount payable to such Lender hereunder, that is not paid when due (regardless
of whether such balances are then due to such Borrower or Guarantor), in which
case it shall promptly notify Administrative Borrower and Agent thereof;
provided, that, such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower
or Guarantor payment of any principal of or interest on any Loan owing to it or
payment of any other amount under this Agreement or any of the other Financing
Agreements through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by any Borrower or Guarantor
to such Lender than the percentage thereof received by any other Lender, it
shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in
the Loans or such other amounts, respectively, owing to such other Lenders (or
such interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
Lenders shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Lender in obtaining or preserving such excess payment)
in accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Each Borrower and Guarantor agrees that any Lender purchasing a
participation (or direct interest) as provided in this Section may exercise, in
a manner consistent with this Section, all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
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(d) Nothing contained herein shall require any Lender to exercise
any right of setoff, banker's lien, counterclaims or similar rights or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable, assign
such rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.11 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
may, at its option, subject to the terms of this Section, make available, on
behalf of Lenders, the full amount of the Loans requested or charged to any
Borrower's loan account(s) or otherwise to be advanced by Lenders pursuant to
the terms hereof, without requirement of prior notice to Lenders of the proposed
Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
Dallas, Texas time on the Business Day immediately preceding the date of each
settlement computation; provided, that, Agent retains the absolute right at any
time or from time to time to make the above described adjustments at intervals
more frequent than weekly, but in no event more than twice in any week. Agent
shall deliver to each of the Lenders after the end of each week, or at such
lesser period or periods as Agent shall determine, a summary statement of the
amount of outstanding Loans for such period (such week or lesser period or
periods being hereinafter referred to as a "Settlement Period"). If the summary
statement is sent by Agent and received by a Lender prior to 12:00 p.m. Dallas,
Texas time, then such Lender shall make the settlement transfer described in
this Section by no later than 3:00 p.m. Dallas, Texas time on the same Business
Day and if received by a Lender after 12:00 p.m. Dallas, Texas time, then such
Lender shall make the settlement transfer by not later than 3:00 p.m. Dallas,
Texas time on the next Business Day following the date of receipt. If, as of the
end of any Settlement Period, the amount of a Lender's Pro Rata Share of the
outstanding Loans is more than such Lender's Pro Rata Share of the outstanding
Loans as of the end of the previous Settlement Period, then such Lender shall
forthwith (but in no event later than the time set forth in the preceding
sentence) transfer to Agent by wire transfer in immediately available funds the
amount of the increase. Alternatively, if the amount of a Lender's Pro Rata
Share of the outstanding Loans in any Settlement Period is less than the amount
of such Lender's Pro Rata Share of the outstanding Loans for the previous
Settlement Period, Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Agent. Agent and each Lender agrees to xxxx its books and records at
the end of each Settlement Period to show at all times the dollar amount of its
Pro Rata Share of the outstanding Loans and Letters of Credit. Each Lender shall
only be entitled to receive interest on its Pro Rata Share of the Loans to the
60
extent such Loans have been funded by such Lender. Because the Agent on behalf
of Lenders may be advancing and/or may be repaid Loans prior to the time when
Lenders will actually advance and/or be repaid such Loans, interest with respect
to Loans shall be allocated by Agent in accordance with the amount of Loans
actually advanced by and repaid to each Lender and the Agent and shall accrue
from and including the date such Loans are so advanced to but excluding the date
such Loans are either repaid by Borrowers or actually settled with the
applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by a Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to a Borrower (or
Administrative Borrower for the benefit of such Borrower) pursuant to Sections
6.11(a) and 6.11(b) above on any day, but is requiring each Lender to provide
Agent with immediately available funds on the date of such Loan as provided in
Section 6.11(c) above, Agent may assume that each Lender will make available to
Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause
a corresponding amount to be made available to or for the benefit of such
Borrower on such day. If Agent makes such corresponding amount available to a
Borrower and such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the
Federal Funds Rate for each day during such period (as published by the Federal
Reserve Bank of New York or at Agent's option based on the arithmetic mean
determined by Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (Dallas, Texas time) on that day by each of
the three leading brokers of Federal funds transactions in Dallas, Texas
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans. During the period in which such Lender has not
paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of any Borrower shall, for
all purposes hereof, be a Loan made by Agent for its own account. Upon any such
failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Administrative Borrower of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days
of Administrative Borrower's receipt of such notice. A Lender who fails to pay
Agent its Pro Rata Share of any Loans made available by the Agent on such
Lender's behalf, or any Lender who fails to pay any other amount owing by it to
Agent, is a "Defaulting Lender". Agent shall not be obligated to transfer to a
Defaulting Lender any
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payments received by Agent for the Defaulting Lender's benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder
(including any principal, interest or fees). Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion, relend to a Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. For purposes of voting
or consenting to matters with respect to this Agreement and the other Financing
Agreements and determining Pro Rata Shares, such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be
zero (0). This Section shall remain effective with respect to a Defaulting
Lender until such default is cured. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any Borrower or Guarantor of their duties
and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
6.12 Obligations Several; Independent Nature of Lenders' Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
6.13 Bank Products. Borrowers and Guarantors, or any of their
Subsidiaries, may (but no such Person is required to) request that the Bank
Product Providers provide or arrange for such Person to obtain Bank Products
from Bank Product Providers, and each Bank Product Provider may, in its sole
discretion, provide or arrange for such Person to obtain the requested Bank
Products. Borrowers and Guarantors or any of their Subsidiaries that obtains
Bank Products shall indemnify and hold Agent, each Lender and their respective
Affiliates harmless from any and all obligations now or hereafter owing to any
other Person by any Bank Product Provider in connection with any Bank Products
other than for gross negligence or willful misconduct on the part of any such
indemnified Person. This Section 6.13 shall survive the payment of the
Obligations and the termination of this Agreement. Borrower and its Subsidiaries
acknowledge and agree that the obtaining of Bank Products from Bank Product
Providers (a) is in the sole discretion of such Bank Product Provider, and (b)
is subject to all rules and regulations of such Bank Product Provider. Each Bank
Product Provider shall be deemed a party hereto for purposes of any reference in
a Financing Agreement to the parties for whom Agent is acting, provided, that,
the rights of such Bank Product Provider hereunder and under any of the other
Financing Agreements shall consist exclusively of such Bank Product Provider's
right to share in payments and collections out of the Collateral as set forth
herein. In connection with any such distribution of payments and collections,
Agent shall be entitled to assume that no amounts are due to any Bank Product
Provider unless such Bank Product
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Provider has notified Agent in writing of any such liability owed to it as of
the date of any such distribution.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrowers shall provide Agent with the following documents in a
form satisfactory to Agent:
(i) as soon as possible after the end of each month (but in
any event within fifteen (15) Business Days after the end thereof) or more
frequently as Agent may request, a Borrowing Base Certificate setting forth the
calculation of the Borrowing Base as of the last Business Day of the immediately
preceding period as to the Inventory, duly completed and executed by the chief
financial officer, vice president of finance, treasurer or controller of
Administrative Borrower, together with all schedules required pursuant to the
terms of the Borrowing Base Certificate duly completed, including but not
limited to (A) a monthly aging of Credit Card Receivables identifying those
outstanding more then five (5) Business Days since the sale date giving rise
thereto and (B) an inventory summary report by category (and upon Agent's
request, letter of credit inventory) and identifying where such Inventory is
located;
(ii) as soon as possible after the end of each month (but in
any event within fifteen (15) Business Days after the end thereof), on a monthly
basis or more frequently as Agent may request, (A) rollforward inventory reports
supported by monthly updates of adjusted cost factors and intercompany
eliminations (and including the amounts of Inventory and the value thereof at
any leased locations and at premises of warehouses, processors or other third
parties), (B) list or agings of outstanding accounts payable (and including
information indicating the amounts owing to owners and lessors of leased
premises, warehouses, fulfillment centers, processors, custom brokers, freight
forwarders and other third parties from time to time in possession of any
Collateral), and (C) reports on sales and use tax collections, deposits and
payments, including monthly sales and use tax accruals;
(iii) as soon as possible after the end of each month (but in
any event fifteen (15) Business Days after the end thereof), in each case
certified by the chief financial officer, vice president of finance, treasurer
or controller of Administrative Borrower as true and correct: (A) a statement
confirming the payment of rent and other amounts due to owners and lessors of
real property used by Borrower in the immediately preceding month, subject to
year-end or monthly percentage rent payment adjustments, (B) the addresses of
all new retail store locations of Borrowers and Guarantors opened and existing
retail store locations closed or sold, in each case since the date of the most
recent certificate delivered to Agent containing the information required under
this clause, (C) a report of any new deposit account established or used by any
Borrower or Guarantor with any bank or other financial institution, including
the Borrower or Guarantor in whose name the account is maintained, the account
number, the name and address of the financial institution at which such account
is maintained, the purpose of such account and, if any, the amount held in such
account on or about the date of such report, and (D) a report of all defective
or non-conforming Inventory and Equipment returned to the manufacturers or
vendors thereof during the immediately preceding month;
63
(iv) as soon as possible after the end of each fiscal quarter
(but in any event within fifteen (15) Business Days after the end thereof), on a
quarterly basis or more frequently as Agent may request, reports by retail store
location of sales and operating profits for each such retail store location;
(v) upon Agent's request, (A) reports of sales for each
category of Inventory, (B) reports of aggregate Inventory purchases and
identifying items of Inventory in transit to any Borrower or Guarantor related
to the applicable documentary letter of credit and/or xxxx of lading number, (C)
copies of remittance advices and reports, and copies of deposit slips and bank
statements, (D) copies of shipping and delivery documents, (E) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by Borrowers and Guarantor, (F) reports of inventory subject to a
license granted to a Borrower by a third party, identifying such inventory by
item, source, licensor, royalties paid, royalties payable and applicable license
agreement, and (G) a report of all Inventory purchased or sold by Borrowers on
consignment;
(vi) upon Agent's request, (A) copies of customer statements,
purchase orders, sales invoices, credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by any Borrower or Guarantor; and
(vii) such other reports as to the Collateral as Agent shall
request from time to time.
(b) Nothing contained in any Borrowing Base Certificate shall be
deemed to limit, impair or otherwise affect the rights of Agent contained herein
and in the event of any conflict or inconsistency between the calculation of the
Borrowing Base as set forth in any Borrowing Base Certificate and as determined
by Agent in good faith, the determination of Agent shall govern and be
conclusive and binding upon Borrowers and Guarantors. Without limiting the
foregoing, Borrowers shall furnish to Agent any information which Agent may
reasonably request regarding the determination and calculation of any of the
amounts set forth in any Borrowing Base Certificate. The Borrowing Base may be
adjusted based on the information set forth in the reports received by Agent
under Section 7.1(a)(i) above. If any Borrower's or Guarantor's records or
reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, such Borrower and Guarantor hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Agent and to follow Agent's
instructions with respect to further services.
7.2 Accounts Covenants.
(a) Borrowers shall notify Agent promptly of the assertion of (i)
any claims, offsets, defenses or counterclaims by any account debtor, Credit
Card Issuer or Credit Card Processor or any disputes with any of such persons or
any settlement, adjustment or compromise thereof, to the extent any of the
foregoing exceeds $250,000 in any one case or $500,000 in the aggregate, (ii)
all material adverse information relating to the financial condition of any
account debtor, Credit Card Issuer or Credit Card Processor, and (iii) any event
or circumstance which, to
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the best of any Borrower's or Guarantor's knowledge, which would cause Agent to
consider any then existing Credit Card Receivables as no longer Eligible Credit
Card Receivables. No credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor, Credit Card Issuer
or Credit Card Processor except in the ordinary course of a Borrower's business
in accordance with the current practices of such Borrower as in effect on the
date hereof. So long as no Event of Default exists or has occurred and is
continuing, no Borrower shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor, Credit Card Issuer, Credit Card
Processor. At any time that an Event of Default exists or has occurred and is
continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors, Credit Card Issuers or Credit Card Processors or grant any credits,
discounts or allowances.
(b) Borrowers shall notify Agent promptly of: (i) any notice of a
material default by such Borrower under any of the Credit Card Agreements or of
any default which has a reasonable likelihood of resulting in the Credit Card
Issuer or Credit Card Processor ceasing to make payments or suspending payments
to such Borrower, (ii) any notice from any Credit Card Issuer or Credit Card
Processor that such person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to any Borrower from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements, and (iii) the failure of such Borrower to comply with any
material terms of the Credit Card Agreements or any terms thereof which has a
reasonable likelihood of resulting in the Credit Card Issuer or Credit Card
Processor ceasing or suspending payments to such Borrower.
(c) Agent shall have the right at any time or times, in Agent's name
or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct a physical count of the Inventory
either through periodic cycle counts or wall to wall counts, so that all
Inventory is subject to such counts at least once each year, but at any time or
times as Agent may request at any time an Event of Default exists or has
occurred and is continuing, and promptly following such physical inventory
(whether through periodic cycle counts or wall to wall counts) shall supply
Agent with a report in the form and with such specificity as may be reasonably
satisfactory to Agent concerning such physical count; (c) Borrowers and
Guarantors shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Agent, except for sales
of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to such
Borrower or Guarantor which is in transit to the locations set forth or
permitted herein and except to return defective or non-conforming Inventory to
the manufacturers or vendors thereof; (d) upon Agent's request, Borrowers shall,
at their expense, no less than two (2) times in any twelve (12) month period,
but at any time or times as Agent may request on or after an Event of Default,
deliver or cause to be delivered to Agent written appraisals as to the Inventory
in form, scope and methodology
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acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders and upon which Agent and Lenders are expressly permitted to rely;
(e) Borrowers and Guarantors shall produce, use, store and maintain the
Inventory with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto); (f) none of the Inventory or
other Collateral constitutes farm products or the proceeds thereof; (g) each
Borrower and Guarantor assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the Inventory; (h)
Borrowers and Guarantors shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate any
Borrower or Guarantor to repurchase such Inventory except for the right of
return given to retail customers of such Borrower or Guarantor in the ordinary
course of the business of such Borrower or Guarantor in accordance with the then
current return policy of such Borrower or Guarantor; (i) Borrowers and
Guarantors shall keep the Inventory in good and marketable condition; and (j)
Borrowers and Guarantors shall not, without prior written notice to Agent or the
specific identification of such Inventory in a report with respect thereto
provided by Administrative Borrower to Agent pursuant to Section 7.1(a) hereof,
acquire or accept any Inventory on consignment or approval.
7.4 Equipment and Real Property Covenants. (a) Upon Agent's request,
Borrowers and Guarantors shall, at their expense, no more than one (1) time in
any twelve (12) month period, but at any time or times as Agent may request on
or after an Event of Default, deliver or cause to be delivered to Agent written
appraisals as to the Baldwyn Real Property in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and upon which Agent is expressly permitted to rely; (b) Borrowers and
Guarantors shall keep the Equipment in good order, repair, and operating
condition (ordinary wear and tear excepted); (c) Borrowers and Guarantors shall
use the Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in material conformity
with all applicable laws; (d) the Equipment is and shall be used in the business
of Borrowers and Guarantors and not for personal, family, household or farming
use; (e) Borrowers and Guarantors shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of its business (or
to return defective or non-conforming Equipment to the manufacturers or vendors
thereof) or to move Equipment directly from one location set forth or permitted
herein to another such location and except for the movement of motor vehicles
used by or for the benefit of such Borrower or Guarantor in the ordinary course
of business; (f) the Equipment is now and shall remain personal property and
Borrowers and Guarantors shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) each Borrower and Guarantor assumes
all responsibility and liability arising from the use of the Equipment and Real
Property.
7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably
designates and appoints Agent (and all persons designated by Agent) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower's, Guarantor's or Agent's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
any Collateral, (ii) enforce payment of any of the Collateral by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any
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Collateral, (iv) sell or assign any Collateral upon such terms, for such amount
and at such time or times as the Agent deems advisable, (v) settle, adjust,
compromise, extend or renew any of the Collateral, (vi) discharge and release
any Collateral, (vii) prepare, file and sign such Borrower's or Guarantor's name
on any proof of claim in bankruptcy or other similar document against an account
debtor or other obligor in respect of any Collateral, (viii) notify the post
office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
or Guarantor and handle and store all mail relating to the Collateral; and (ix)
do all acts and things which are necessary, in Agent's determination, to fulfill
such Borrower's or Guarantor's obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any manner of
any item of payment constituting Collateral or otherwise received in or for
deposit in the Blocked Accounts if a Cash Dominion Event has occurred or any
item of payment constituting Collateral is otherwise received by Agent or any
Lender, (ii) have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Collateral are sent or
received if a Cash Dominion Event has occurred, (iii) endorse such Borrower's or
Guarantor's name upon any items of payment in respect of Collateral received by
Agent and any Lender and deposit the same in Agent's account for application to
the Obligations, (iv) endorse such Borrower's or Guarantor's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Receivable or any goods pertaining thereto or any other
Collateral, including any warehouse or other receipts, or bills of lading and
other negotiable or non-negotiable documents, (v) clear Inventory the purchase
of which was financed with a Letter of Credit through U.S. Customs or foreign
export control authorities in such Borrower's or Guarantor's name, Agent's name
or the name of Agent's designee, and to sign and deliver to customs officials
powers of attorney in such Borrower's or Guarantor's name for such purpose, and
to complete in such Borrower's or Guarantor's or Agent's name, any order, sale
or transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof, and (vi) sign such Borrower's or Guarantor's name
on any verification of amounts owing constituting Collateral and notices thereof
to account debtors or any secondary obligors or other obligors in respect
thereof. Each Borrower and Guarantor hereby releases Agent and Lenders and their
respective officers, employees and designees from any liabilities arising from
any act or acts under this power of attorney and in furtherance thereof, whether
of omission or commission, except as a result of Agent's or any Lender's own
gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, upon notice to Administrative
Borrower, (a) cure any default by any Borrower or Guarantor under any material
agreement with a third party that affects the Collateral, its value or the
ability of Agent to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Agent or any Lender therein or the ability of any
Borrower or Guarantor to perform its obligations hereunder or under any of the
other Financing Agreements, (b) pay or bond on appeal any judgment entered
against any Borrower or Guarantor, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (d) pay any amount, incur any expense or perform any act
which, in Agent's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Agent and Lenders with
respect thereto. Agent may add any amounts so expended to the Obligations and
charge any Borrower's account therefor, such amounts to be repayable by
Borrowers on demand. Agent and Lenders shall be
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under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of any Borrower
or Guarantor. Any payment made or other action taken by Agent or any Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower's and Guarantor's premises during normal business
hours and after notice to Parent, or at any time and without notice to
Administrative Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of each Borrower's and Guarantor's books and records,
including the Records, and (b) each Borrower and Guarantor shall promptly
furnish to Agent such copies of such books and records or extracts therefrom as
Agent may request, and Agent or any Lender or Agent's designee may use during
normal business hours such of any Borrower's and Guarantor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Receivables and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Agent,
Lenders and Issuing Bank the following (which shall survive the execution and
delivery of this Agreement):
8.1 Existence, Power and Authority. Each Borrower and Guarantor is a
corporation or limited liability company duly organized and in good standing
under the laws of its jurisdiction of organization or formation and is duly
qualified as a foreign corporation or limited liability company and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Borrower's or Guarantor's
financial condition, results of operation or business or the rights of Agent in
or to any of the Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder (a) are all within each Borrower's and Guarantor's
powers, (b) have been duly authorized, (c) are not in contravention of law or
the terms of any Borrower's or Guarantor's certificate of incorporation or
formation, by laws, operating agreements or other organizational documentation,
or any indenture, agreement or undertaking to which any Borrower or Guarantor is
a party or by which any Borrower or Guarantor or its property are bound and (d)
will not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of any Borrower or Guarantor. This Agreement and the other
Financing Agreements to which any Borrower or Guarantor is a party constitute
legal, valid and binding obligations of such Borrower and Guarantor enforceable
in accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations. .
(a) The exact legal name of each Borrower and Guarantor is as set
forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or
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Guarantor has, during the five years prior to the date of this Agreement, been
known by or used any other corporate or fictitious name or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property or assets out of the ordinary course
of business, except as set forth in the Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type and
organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each Borrower
and Guarantor and each Borrower's and Guarantor's Records concerning Accounts
are located only at the address identified as such in Schedule 8.2 to the
Information Certificate and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to
the Information Certificate, subject to the rights of any Borrower or Guarantor
to establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by a
Borrower or Guarantor and sets forth the owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have
been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of such Borrower
and Guarantor as at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrowers and
Guarantors to Agent prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements of
any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior
to the date of this Agreement. The projections dated April 27, 2005 for the
fiscal years ending in 2006 through 2009 that have been delivered to Agent or
any projections hereafter delivered to Agent have been prepared in light of the
past operations of the businesses of Borrowers and Guarantors and are based upon
estimates and assumptions stated therein, all of which Borrowers and Guarantors
have determined to be reasonable and fair in light of the then current
conditions and current facts and reflect the good faith and reasonable estimates
of Borrowers and Guarantors of the future financial performance of Parent and
its Subsidiaries and of the other information projected therein for the periods
set forth therein.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate and the other liens permitted under Section 9.8
hereof. Each Borrower and Guarantor has good and marketable fee simple title to
or valid leasehold interests in all of its Real Property and good, valid and
merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests,
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encumbrances or charges of any kind, except those granted to Agent and such
others as are specifically listed on Schedule 8.4 to the Information Certificate
or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, except taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower or Guarantor and with respect to which
adequate reserves have been set aside on its books. Adequate provision has been
made for the payment of all accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to the Information
Certificate, (a) there is no investigation by any Governmental Authority
pending, or to the best of any Borrower's or Guarantor's knowledge threatened,
against or affecting any Borrower or Guarantor, its or their assets or business
and (b) there is no action, suit, proceeding or claim by any Person pending, or
to the best of any Borrower's or Guarantor's knowledge threatened, against any
Borrower or Guarantor or its or their assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, in each case, which
if adversely determined against such Borrower or Guarantor has or could
reasonably be expected to have a Material Adverse Effect. .
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrowers and Guarantors are not in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to their respective businesses,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Environmental Laws, all Federal, State and local
statutes, regulations, rules and orders relating to consumer credit (including,
without limitation, as each has been amended, the Truth-in-Lending Act, the Fair
Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act, and regulations, rules and orders promulgated thereunder), and
all Federal, State and local states, regulations, rules and orders pertaining to
sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as
amended, and all regulations, rules and orders promulgated thereunder).
(b) Borrowers and Guarantors have obtained all material permits,
licenses, approvals, consents, certificates, orders or authorizations of any
Governmental Authority required for the lawful conduct of its business (the
"Permits"). All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to
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the best of any Borrower's or Guarantor's knowledge, threatened that seek the
revocation, cancellation, suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any applicable Environmental Law or Permit, and the operations
of Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor
complies in all material respects with all Environmental Laws and all Permits.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person nor is any pending or to the best of
any Borrower's or Guarantor's knowledge threatened, with respect to any non
compliance with or violation of the requirements of any Environmental Law by any
Borrower or Guarantor or the release, spill or discharge, threatened or actual,
of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which adversely
affects or could reasonably be expected to adversely affect in any material
respect any Borrower or Guarantor or its or their business, operations or assets
or any properties at which such Borrower or Guarantor has transported, stored or
disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers and Guarantors have no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrowers and Guarantors have all Permits required to be
obtained or filed in connection with the operations of Borrowers and Guarantors
under any Environmental Law and all of such licenses, certificates, approvals or
similar authorizations and other Permits are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best of any Borrower's or Guarantor's knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA
Affiliates have made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
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(b) There are no pending, or to the best of any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan.
(c) No ERISA Event has occurred or is reasonably expected to occur;
(ii) based on the latest valuation of each Pension Plan and on the actuarial
methods and assumptions employed for such valuation (determined in accordance
with the assumptions used for funding such Pension Plan pursuant to Section 412
of the Code), the aggregate current value of accumulated benefit liabilities of
such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the
aggregate current value of the assets of such Pension Plan; (iii) each Borrower
and Guarantor, and their ERISA Affiliates, have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates, have not
incurred and do not reasonably expect to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA
Affiliates, have not engaged in a transaction that would be subject to Section
4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Each Borrower and Guarantor owns or licenses
or otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted. As
of the date hereof, Borrowers and Guarantors do not have any Intellectual
Property registered, or subject to pending applications, in the United States
Patent and Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or in any other
country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of any
Borrower's and Guarantor's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold by
or employed by any Borrower or Guarantor infringes any patent, trademark,
servicemark, tradename, copyright, license or other Intellectual Property owned
by any other Person presently and no claim or litigation is pending or
threatened against or affecting any Borrower or Guarantor contesting its right
to sell or use any such Intellectual Property. Schedule 8.11 to the Information
Certificate sets forth all of the agreements or other arrangements of each
Borrower and Guarantor pursuant to which such Borrower or Guarantor has a
license or other right to use any trademarks, logos, designs, representations or
other Intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other arrangements
of such Borrower or Guarantor as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be
72
entered into by any Borrower or Guarantor after the date hereof, collectively,
the "License Agreements" and individually, a "License Agreement"). No trademark,
servicemark, copyright or other Intellectual Property at any time used by any
Borrower or Guarantor which is owned by another person, or owned by such
Borrower or Guarantor subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than Agent,
is affixed to any Eligible Inventory, except (a) to the extent permitted under
the term of the license agreements listed on Schedule 8.11 to the Information
Certificate and (b) to the extent the sale of Inventory to which such
Intellectual Property is affixed is permitted to be sold by such Borrower or
Guarantor under applicable law (including the United States Copyright Act of
1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Each Borrower and Guarantor does not have any direct or indirect
Subsidiaries and is not engaged in any joint venture or partnership except as
set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial owner
of all of the issued and outstanding shares of Capital Stock of each of the
Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by such Borrower or Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any kind or nature and
there are no contracts, commitments, understandings or arrangements by which any
Subsidiary is or may become bound to issue additional shares of it Capital Stock
or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each
Borrower (other than Parent) and Guarantor are directly and beneficially owned
and held by the persons indicated in the Information Certificate, and in each
case all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind, except as disclosed in writing to Agent prior to the date hereof.
(d) Each Borrower and Guarantor is Solvent and will continue to be
Solvent after the creation of the Obligations, the security interests of Agent
and the other transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or Guarantor or, to the best of any Borrower's or
Guarantor's knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Guarantor or, to best of any
Borrower's or
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Guarantor's knowledge, threatened against it, and (ii) no significant strike,
labor dispute, slowdown or stoppage is pending against any Borrower or Guarantor
or, to the best of any Borrower's or Guarantor's knowledge, threatened against
any Borrower or Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of
cash or other assets (i) between any Borrower or Guarantor and any of its or
their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor
or (b) the ability of any Borrower or Guarantor or any of its or their
Subsidiaries to incur Indebtedness or grant security interests to Agent or any
Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which any Borrower or Guarantor is a party or is
bound as of the date hereof. Borrowers and Guarantors have delivered true,
correct and complete copies of such Material Contracts to Agent on or before the
date hereof. Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.
8.16 Credit Card Agreements. Set forth in Schedule 8.16 hereto is a
correct and complete list of all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among any Borrower, any of its Subsidiaries, the Credit Card Issuers, the Credit
Card Processors and any of their Affiliates. The Credit Card Agreements
constitute all of such agreements necessary for each Borrower to operate its
business as presently conducted with respect to credit cards and debit cards and
no Receivables of any Borrower arise from purchases by customers of Inventory
with credit cards or debit cards, other than those which are issued by Credit
Card Issuers with whom such Borrower has entered into one of the Credit Card
Agreements set forth on Schedule 8.16 hereto or with whom Borrower has entered
into a Credit Card Agreement in accordance with Section 9.18 hereof. Each of the
Credit Card Agreements constitutes the legal, valid and binding obligations of
the Borrower that is party thereto and to the best of each Borrower's and
Guarantor's knowledge, the other parties thereto, enforceable in accordance with
their respective terms and is in full force and effect. No material default or
material event of default, or act, condition or event which after notice or
passage of time or both, would constitute a material default or a material event
of default under any of the Credit Card Agreements exists or has occurred that
would entitle the other party thereto to suspend, withhold or reduce amounts
that would otherwise be payable to a Borrower. Each Borrower and the other
parties thereto have complied in all material respects with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower to be entitled to receive all payments thereunder. Borrowers have
delivered, or caused to be delivered to Agent, true, correct and complete copies
of all of the Credit Card Agreements.
8.17 Interrelated Businesses. Borrowers and Guarantors make up a related
organization of various entities constituting a single economic and business
enterprise so that Borrowers and Guarantors share an identity of interests such
that any benefit received by any one of them benefits the others. Borrowers and
Guarantors render services to or for the benefit of the other
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Borrowers and/or Guarantors, as the case may be, purchase or sell and supply
goods to or from or for the benefit of the others, make loans, advances and
provide other financial accommodations to or for the benefit of the other
Borrowers and Guarantors (including inter alia, the payment by Borrowers and
Guarantors of creditors of the other Borrowers or Guarantors and guarantees by
Borrowers and Guarantors of indebtedness of the other Borrowers and Guarantors
and provide administrative, marketing, payroll and management services to or for
the benefit of the other Borrowers and Guarantors). Substantially all of the
Inventory is paid for pursuant to Letters of Credit funded by Merchandising on
behalf of the other Borrowers or are otherwise paid for by Merchandising, and
Borrowers use substantially all of the proceeds from the disposition of the
Inventory so purchased to repay the amounts owing to Merchandising as a result
of such arrangements. Borrowers and Guarantors have centralized accounting and
legal services, certain common officers and directors and generally do not
provide consolidating financial statements to creditors and certain Borrowers
and Guarantors have the same chief executive office.
8.18 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.19 Accuracy and Completeness of Information. All information furnished
by or on behalf of any Borrower or Guarantor in writing to Agent or any Lender
in connection with this Agreement or any of the other Financing Agreements or
any transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Affect, which has not been fully and accurately
disclosed to Agent in writing prior to the date hereof.
8.20 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower and Guarantor shall at all times preserve, renew
and keep in full force and effect its existence and rights and franchises with
respect thereto and maintain in full force and effect all licenses, trademarks,
tradenames, approvals, authorizations, leases, contracts and Permits necessary
to carry on the business as presently or proposed to be
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conducted, other than as permitted in Section 9.7 hereto and other than the
termination or expiration of leases in the ordinary course of business.
(b) No Borrower or Guarantor shall change its name unless each of
the following conditions is satisfied: (i) Agent shall have received not less
than thirty (30) days prior written notice from Administrative Borrower of such
proposed change in its corporate name, which notice shall accurately set forth
the new name; and (ii) Agent shall have received a copy of the amendment to the
certificate of incorporation or formation of such Borrower or Guarantor
providing for the name change certified by the Secretary of State of the
jurisdiction of incorporation or organization of such Borrower or Guarantor as
soon as it is available.
(c) No Borrower or Guarantor shall change its chief executive office
or its mailing address or organizational identification number (or if it does
not have one, shall not acquire one) unless Agent shall have received not less
than thirty (30) days' prior written notice from Administrative Borrower of such
proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as
Agent may reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New Collateral Locations. Each Borrower and Guarantor may only open
any new location within the continental United States provided such Borrower or
Guarantor (a) gives Agent twenty (20) days prior written notice of the intended
opening of any such new location and (b) executes and delivers, or causes to be
executed and delivered, to Agent such agreements, documents, and instruments as
Agent may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, approvals, orders and other Permits applicable to
it and duly observe all requirements of any foreign, Federal, State or local
Governmental Authority.
(b) Borrowers and Guarantors shall give written notice to Agent
immediately upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor's otherwise obtaining knowledge of, (i) the occurrence
of any event involving the release, spill or discharge, threatened or actual, of
any Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by any Borrower or Guarantor or (B)
the release, spill or discharge, threatened or actual, of any Hazardous Material
other than in the ordinary course of business and other than as permitted under
any applicable Environmental Law. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall be
promptly furnished, or caused to be furnished, by such Borrower or Guarantor to
Agent. Each Borrower and Guarantor shall take prompt action to respond to any
material non-compliance with any of the Environmental Laws and shall regularly
report to Agent on such response.
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(c) Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower or Guarantor in order to
avoid any non compliance, with any Environmental Law, Borrowers shall, at
Agent's request and Borrowers' expense: (i) cause an independent environmental
engineer reasonably acceptable to Agent to conduct such tests of the site where
non-compliance or alleged non compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Agent a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower's or
Guarantor's response thereto or the estimated costs thereof, shall change in any
material respect.
(d) Each Borrower and Guarantor shall indemnify and hold harmless
Agent and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all material taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes the validity of which are being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, Guarantor or Subsidiary, as the case may be, and with respect to
which adequate reserves have been set aside on its books to the extent required
by GAAP.
9.5 Insurance. Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Agent as
Agent shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, Agent is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Agent of any cancellation or
reduction of coverage and that Agent may act as attorney for each Borrower and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Agent to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrowers and Guarantors shall obtain
non-contributory lender's loss
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payable endorsements to all insurance policies in form and substance
satisfactory to Agent. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Agent as its interests
may appear and further specify that Agent and Lenders shall be paid regardless
of any act or omission by any Borrower, Guarantor or any of its or their
Subsidiaries. Without limiting any other rights of Agent or Lenders, any
insurance proceeds received by Agent at any time may be applied to payment of
the Obligations, whether or not then due, in any order and in such manner as
Agent may determine. Upon application of such proceeds to the Revolving Loans,
Revolving Loans may be available subject and pursuant to the terms hereof to be
used for the costs of repair or replacement of the Collateral lost or damages
resulting in the payment of such insurance proceeds.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent
and Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and Borrower shall notify the auditors and accountants
of Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers shall furnish or
cause to be furnished to Agent, the following:
(i) within forty-five (45) days after the end of each fiscal
quarter, quarterly unaudited consolidated financial statements and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting in all
material respects the financial position and the results of the operations of
Parent and its Subsidiaries as of the end of and through such fiscal quarter,
certified to be correct by the chief financial officer of Parent, subject to
normal year-end adjustments, and accompanied by a compliance certificate
substantially in the form of Exhibit D hereto, along with a schedule in form
reasonably satisfactory to Agent of the calculations used in determining, as of
the end of such fiscal quarter, (A) whether Borrowers and Guarantors were in
compliance with the covenants set forth in Section 9.19 of this Agreement for
such fiscal quarter, and (B) the EBITDA of the Parent and its Subsidiaries for
the four (4) fiscal quarters ended on the last day of such fiscal quarter,
(ii) within ninety (90) days after the end of each fiscal
year, audited consolidated financial statements and unaudited consolidating
financial statements of Parent and its Subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting in all material respects the financial
position and the results of the operations of Parent and its Subsidiaries as of
the end of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants with respect to the audited
consolidated financial statements, which accountants shall be an independent
accounting firm selected by the audit committe of Parent and acceptable to Agent
(it being understood that any of the "Big Four" accounting firms is acceptable
to Agent), that such audited consolidated
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financial statements have been prepared in accordance with GAAP, and present
fairly in all material respects the results of operations and financial
condition of Parent and its Subsidiaries as of the end of and for the fiscal
year then ended, and
(iii) at such time as available, but in no event later than
thirty (30) days prior to the end of each fiscal year (commencing with the
fiscal year of Borrowers ending on or about the last Saturday in January of
2006), projected consolidated financial statements (including in each case,
forecasted balance sheets and statements of income and loss, statements of cash
flow, and statements of shareholders' equity) of Parent and its Subsidiaries for
the next fiscal year, all in reasonable detail, and in a format consistent with
the projections delivered by Borrowers to Agent prior to the date hereof,
together with such supporting information as Agent may reasonably request. Such
projected financial statements shall be prepared on a quarterly basis for the
next succeeding year. Such projections shall represent the reasonable best
estimate by Borrowers and Guarantors of the future financial performance of
Parent and its Subsidiaries for the periods set forth therein and shall have
been prepared on the basis of the assumptions set forth therein which Borrowers
and Guarantors believe are fair and reasonable as of the date of preparation in
light of current and reasonably foreseeable business conditions (it being
understood that actual results may differ from those set forth in such projected
financial statements). Each year Borrowers shall provide to Agent a semi-annual
update with respect to such projections or at any time a Default or Event of
Default exists or has occurred and is continuing, more frequently as Agent may
require.
(b) Borrowers and Guarantors shall promptly notify Agent in writing
of the details of (i) any loss, damage, investigation, action, suit, proceeding
or claim relating to Collateral having a value of more than $250,000 or which if
adversely determined would result in any material adverse change in any
Borrower's or Guarantor's business, properties, assets, goodwill or condition,
financial or otherwise, (ii) any Material Contract being terminated or amended
or any new Material Contract entered into (in which event Borrowers and
Guarantors shall provide Agent with a copy of such Material Contract), (iii) any
order, judgment or decree in excess of $250,000 shall have been entered against
any Borrower or Guarantor any of its or their properties or assets, (iv) any
notification of a material violation of laws or regulations received by any
Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any
Default or Event of Default.
(c) Promptly after the sending or filing thereof, Borrowers shall
send to Agent copies of (i) all reports which Parent or any of its Subsidiaries
sends to its security holders generally, (ii) all reports and registration
statements which Parent or any of its Subsidiaries files with the Securities
Exchange Commission, any national or foreign securities exchange or the National
Association of Securities Dealers, Inc., and such other reports as Agent may
hereafter specifically identify to Administrative Borrower that Agent will
require be provided to Agent, (iii) all press releases and (iv) all other
statements concerning material changes or developments in the business of a
Borrower or Guarantor made available by any Borrower or Guarantor to the public.
(d) Borrowers and Guarantors shall furnish or cause to be furnished
to Agent such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrowers and Guarantors, as Agent may, from
time to time, reasonably request.
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Agent is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrowers and Guarantors to any
court or other Governmental Authority or to any Lender or Participant or
prospective Lender or Participant or any Affiliate of any Lender or Participant.
Each Borrower and Guarantor hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Agent, at Borrowers' expense, copies of
the financial statements of any Borrower and Guarantor and any reports or
management letters prepared by such accountants or auditors on behalf of any
Borrower or Guarantor and to disclose to Agent and Lenders such information as
they may have regarding the business of any Borrower and Guarantor. Any
documents, schedules, invoices or other papers delivered to Agent or any Lender
may be destroyed or otherwise disposed of by Agent or such Lender one (1) year
after the same are delivered to Agent or such Lender, except as otherwise
designated by Administrative Borrower to Agent or such Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower
and Guarantor shall not, and shall not permit any Subsidiary to, directly or
indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it except that
any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with
and into or consolidate with any other wholly-owned Subsidiary of Parent (other
than any Borrower, and including any such Subsidiary that only becomes a
Subsidiary after giving effect to such merger or consolidation subject to the
conditions set forth herein) and any Borrower may merge with and into or
consolidate with any other Borrower, provided, that, in each case each of the
following conditions is satisfied as determined by Agent: (i) Agent shall have
received not less than ten (10) Business Days' prior written notice of the
intention of such Subsidiaries to so merge or consolidate, which notice shall
set forth in reasonable detail satisfactory to Agent, the persons that are
merging or consolidating, which person will be the surviving entity, the
locations of the assets of the persons that are merging or consolidating, and
the material agreements and documents relating to such merger or consolidation,
(ii) Agent shall have received such other information with respect to such
merger or consolidation as Agent may reasonably request, (iii) as of the
effective date of the merger or consolidation and after giving effect thereto,
no Default or Event of Default shall exist or have occurred, (iv) Agent shall
have received, true, correct and complete copies of all agreements, documents
and instruments relating to such merger or consolidation, including, but not
limited to, the certificate or certificates of merger to be filed with each
appropriate Secretary of State (with a copy as filed promptly after such
filing), and (v) the surviving corporation shall expressly confirm, ratify and
assume the Obligations and the Financing Agreements to which it is a party in
writing, in form and substance satisfactory to Agent, and Borrowers and
Guarantors shall execute and deliver such other agreements, documents and
instruments as Agent may request in connection therewith;
(b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for:
(i) Permitted Dispositions; provided, that, in the event of a
sale of Real Property by any Borrower or Guarantor, (A) Agent shall have
received not less than ten (10) Business Days' prior written notice of such sale
by such Borrower or Guarantor, which
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notice shall specify the parties to whom such Real Property is to be sold, the
terms of such sale, the total amount which it is anticipated will be realized
from the sale of such Real Property and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
the terms and conditions of the sale thereof shall be acceptable to Agent, (C)
except as Agent may otherwise agree in writing, all of the proceeds of the sale
of such Real Property shall be paid to Agent for application to the Obligations
in accordance with the terms hereof and (D) as of the date of such sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred,
(ii) the issuance and sale by any Borrower or Guarantor of
Capital Stock of such Borrower or Guarantor after the date hereof; provided,
that, (A) Agent shall have received not less than ten (10) Business Days' prior
written notice of such issuance and sale by such Borrower or Guarantor, which
notice shall specify the parties to whom such shares are to be sold, the terms
of such sale, the total amount which it is anticipated will be realized from the
issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
such Borrower or Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of
such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letters of Credit or the right of
any Borrower and Guarantor to amend or modify any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrowers and Guarantors with Agent and
Lenders or are more restrictive or burdensome to any Borrower or Guarantor than
the terms of any Capital Stock in effect on the date hereof, (D) except as Agent
may otherwise agree in writing, all of the proceeds of the sale and issuance of
such Capital Stock shall be paid to Agent for application to the Obligations in
accordance with the terms hereof and (E) as of the date of such issuance and
sale and after giving effect thereto, no Default or Event of Default shall exist
or have occurred,
(iii) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to a restricted stock award, an
employee stock option or grant or similar equity plan or 401(k) plans of such
Borrower or Guarantor for the benefit of its employees, directors and
consultants, provided, that, in no event shall such Borrower or Guarantor be
required to issue, or shall such Borrower or Guarantor issue, Capital Stock
pursuant to such stock plans or 401(k) plans which would result in a Change of
Control or other Event of Default,
(iv) the sublease by any Borrower or Guarantor of any Real
Property leased by such Borrower or Guarantor; provided, that, as to any such
sublease, (A) after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing, and (B) such sublease shall be on
commercially reasonable prices and terms in a bona fide arm's length
transaction, and
(v) Licenses and sublicenses of Intellectual Property by a
Borrower or Guarantor to another Borrower or Guarantor in the ordinary course of
business and consistent with past practices.
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(c) wind up, liquidate or dissolve except that any Guarantor or
Subsidiary of Parent (other than a Borrower) may wind up, liquidate and
dissolve, provided, that, each of the following conditions is satisfied, (i) the
winding up, liquidation and dissolution of such Guarantor or other Subsidiary
shall not violate any law or any order or decree of any court or other
Governmental Authority in any material respect and shall not conflict with or
result in the breach of, or constitute a default under, any indenture, mortgage,
deed of trust, or any other agreement or instrument to which any Borrower or
Guarantor is a party or may be bound, (ii) such winding up, liquidation or
dissolution shall be done in accordance with the requirements of all applicable
laws and regulations, (iii) effective upon such winding up, liquidation or
dissolution, all of the assets and properties of such Guarantor or other
Subsidiary shall be duly and validly transferred and assigned to its
shareholders, free and clear of any liens, restrictions or encumbrances other
than the security interest and liens of Agent (and Agent shall have received
such evidence thereof as Agent may require) and Agent shall have received such
deeds, assignments or other agreements as Agent may request to evidence and
confirm the transfer of such assets of such Guarantor to a Borrower, (iv) Agent
shall have received all documents and agreements that any Borrower or Guarantor
has filed with any Governmental Authority or as are otherwise required to
effectuate such winding up, liquidation or dissolution, (v) no Borrower or
Guarantor shall assume any Indebtedness, obligations or liabilities as a result
of such winding up, liquidation or dissolution, or otherwise become liable in
respect of any obligations or liabilities of the entity that is winding up,
liquidating or dissolving, unless such Indebtedness is otherwise expressly
permitted hereunder, (vi) Agent shall have received not less than ten (10)
Business Days prior written notice of the intention of such Guarantor or
Subsidiary to wind up, liquidate or dissolve, and (vii) as of the date of such
winding up, liquidation or dissolution and after giving effect thereto, no
Default or Event of Default shall exist or have occurred; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, or file
or permit the filing of, or permit to remain in effect, any financing statement
or other similar notice of any security interest or lien with respect to any
such assets or properties, except:
(a) the security interests and liens of Agent for itself and the
benefit of the Secured Parties;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's, Guarantor's
or Subsidiary's business to the extent: (i) such liens secure Indebtedness which
is not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the
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sole cost and expense and at the sole risk of the insurer or being contested in
good faith by appropriate proceedings diligently pursued and available to such
Borrower, Guarantor or such Subsidiary, in each case prior to the commencement
of foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower, Guarantor or such Subsidiary as presently conducted
thereon or materially impair the value of the Real Property which may be subject
thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of such Borrower or Guarantor as of the
date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance satisfactory to Agent;
(h) liens arising from (i) operating leases and the precautionary
UCC financing statement filings in respect thereof and (ii) equipment or other
materials which are not owned by any Borrower or Guarantor located on the
premises of such Borrower or Guarantor (but not in connection with, or as part
of, the financing thereof) from time to time in the ordinary course of business
and consistent with current practices of such Borrower or Guarantor and the
precautionary UCC financing statement filings in respect thereof;
(i) liens or rights of setoff against credit balances of Borrowers
with Credit Card Issuers or Credit Card Processors or amounts owing by such
Credit Card Issuers or Credit Card Processors to Borrower in the ordinary course
of business, but not liens on or rights of setoff against any other property or
assets of Borrowers, pursuant to the Credit Card Agreements (as in effect on the
date hereof) to secure the obligations of Borrowers to the Credit Card Issuers
or Credit Card Processors as a result of fees and chargebacks;
(j) statutory or common law liens or rights of setoff of depository
banks with respect to funds of Borrowers or Guarantors at such banks to secure
fees and charges in connection with returned items or the standard fees and
charges of such banks in connection with
83
the deposit accounts maintained by Borrowers and Guarantors at such banks (but
not any other Indebtedness or obligations);
(k) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto;
(l) the security interests and liens set forth on Schedule 8.4 to
the Information Certificate which are not permitted by the other provisions of
Section 9.8 above; and
(m) non-consensual security interests and liens which are not
permitted by the other provisions of Section 9.8 above to secure Indebtedness
and other liabilities in an amount not to exceed $100,000 in the aggregate.
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiaries to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly),
the Indebtedness, performance, obligations or dividends of any other Person,
except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $500,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of such
Borrower, Guarantor or Subsidiary other than the Equipment or Real Property so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Borrower or Guarantor of the Obligations of
the other Borrowers or Guarantors in favor of Agent for the benefit of Lenders;
(d) the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor or any other Subsidiary of Parent arising pursuant to
loans permitted under Section 9.10(d) or (e) hereof, provided, that, as to any
such Indebtedness at any time owing by a Borrower to a Guarantor or any other
Subsidiary of Parent (other than a Borrower), (i) the Indebtedness arising
pursuant to such loans shall be subject to, and subordinate in right of payment
to, the right of Agent and Lenders to receive the prior final payment and
satisfaction in full of all of the Obligations on terms and conditions
acceptable to Agent, (ii) promptly upon Agent's request, Agent shall have
received a subordination agreement, in form and substance satisfactory to Agent,
providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by such
Guarantor and such Borrower, (iii) such Borrower shall not, directly or
indirectly make, or be required to make, any payments
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in respect of such Indebtedness prior to the end of the then current term of
this Agreement, except that Parent and Merchandising may make payments of
interest to Resources on a quarterly basis in respect of intercompany loans by
Resources to Parent or Merchandising, as the case may be, so long as Resources
immediately applies all of the proceeds of such interest payments to make an
intercompany loan in cash to Parent or Merchandising in accordance with the
terms of Section 9.10(d) hereof; and (iv) in the case of any Indebtedness owing
to a Borrower or Guarantor, the Indebtedness arising pursuant to any such loan
shall not be evidenced by a promissory note or other instrument, unless the
single original of such note or other instrument is promptly delivered to Agent
upon its request to hold as part of the Collateral, with such endorsement and/or
assignment by the payee of such note or other instrument as Agent may require;
(e) Indebtedness of any Borrower or Guarantor entered into in the
ordinary course of business pursuant to a Hedge Agreement; provided, that, (i)
such arrangements are with a Bank Product Provider, (ii) such arrangements are
not for speculative purposes, and (iii) such Indebtedness shall be unsecured,
except to the extent such Indebtedness constitutes part of the Obligations
arising under or pursuant to Hedge Agreements with any Bank Product Provider
that are secured under the terms hereof;
(f) unsecured guarantees by Parent or a Borrower of the obligations
of a Borrower arising pursuant to a lease from a third party in a bona fide
arm's length transaction of real property for use as a retail store location in
the ordinary course of the business of such Borrower; provided, that, (i) the
Person issuing such guarantee is permitted hereunder to incur directly the
obligation that is being guaranteed and (ii) as of the date on which such
guarantee is issued no Event of Default exists or has occurred and is
continuing;
(g) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof to any third person (but not to any other Borrower or
Guarantor), provided, that, each of the following conditions is satisfied as
determined by Agent: (i) such Indebtedness shall be on terms and conditions
acceptable to Agent and shall be subject and subordinate in right of payment to
the right of Agent and Lenders to receive the prior indefeasible payment and
satisfaction in full payment of all of the Obligations pursuant to the terms of
an intercreditor agreement between Agent and such third party, in form and
substance satisfactory to Agent, (ii) Agent shall have received not less than
ten (10) days prior written notice of the intention of such Borrower or
Guarantor to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Agent the amount of such Indebtedness, the person or
persons to whom such Indebtedness will be owed, the interest rate, the schedule
of repayments and maturity date with respect thereto and such other information
as Agent may request with respect thereto, (iii) Agent shall have received true,
correct and complete copies of all Subordinated Debt Documents evidencing or
otherwise related to such Indebtedness, (iv) except as Agent may otherwise agree
in writing, all of the proceeds of the loans or other accommodations giving rise
to such Indebtedness shall be paid to Agent for application to the Obligations
in accordance with the terms hereof, (v) as of the date of incurring such
Indebtedness and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, (vi) such Borrower and Guarantor shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto, except,
that, such Borrower or Guarantor may, after prior written notice to Agent,
amend, modify, alter or change
85
the terms thereof so as to extend the maturity thereof, or defer the timing of
any payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vii) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;
(h) Indebtedness arising from lease payments in connection with one
or more sale-leaseback transactions in respect of (i) the Owned Store Real
Properties, and (ii) the Real Properties formerly owned by Borrowers located at
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000 and 0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxx 00000;
(i) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate which are not permitted by the other provisions of Section 9.9
above; provided, that, (i) Borrowers and Guarantors may only make regularly
scheduled payments of principal and interest in respect of such Indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such Indebtedness as in effect on the date hereof, (ii) Borrowers and
Guarantors shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such Indebtedness or any agreement, document or instrument related
thereto as in effect on the date hereof except, that, Borrowers and Guarantors
may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrowers and
Guarantors shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf, concurrently with the sending thereof, as the case may be; and
(j) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof to any third person which is not permitted by the other
provisions of Section 9.9 above in an aggregate outstanding amount not to exceed
$100,000 at any time.
9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, directly or indirectly, purchase, hold or
acquire (including pursuant to any merger with any Person that was not a wholly
owned Subsidiary immediately prior to such merger) any Capital Stock, evidences
of indebtedness or other securities (including any option, warrant or other
right to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, or make or permit to exist any investment or any other interest in,
any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit or all or a substantial part of the assets or property of any other Person
(whether through purchase of assets, merger or otherwise), or form or acquire
86
any Subsidiaries, or agree to do any of the foregoing (each of the foregoing an
"Investment"), except:
(a) Permitted Investments;
(b) Permitted Acquisitions;
(c) Investments by a Borrower, Guarantor or other Subsidiary of
Parent in a Borrower or by a Guarantor or other Subsidiary of Parent (other than
a Borrower) in another Guarantor, in each case after the date hereof, provided,
that, to the extent that such Investment gives rise to any Indebtedness, such
Indebtedness is permitted hereunder and to the extent that such Investment gives
rise to the issuance of any shares of Capital Stock, such issuance is permitted
hereunder;
(d) loans by a Borrower or Guarantor to another Borrower or
Guarantor after the date hereof, provided, that,
(i) as to all of such loans, (A) within thirty (30) days after
the end of each fiscal month, Borrowers shall provide to Agent a report in form
and substance satisfactory to Agent of the outstanding amount of such loans as
of the last day of the immediately preceding month and indicating any loans made
and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument (and any amendment or modification thereto) is promptly
delivered to Agent to hold as part of the Collateral, with such endorsement
and/or assignment by the payee of such note or other instrument as Agent may
require,
(ii) as to loans by a Borrower to a Guarantor or by a
Guarantor to another Guarantor, (A) as of the date of any such loan and after
giving effect thereto, the Borrower or Guarantor making such loan shall be
Solvent, and (B) as of the date of any such loan and after giving effect
thereto, as of the date of any such loan and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
(iii) as to loans by a Guarantor to a Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Agent and Lenders to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) promptly upon Agent's request, Agent shall
have received a subordination agreement, in form and substance satisfactory to
Agent, providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by such
Guarantor and such Borrower, and (C) such Borrower shall not, directly or
indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement, except
that Parent and Merchandising may make payments of interest to Resources on a
quarterly basis in respect of intercompany loans by Resources to Parent or
Merchandising, as the case may be, so long as Resources immediately applies all
of the proceeds of such interest payments to make an
87
intercompany loan in cash to Parent or Merchandising in accordance with the
terms of Section 9.10(d) hereof; and
(iv) the aggregate outstanding principal amount of all loans
made by Borrowers to Guarantors shall not exceed $100,000 at any time; and
(e) the loans and advances set forth on Schedule 9.10 to the
Information Certificate which are not permitted by the other provisions of
Section 9.10 above; provided, that:
(i) as to all such loans and advances, (A) Borrowers and
Guarantors shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto, except that Borrowers and Guarantors may amend any such
agreement, document or instrument to increase the principal amount of any loans
made by a Guarantor to a Borrower so long as the single original of any
amendment to any note or other instrument shall be promptly delivered to Agent
to hold as part of the Collateral with such endorsement and/or assignment by the
payee of such note or other instrument as Agent may require, and (B) Borrowers
and Guarantors shall furnish to Agent all notices or demands in connection with
such loans and advances either received by any Borrower or Guarantor or on its
behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor
or on its behalf, concurrently with the sending thereof, as the case may be; and
(ii) as to loans by a Guarantor to a Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Agent and Lenders to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) Agent shall have received a subordination
agreement, in form and substance satisfactory to Agent, providing for the terms
of the subordination in right of payment of such Indebtedness of such Borrower
to the prior final payment and satisfaction in full of all of the Obligations,
duly authorized, executed and delivered by such Guarantor and such Borrower, and
(C) such Borrower shall not, directly or indirectly make, or be required to
make, any payments in respect of such Indebtedness prior to the end of the then
current term of this Agreement, except that Parent and Merchandisng may make
payments of interest to Resources on a quarterly basis in respect of
intercompany loans by Resources to Parent or Merchandisng, as the case may be,
so long as Resources immediately applies all of the proceeds of such interest
payments to make an intercompany loan in cash to Parent or Merchandising in
accordance with the terms of Section 9.10(d) hereof.
9.11 Restricted Payments. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, except:
(a) Parent may make Restricted Payments with respect to its Capital
Stock payable solely in additional shares of its Capital Stock that satisfies
the requirements for issuance of Capital Stock by Parent under Section
9.7(b)(ii) hereof;
(b) Subsidiaries of any Borrower or Guarantor may make Restricted
Payments to a Borrower;
88
(c) Enterprises may make Restricted Payments to Resources for the
purpose of paying dividends in respect of the Capital Stock of Enterprises so
long as Resources immediately applies all of the proceeds of such Restricted
Payments to make an intercompany loan in cash to Parent in accordance with the
terms of Section 9.10(d) hereof;
(d) Borrowers and Guarantors may repurchase Capital Stock consisting
of common stock held by employees pursuant to any employee stock ownership plan
thereof upon the termination, retirement or death of any such employee in
accordance with the provisions of such plan or upon the vesting of restricted
stock in any such employee in accordance with the provisions of the restricted
stock plan, provided, that, as to any such repurchase, each of the following
conditions is satisfied: (i) as of the date of the payment for such repurchase
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing, (ii) such repurchase shall be paid with funds
legally available therefor, (iii) such repurchase shall not violate any law or
regulation or the terms of any indenture, agreement or undertaking to which such
Borrower or Guarantor is a party or by which such Borrower or Guarantor or its
or their property are bound, and (iv) the aggregate amount of all payments for
such repurchases in any calendar year shall not exceed $1,000,000, except that
the aggregate amount of all payments for such repurchases in any calendar year
may exceed $1,000,000 (but shall not exceed $4,000,000) if (A) Excess
Availability shall have been equal to or greater than $30,000,000 (or, if the
Maximum Credit has been increased above $110,000,000, such greater amount as
Agent may determine) for each of the two consecutive months immediately prior to
the date of such payment based on the Borrowing Base as of the end of each of
such months and after giving effect to the payment of such repurchases, on a pro
forma basis using the Excess Availability as of the end of the month immediately
prior to the date of such repurchases, Excess Availability shall be not less
than $30,000,000, and (B) as of the date of any such payment and after giving
effect thereto, no Default or Event of Default shall exist or have occurred;
(e) Parent may make Restricted Payments for the purpose of paying
dividends and paying other distributions in respect of its Capital Stock or the
repurchase of its Capital Stock, provided, that, each of the following
conditions is satisfied as determined by Agent: (i) Administrative Borrower
shall have provided to Agent not less than ten (10) Business Days' prior written
notice of the intention of such Borrower or Guarantor to pay such dividends or
other distributions or make such other repurchases (specifying the amount to be
paid by Borrowers or Guarantors), (ii) such dividends, distributions or
repurchases shall paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are bound,
(iv) Excess Availability shall have been not less than $30,000,000 (or, if the
Maximum Credit has been increased above $110,000,000, such greater amount as
Agent may determine) for each of the two consecutive months immediately prior to
the date of any such payment based on the Borrowing Base as of the end of each
of such months and after giving effect to the payment of such dividends or other
distributions or repurchases, on a pro forma basis using the Excess Availability
as of the end of the month immediately prior to the date of such dividends or
other distributions or repurchases, Excess Availability shall be not less than
$30,000,000, and (v) as of the date of any such payment and after giving effect
thereto, no Default or Event of Default shall exist or have occurred.
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9.12 Transactions with Affiliates. Each Borrower and Guarantor shall not,
directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director or other Affiliate of
such Borrower or Guarantor, except (a) in the ordinary course of such Borrower's
or Guarantor's business and upon terms no less favorable to such Borrower or
Guarantor than such Borrower or Guarantor would obtain in a comparable arm's
length transaction with an unaffiliated person, (b) for any purchase or
acquisition by any Borrower from another Borrower, any sale or transfer by any
Borrower to another Borrower, or any lease of any property by any Borrower from
another Borrower or lease of any property from any Borrower to another Borrower
and (c) transactions expressly permitted by Section 9.7, 9.9, 9.10 or 9.11
hereof.
9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other Federal and State law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (c) not terminate any
Pension Plan so as to incur any material liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any Plan or any trust created thereunder which would
subject such Borrower, Guarantor or such ERISA Affiliate to a material tax or
other liability on prohibited transactions imposed under Section 4975 of the
Code or ERISA; (e) make all required contributions to any Plan which it is
obligated to pay under Section 302 of ERISA, Section 412 of the Code or the
terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Pension Plan; (g)
not engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA; or (h) not allow or suffer to exist any occurrence of a reportable event
or any other event or condition which presents a material risk of termination by
the Pension Benefit Guaranty Corporation of any Plan that is a single employer
plan, which termination could result in any material liability to the Pension
Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor
shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on the last Saturday closest to January
31st of each year and (b) fiscal quarters to end on or about each April 30th,
July 31st, October 31st and January 31st of each year.
9.15 Change in Business. Each Borrower and Guarantor shall not engage in
any business other than the business of such Borrower or Guarantor on the date
hereof and any business reasonably related, ancillary or complimentary to the
business in which such Borrower or Guarantor is engaged on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower and
Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except for encumbrances and
restrictions
90
arising under (i) applicable law, (ii) this Agreement, (iii) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of such Borrower or
Guarantor prior to the date on which such Subsidiary was acquired by such
Borrower or such Guarantor and outstanding on such acquisition date, and (vi)
the extension or continuation of contractual obligations in existence on the
date hereof; provided, that, any such encumbrances or restrictions contained in
such extension or continuation are no less favorable to Agent and Lenders than
those encumbrances and restrictions under or pursuant to the contractual
obligations so extended or continued.
9.17 License Agreements.
(a) With respect to a License Agreement applicable to Intellectual
Property that is owned by a third party and licensed to a Borrower or Guarantor
and that is affixed to or otherwise used in connection with the manufacture,
sale or distribution of any Inventory, each Borrower and Guarantor shall (i)
give Agent not less than ninety (90) days prior written notice of its intention
to not renew or to terminate, cancel, surrender or release its rights under any
such License Agreement, or to amend any such License Agreement or related
arrangements to limit the scope of the right of such Borrower or Guarantor to
use the Intellectual Property subject to such License Agreement in any material
respect, either with respect to product, territory, term or otherwise, or to
increase in any material respect the amounts to be paid by such Borrower or
Guarantor thereunder or in connection therewith (and Agent may establish such
Reserves as a result of any of the foregoing as Agent may reasonably determine),
(ii) give Agent prompt written notice of any such License Agreement entered into
by such Borrower or Guarantor after the date hereof, or any material amendment
to any such License Agreement existing on the date hereof, in each case together
with a true, correct and complete copy thereof and such other information with
respect thereto as Agent may in good faith request, (iii) give Agent prompt
written notice of any material breach of any obligation, or any default, by the
third party that is the licensor or by the Borrower or Guarantor that is the
licensee or any other party under any such License Agreement, and deliver to
Agent (promptly upon the receipt thereof by such Borrower or Guarantor in the
case of a notice to such Borrower or Guarantor and concurrently with the sending
thereof in the case of a notice from such Borrower or Guarantor) a copy of each
notice of default and any other notice received or delivered by such Borrower or
Guarantor in connection with any such a License Agreement that relates to the
scope of the right, or the continuation of the right, of such Borrower or
Guarantor to use the Intellectual Property subject to such License Agreement or
the amounts required to be paid thereunder.
(b) With respect to a License Agreement applicable to Intellectual
Property that is owned by a third party and licensed to a Borrower or Guarantor
and that is affixed to or otherwise used in connection with the manufacture,
sale or distribution of any Inventory, at any time an Event of Default shall
exist or have occurred and be continuing or if after giving effect to any
Reserves, or the reduction in the applicable Borrowing Base as a result of
Eligible Inventory using such licensed Intellectual Property ceasing to be
Eligible Inventory, the Excess Availability shall be less than the amount
required pursuant to Section 9.19 hereof, Agent shall
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have, and is hereby granted, the irrevocable right and authority, at its option,
to renew or extend the term of such License Agreement, whether in its own name
and behalf, or in the name and behalf of a designee or nominee of Agent or in
the name and behalf of such Borrower or Guarantor, subject to and in accordance
with the terms of such License Agreement. Agent may, but shall not be required
to, perform any or all of such obligations of such Borrower or Guarantor under
any of the License Agreements, including, but not limited to, the payment of any
or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by
Agent shall constitute part of the Obligations.
9.18 Credit Card Agreements. Each Borrower shall (a) observe and perform
all material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
and (b) at all times maintain in full force and effect the Credit Card
Agreements and not terminate, cancel, surrender, modify, amend, waive or release
any of the Credit Card Agreements, or consent to or permit to occur any of the
foregoing; except, that, (i) any Borrower may terminate or cancel any of the
Credit Card Agreements in the ordinary course of the business of such Borrower;
provided, that, such Borrower shall give Agent not less than thirty (30) days
prior written notice of its intention to so terminate or cancel any of the
Credit Card Agreements; (d) not enter into any new Credit Card Agreements with
any new Credit Card Issuer unless (i) Agent shall have received not less than
thirty (30) days prior written notice of the intention of such Borrower to enter
into such agreement (together with such other information with respect thereto
as Agent may request) and (ii) such Borrower delivers, or causes to be delivered
to Agent, a Credit Card Acknowledgment in favor of Agent, (e) give Agent
immediate written notice of any Credit Card Agreement entered into by such
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may request;
and (f) furnish to Agent, promptly upon the request of Agent, such information
and evidence as Agent may require from time to time concerning the observance,
performance and compliance by such Borrower or the other party or parties
thereto with the terms, covenants or provisions of the Credit Card Agreements.
9.19 Minimum Excess Availability. Borrowers shall at all times maintain
Excess Availability of not less than the Specified Amount (it being understood
that, solely for purposes of calculating this Section 9.19, the amount of Excess
Availability shall be determined as if the Maximum Credit were equal to the
Maximum Credit plus $7,500,000).
9.20 After Acquired Real Property. If any Borrower or Guarantor hereafter
acquires any Real Property, fixtures or any other property that is of the kind
or nature described in the Mortgage and such Real Property, fixtures or other
property is adjacent to, contiguous with or necessary or related to or used in
connection with any Real Property then subject to a Mortgage, or if such Real
Property is not adjacent to, contiguous with or related to or used in connection
with such Real Property, then if such Real Property, fixtures or other property
at any location (or series of adjacent, contiguous or related locations, and
regardless of the number of parcels) has a fair market value in an amount equal
to or greater than $250,000 (or if an Event of Default exists, then regardless
of the fair market value of such assets), or if the Tupelo Real Property is not
sold in accordance with the terms of this Agreement by December 31, 2005,
without limiting any other rights of Agent or any Lender, or duties or
obligations of any Borrower or Guarantor, reasonably promptly upon Agent's
request, such Borrower or Guarantor shall execute and deliver to Agent a
mortgage, deed of trust or deed to secure debt, as Agent may determine, in
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form and substance substantially similar to the Mortgage and as to any
provisions relating to specific state laws satisfactory to Agent and in form
appropriate for recording in the real estate records of the jurisdiction in
which such Real Property or other property is located granting to Agent a first
and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as such Borrower or Guarantor would otherwise
be permitted to incur hereunder or under the Mortgage or as otherwise consented
to in writing by Agent) and such other agreements, documents and instruments as
Agent may require in connection therewith provided, that, as to any such Real
Property that is not adjacent, contiguous or related to Real Property then
subject to a Mortgage, if the purchase price for such Real Property (other than
the Tupelo Real Property) is paid with the initial proceeds of a loan from a
financial institution giving rise to Indebtedness permitted under Section 9.9(b)
hereof, then such Borrower or Guarantor shall not be required to execute and
deliver such mortgage, deed of trust or deed to secure debt in favor of Agent
with respect to such Real Property.
9.21 Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans or the requesting or issuance, extension or renewal of
any Letter of Credit or the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 USC Section 1 et seq., as amended) (the "Trading
With the Enemy Act") or any of the foreign assets control regulations of the
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended)
(the "Foreign Assets Control Regulations") or any enabling legislation or
executive order relating thereto (including, but not limited to (a) Executive
order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56). None of Borrowers or any of their
Subsidiaries is or will become a "blocked person" as described in the Executive
Order, the Trading with the Enemy Act or the Foreign Assets Control Regulations
or engages or will engage in any dealings or transactions, or be otherwise
associated, with any such "blocked person".
9.22 Costs and Expenses. Borrowers and Guarantors shall pay to Agent
reasonably promptly after demand all costs, expenses, filing fees and taxes paid
or payable in connection with the preparation, negotiation, execution, delivery,
recording, syndication, administration, collection, liquidation, enforcement and
defense of the Obligations, Agent's rights in the Collateral, this Agreement,
the other Financing Agreements and all other documents related hereto or
thereto, including any amendments, supplements or consents which may hereafter
be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
title insurance premiums, surveys, assessments, engineering reports and
inspections, appraisal fees and search fees, background checks, costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Agent's customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any Lender in connection with any Letter of Credit; (d)
costs and expenses of preserving and protecting the Collateral; (e) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Agent, selling or
otherwise realizing upon the Collateral, and otherwise
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enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Agent or any Lender arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (f) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Agent during
the course of periodic field examinations of the Collateral and such Borrower's
or Guarantor's operations, plus a per diem charge at Agent's then standard rate
for Agent's examiners in the field and office (which rate as of the date hereof
is $850 per person per day); and (g) the fees and disbursements of counsel
(including legal assistants) to Agent in connection with any of the foregoing.
9.23 Further Assurances. (a) In the case of the formation or acquisition
by a Borrower or Guarantor of any Subsidiary after the date hereof, as to any
such Subsidiary, (i) the Borrower or Guarantor forming such Subsidiary shall
cause any such Subsidiary to execute and deliver to Agent, the following (each
in form and substance satisfactory to Agent), (A) an absolute and unconditional
guarantee of payment of the Obligations, (B) a security agreement granting to
Agent a first security interest and lien (except as otherwise consented to in
writing by Agent) upon all of the assets of any such Subsidiary of the type or
category of the assets of Borrowers subject to the security interests and liens
pursuant hereto, and (C) such other agreements, documents and instruments as
Agent may require in connection with the documents referred to above in order to
make such Subsidiary a party to this Agreement as a "Borrower" or as a
"Guarantor" as Agent may determine, including, but not limited to, supplements
and amendments hereto, authorization to file UCC financing statements,
Collateral Access Agreements and other consents, waivers, acknowledgments and
other agreements from third persons which Agent may deem necessary or desirable
in order to permit, protect and perfect its security interests in and liens upon
the assets purchased, corporate resolutions and other organization and
authorizing documents of such Person, and favorable opinions of counsel to such
person and (ii) the Borrower or Guarantor forming such Subsidiary shall (A)
execute and deliver to Agent, a pledge and security agreement, in form and
substance satisfactory to Agent, granting to Agent a first pledge of and lien on
all of the issued and outstanding shares of Capital Stock of any such
Subsidiary, and (B) deliver the original stock certificates evidencing such
shares of Capital Stock (or such other evidence as may be issued in the case of
a limited liability company), together with stock powers with respect thereto
duly executed in blank (or the equivalent thereof in the case of a limited
liability company in which such interests are certificated, or otherwise take
such actions as Agent shall require with respect to Agent's security interests
therein).
(b) In the case of an acquisition of assets (other than Capital
Stock) by a Borrower or Guarantor pursuant to a Permitted Acquisition after the
date hereof, Agent shall have received, in form and substance satisfactory to
Agent, (i) evidence that Agent has valid and perfected security interests in and
liens upon all purchased assets, (ii) all Collateral Access Agreements and other
consents, waivers, acknowledgments and other agreements from third persons which
Agent may deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the assets purchased, (iii) the
agreement of the seller consenting to the collateral assignment by the Borrower
or Guarantor purchasing such assets of all rights and remedies and claims for
damages of such Borrower or Guarantor relating to the Collateral (including,
without limitation, any bulk sales indemnification) under the agreements,
documents and instruments relating to such acquisition and (iv) such other
agreements,
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documents and instruments as Agent may require in connection with the documents
referred to above, including, but not limited to, supplements and amendments
hereto, corporate resolutions and other organization and authorizing documents
and favorable opinions of counsel to such person.
(c) At the request of Agent at any time and from time to time,
Borrowers and Guarantors shall, at their expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Agent may
at any time and from time to time request a certificate from an officer of any
Borrower or Guarantor representing that all conditions precedent to the making
of Loans and providing Letters of Credit contained herein are satisfied. In the
event of such request by Agent, Agent and Lenders may, at Agent's option, cease
to make any further Loans or provide any further Letters of Credit until Agent
has received such certificate and, in addition, Agent has determined that such
conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations when due or
(ii) any Borrower or Guarantor fails to perform any of the covenants contained
in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such
failure shall continue for twenty (20) days; provided, that, such twenty (20)
day period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such twenty (20)
day period or which has been the subject of a prior failure within a six (6)
month period or (B) an intentional breach by any Borrower or Guarantor of any
such covenant or (iii) any Borrower or Guarantor fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement other
than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above or (iv) any
Borrower or Guarantor fails to perform in any material respect any of the terms,
covenants, conditions or provisions contained in any of the other Financing
Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii)
above;
(b) any representation, warranty or statement of fact made by any
Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements
or any other written agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading in any material respect;
(c) any Guarantor revokes or terminates or purports to revoke or
terminate or fails to perform any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favor of Agent or any Lender;
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(d) one or more judgments for the payment of money is or are
rendered against any Borrower or Guarantor in excess of $750,000 in the
aggregate (to the extent not covered by insurance where the insurer has assumed
responsibility in writing for such judgment) and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
any Borrower or Guarantor or any of the Collateral having a value in excess of
$750,000;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or Guarantor makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer of any of their respective
assets or calls a meeting of its creditors or principal creditors in connection
with a moratorium or adjustment of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Guarantor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or any Borrower or Guarantor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Guarantor or for all or any part of its
property;
(i) any default by any Borrower or Guarantor under any agreement,
document or instrument relating to any Indebtedness owing to any person other
than Lenders, or any capitalized lease obligations, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lenders, in an amount in excess of
$750,000 which default continues for more than the applicable cure period, if
any, with respect thereto, or any default by any Borrower or Guarantor under any
Material Contract, which default continues for more than the applicable cure
period, if any, with respect thereto and/or is not waived in writing by the
other parties thereto or any Credit Card Issuer or Credit Card Processor
withholds payment of amounts otherwise payable to a Borrower to fund a reserve
account or otherwise hold as collateral, or shall require a Borrower to pay
funds into a reserve account or for such Credit Card Issuer or Credit Card
Processor to otherwise hold as collateral, or any Borrower shall provide a
letter of credit, guarantee, indemnity or similar instrument to or in favor of
such Credit Card Issuer or Credit Card Processor such that in the aggregate all
of such funds in the reserve account, other amounts held as collateral and the
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amount of such letters of credit, guarantees, indemnities or similar instruments
shall exceed $750,000 or any such Credit Card Issuer or Credit Card Processor
shall debit or deduct any amounts in excess of $750,000 in the aggregate in any
fiscal year of Borrowers and Guarantors from any deposit account of any
Borrower;
(j) any Credit Card Issuer or Credit Card Processor shall send
notice to Borrower that it is ceasing to make or suspending payments to Borrower
of amounts due or to become due to Borrower or shall cease or suspend such
payments, or shall send notice to Borrower that it is terminating its
arrangements with Borrower or such arrangements shall terminate as a result of
any event of default under such arrangements, which continues for more than the
applicable cure period, if any, with respect thereto, unless (in the case of any
of the foregoing) Borrower shall have entered into arrangements with another
Credit Card Issuer or Credit Card Processor, as the case may be, within sixty
(60) days after the date of any such notice;
(k) any bank at which any deposit account of Borrower or Guarantor
is maintained shall fail to comply with any of the material terms of any Deposit
Account Control Agreement to which such bank is a party or any securities
intermediary, commodity intermediary or other financial institution at any time
in custody, control or possession of any investment property of Borrower or
Guarantor shall fail to comply with any of the material terms of any Investment
Property Control Agreement to which such person is a party;
(l) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any action based
on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in
accordance with its terms, or any security interest provided for herein or in
any of the other Financing Agreements shall cease to be a valid and perfected
first priority security interest in any of the Collateral purported to be
subject thereto except as otherwise permitted herein or therein and except as to
Collateral having an aggregate value of not more than $750,000;
(m) an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of any Borrower in an aggregate amount in
excess of $750,000;
(n) any Change of Control;
(o) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Guarantor of which any Borrower,
Guarantor or Agent receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Agent, under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against such Borrower
or Guarantor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of (i) any of the Collateral having a
value in excess of $750,000 or (ii) any other
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property of any Borrower or Guarantor which is necessary or material to the
conduct of its business; or
(p) there shall be a material adverse change in the business, assets
or prospects of any Borrower or Guarantor after the date hereof.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Guarantor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Guarantor of this
Agreement or any of the other Financing Agreements. Subject to Section 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or Guarantor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the generality of the foregoing, at any time an
Event of Default exists or has occurred and is continuing, Agent may, at its
option and shall upon the direction of the Required Lenders, (i) upon notice to
Administrative Borrower, accelerate the payment of all Obligations and demand
immediate payment thereof to Agent for itself and the benefit of Lenders
(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), and (ii) terminate the Commitments whereupon the
obligation of each Lender to make any Loan and Issuing Bank to issue any Letter
of Credit shall immediately terminate (provided, that, upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h), the Commitments
and any other obligation of the Agent or a Lender hereunder shall automatically
terminate).
(c) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion (i) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (ii) require any Borrower or Guarantor, at Borrowers'
expense, to assemble and make available to Agent any part or all of the
Collateral at any place and time designated by Agent, (iii) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (iv)
remove any or all of the Collateral from any premises on or in which the same
may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (v) sell, lease, transfer, assign,
deliver or otherwise dispose of any and all Collateral (including entering into
contracts with respect thereto, public or private sales at any exchange,
broker's board, at any office of Agent or elsewhere) at such prices or terms as
Agent may deem reasonable, for cash, upon credit or for future delivery, with
the
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Agent having the right to purchase the whole or any part of the Collateral at
any such public sale, all of the foregoing being free from any right or equity
of redemption of any Borrower or Guarantor, which right or equity of redemption
is hereby expressly waived and released by Borrowers and Guarantors and/or (vi)
terminate this Agreement. If any of the Collateral is sold or leased by Agent
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Agent. If
notice of disposition of Collateral is required by law, ten (10) days prior
notice by Agent to Administrative Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrowers and Guarantors waive any other notice. In the event Agent
institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, each Borrower and Guarantor waives the
posting of any bond which might otherwise be required. At any time an Event of
Default exists or has occurred and is continuing, upon Agent's request,
Borrowers will either, as Agent shall specify, furnish cash collateral to
Issuing Bank to be used to secure and fund the reimbursement obligations to
Issuing Bank in connection with any Letter of Credit Obligations or furnish cash
collateral to Issuing Bank for the Letter of Credit Obligations. Such cash
collateral shall be in the amount equal to one hundred ten (110%) percent of the
amount of the Letter of Credit Obligations plus the amount of any fees and
expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Obligations.
(d) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, enforce the rights of
any Borrower or Guarantor against any account debtor, secondary obligor or other
obligor in respect of any of the Accounts or other Receivables. Without limiting
the generality of the foregoing, Agent may, in its discretion, at such time or
times (i) notify any or all account debtors (including Credit Card Issuers and
Credit Card Processors), secondary obligors or other obligors in respect thereof
that the Receivables have been assigned to Agent and that Agent has a security
interest therein and Agent may direct any or all account debtors(including
Credit Card Issuers and Credit Card Processors), secondary obligors and other
obligors to make payment of Receivables directly to Agent, (ii) extend the time
of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any secondary obligors or other
obligors in respect thereof without affecting any of the Obligations, (iii)
demand, collect or enforce payment of any Receivables or such other obligations,
but without any duty to do so, and Agent and Lenders shall not be liable for any
failure to collect or enforce the payment thereof nor for the negligence of its
agents or attorneys with respect thereto and (iv) take whatever other action
Agent may deem necessary or desirable for the protection of its interests and
the interests of Lenders. At any time that an Event of Default exists or has
occurred and is continuing, at Agent's request, all invoices and statements sent
to any account debtor shall state that the Accounts and such other obligations
have been assigned to Agent and are payable directly and only to Agent and
Borrowers and Guarantors shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require. In the event any account debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Agent's request, hold the returned Inventory
in trust for Agent, segregate all returned Inventory from all of its other
property, dispose of the returned Inventory solely according to Agent's
instructions,
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and not issue any credits, discounts or allowances with respect thereto without
Agent's prior written consent.
(e) To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower and Guarantor acknowledges and
agrees that it is not commercially unreasonable for Agent or any Lender (i) to
fail to incur expenses reasonably deemed significant by Agent or any Lender to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or to fail to obtain consents of any Governmental Authority or
other third party for the collection or disposition of Collateral to be
collected or disposed of, except to the extent such failure violates applicable
law, (iii) to fail to exercise collection remedies against account debtors,
secondary obligors or other persons obligated on Collateral or to remove liens
or encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower and Guarantor acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
Agent or any Lender would not be commercially unreasonable in the exercise by
Agent or any Lender of remedies against the Collateral and that other actions or
omissions by Agent or any Lender shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section. Without limitation of
the foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section.
(f) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Guarantor hereby grants to Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Guarantor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Guarantor, wherever the same maybe located,
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including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
(g) At any time an Event of Default exists or has occurred and is
continuing, Agent may apply the cash proceeds of Collateral actually received by
Agent from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in accordance with the
terms hereof, whether or not then due or may hold such proceeds as cash
collateral for the Obligations. Borrowers and Guarantors shall remain liable to
Agent and Lenders for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and expenses.
(h) Without limiting the foregoing, upon the occurrence of a Default
or an Event of Default, (i) Agent and Lenders may, at Agent's option, and upon
the occurrence of an Event of Default at the direction of the Required Lenders,
Agent and Lenders shall, without notice, (A) cease making Loans or arranging for
Letters of Credit or reduce the lending formulas or amounts of Loans and Letters
of Credit available to Borrowers and/or (B) terminate any provision of this
Agreement providing for any future Loans to be made by Agent and Lenders or
Letters of Credit to be issued by Issuing Bank and (ii) Agent may, at its
option, establish such Reserves as Agent determines, without limitation or
restriction, notwithstanding anything to the contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements (except as otherwise provided therein) and
any dispute arising out of the relationship between the parties hereto, whether
in contract, tort, equity or otherwise, shall be governed by the internal laws
of the State of New York but excluding any principles of conflicts of law or
other rule of law that would cause the application of the law of any
jurisdiction other than the laws of the State of New York.
(b) Borrowers, Guarantors, Agent, Lenders and Issuing Bank
irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme
Court of the State of New York in New York County and the United States District
Court for the Southern District of New York, whichever Agent may elect, and
waive any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Agreement or any of the other
Financing Agreements or in any way connected with or related or incidental to
the dealings of the parties hereto in respect of this Agreement or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Agent and
Lenders shall have the right to bring any action or proceeding against any
Borrower or Guarantor or its or their property in the courts of any other
jurisdiction which Agent deems
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necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against any Borrower or Guarantor or its or their property).
(c) Each Borrower and Guarantor hereby waives personal service of
any and all process upon it and consents that all such service of process may be
made by U.S. certified mail (return receipt requested) directed to its address
set forth herein and service so made shall be deemed to be completed immediately
upon receipt thereof by the applicable Borrower or Guarantor, or, at Agent's
option, by service upon any Borrower or Guarantor (or Administrative Borrower on
behalf of such Borrower or Guarantor) in any other manner provided under the
rules of any such courts. Within thirty (30) days after such service, such
Borrower or Guarantor shall appear in answer to such process, failing which such
Borrower or Guarantor shall be deemed in default and judgment may be entered by
Agent against such Borrower or Guarantor for the amount of the claim and other
relief requested.
(d) BORROWERS, GUARANTORS, AGENT, LENDERS AND ISSUING BANK EACH
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS
OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. BORROWERS, GUARANTORS, AGENT, LENDERS AND ISSUING BANK EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR,
AGENT, ANY LENDER OR ISSUING BANK MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent, Lenders and Issuing Bank shall not have any liability to
any Borrower or Guarantor (whether in tort, contract, equity or otherwise) for
losses suffered by such Borrower or Guarantor in connection with, arising out
of, or in any way related to the transactions or relationships contemplated by
this Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Agent, such Lender and Issuing Bank, that the losses were the result
of acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Agent, Lenders and Issuing Bank shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement. Each Borrower and Guarantor: (i) certifies that neither Agent, any
Lender, nor any representative, agent or attorney acting for or on behalf of
Agent, any Lender or Issuing Bank has represented, expressly or otherwise, that
Agent, Lenders and Issuing Bank would not, in the event of litigation, seek to
enforce any of the waivers provided for in this Agreement or any of the other
Financing Agreements and (ii) acknowledges that in entering into this Agreement
and the other Financing Agreements, Agent, Lenders and Issuing Bank are
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relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and chattel paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle such Borrower or Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing signed by Agent
and the Required Lenders or at Agent's option, by Agent with the authorization
or consent of the Required Lenders, and as to amendments to any of the Financing
Agreements (other than with respect to any provision of Section 12 hereof), by
any Borrower and such amendment, waiver, discharger or termination shall be
effective and binding as to all Lenders only in the specific instance and for
the specific purpose for which given; except, that, no such amendment, waiver,
discharge or termination shall:
(i) reduce the interest rate or any fees or extend the time of
payment of principal, interest or any fees or reduce the principal amount of any
Loan or Letter of Credit, in each case without the consent of each Lender
directly affected thereby,
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, in each case without the consent
of the Lender directly affected thereby,
(iii) release any Collateral (except as expressly required
hereunder or under any of the other Financing Agreements or applicable law and
except as permitted under Section 12.11(b) hereof), without the consent of Agent
and all of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3
hereof, without the consent of Agent and all of Lenders, or
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
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(b) Agent, Lenders and Issuing Bank shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
or their rights, powers and/or remedies unless such waiver shall be in writing
and signed as provided herein. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Agent, any Lender or Issuing
Bank of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Agent, any Lender or Issuing Bank would otherwise have on any future occasion,
whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a "Non-Consenting Lender"), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Wachovia shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Wachovia of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Wachovia shall provide the Non-Consenting Lender with
prior written notice of its intent to exercise its right under this Section,
which notice shall specify on date on which such purchase and sale shall occur.
Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Wachovia, or such Eligible Transferee
specified by Wachovia, shall pay to the Non-Consenting Lender (except as
Wachovia and such Non-Consenting Lender may otherwise agree) the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately
preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase (but in no event shall the
Non-Consenting Lender be deemed entitled to any early termination fee). Such
purchase and sale shall be effective on the date of the payment of such amount
to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender
shall terminate on such date.
(d) The consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory
shall not be deemed an amendment to the advance rates provided for in this
Section 11.3. The consent of Issuing Bank shall be required for any amendment,
waiver or consent affecting the rights or duties of Issuing Bank hereunder or
under any of the other Financing Agreements, in addition to the consent of the
Lenders otherwise required by this Section, provided, that, the consent of
Issuing Bank shall not be required for any other amendments, waivers or
consents. Notwithstanding anything to the contrary contained in Section 11.3(a)
above, (i) in the event that Agent shall agree that any items otherwise required
to be delivered to Agent as a condition of the initial Loans and Letters of
Credit hereunder may be delivered after the date hereof, Agent may, in its
discretion, agree to extend the date for delivery of such items or take such
other action as Agent may deem appropriate as a result of the failure
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to receive such items as Agent may determine or may waive any Event of Default
as a result of the failure to receive such items, in each case without the
consent of any Lender and (ii) Agent may consent to any change in the type of
organization, jurisdiction of organization or other legal structure of any
Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or
of any of the other Financing Agreements as may be necessary or desirable to
reflect any such change, in each case without the approval of any Lender.
(e) The consent of Agent and any Bank Product Provider that is
providing Bank Products and has outstanding any such Bank Products at such time
that are secured hereunder shall be required for any amendment to the priority
of payment of Obligations arising under or pursuant to any Hedge Agreements of a
Borrower or Guarantor or other Bank Products as set forth in Section 6.4(a)
hereof.
11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding
involving Agent, Issuing Bank or any Lender with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating hereto
or thereto.
11.5 Indemnification. Each Borrower and Guarantor shall, jointly and
severally, indemnify and hold Agent, each Lender and Issuing Bank and their
respective officers, directors, agents, employees, advisors and counsel and
their respective Affiliates (each such person being an "Indemnitee"), harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses (including attorneys' fees and expenses) imposed on, incurred by or
asserted against any of them in connection with any litigation, investigation,
claim or proceeding commenced or threatened related to the negotiation,
preparation, execution, delivery, enforcement, performance or administration of
this Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the fees and expenses of counsel except that
Borrowers and Guarantors shall not have any obligation under this Section 11.5
to indemnify an Indemnitee with respect to a matter covered hereby resulting
from the gross negligence or willful misconduct of such Indemnitee as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction
(but without limiting the obligations of Borrowers or Guarantors as to any other
Indemnitee). To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrowers and Guarantors shall pay the maximum portion
which it is permitted to pay under applicable law to Agent and Lenders in
satisfaction of indemnified matters under this Section. To the extent permitted
by applicable law, no Borrower or Guarantor shall assert, and each Borrower and
Guarantor hereby waives, any claim against any Indemnitee, on any theory of
liability for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. No Indemnitee referred to above shall be liable
for any damages arising from the use by unintended recipients of any information
or other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or any
of the other Financing Agreements or the transaction contemplated hereby or
thereby, except for damages
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resulting from the gross negligence or willful misconduct of such Indemnitee as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. All amounts due under this Section shall be payable upon demand.
The foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Secured Party irrevocably
designates, appoints and authorizes Wachovia to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Secured Party; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any Guarantor or any other Person
to perform any of its obligations hereunder or thereunder; and (c) shall not be
responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys in fact and shall not be
responsible for the negligence or misconduct of any such agents or attorneys in
fact selected by it in good faith. Agent may deem and treat the payee of any
note as the holder thereof for all purposes hereof unless and until the
assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent. Wachovia Capital Markets LLC is hereby designated as
the sole lead arranger, manager and bookrunner with respect to the Credit
Facility. The designation of Wachovia Capital Markets LLC as sole lead arranger,
manager and bookrunner shall not create any rights in favor of it in such
capacity nor subject it to any duties or obligations in such capacity.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
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12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letters of Credit hereunder, unless and until Agent
has received written notice from a Lender, or Borrower specifying such Event of
Default or any unfulfilled condition precedent, and stating that such notice is
a "Notice of Default or Failure of Condition". In the event that Agent receives
such a Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders. Agent shall (subject to Section 12.7) take such action
with respect to any such Event of Default or failure of condition precedent as
shall be directed by the Required Lenders to the extent provided for herein;
provided, that, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to or by reason of such Event of Default or
failure of condition precedent, as it shall deem advisable in the best interest
of Lenders. Without limiting the foregoing, and notwithstanding the existence or
occurrence and continuance of an Event of Default or any other failure to
satisfy any of the conditions precedent set forth in Section 4 of this Agreement
to the contrary, unless and until otherwise directed by the Required Lenders,
Agent may, but shall have no obligation to, continue to make Loans and Issuing
Bank may, but shall have no obligation to, issue or cause to be issued any
Letter of Credit for the ratable account and risk of Lenders from time to time
if Agent believes making such Loans or issuing or causing to be issued such
Letter of Credit is in the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender or
Issuing Bank may assert or exercise any enforcement right or remedy in respect
of the Loans, Letters of Credit or other Obligations, as against any Borrower or
Guarantor or any of the Collateral or other property of any Borrower or
Guarantor.
12.4 Wachovia in its Individual Capacity. With respect to its Commitment
and the Loans made and Letters of Credit issued or caused to be issued by it
(and any successor acting as Agent), so long as Wachovia shall be a Lender
hereunder, it shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Wachovia in its individual capacity as Lender hereunder. Wachovia (and
any successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with Borrowers (and any of its Subsidiaries or
Affiliates) as if it were not acting as Agent, and Wachovia and its Affiliates
may accept fees and other consideration from any Borrower or Guarantor and any
of its Subsidiaries and Affiliates for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent and Issuing Bank
(to the extent not reimbursed by Borrowers hereunder and without limiting any
obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata
Shares, for any and all claims of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against Agent (including by any Lender)
arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Financing Agreement or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or
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thereby (including the costs and expenses that Agent is obligated to pay
hereunder) or the enforcement of any of the terms hereof or thereof or of any
such other documents, provided, that, no Lender shall be liable for any of the
foregoing to the extent it arises from the gross negligence or willful
misconduct of the party to be indemnified as determined by a final
non-appealable judgment of a court of competent jurisdiction. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
12.6 Non-Reliance on Agent and Other Lenders. Each Secured Party agrees
that it has, independently and without reliance on Agent or any other Secured
Party, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of Borrowers and Guarantors and has made its own
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Secured Party, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or any of the other Financing Agreements. Agent shall not be required
to keep itself informed as to the performance or observance by any Borrower or
Guarantor of any term or provision of this Agreement or any of the other
Financing Agreements or any other document referred to or provided for herein or
therein or to inspect the properties or books of any Borrower or Guarantor.
Agent will use reasonable efforts to provide Lenders with any information
received by Agent from any Borrower or Guarantor which is required to be
provided to Lenders or deemed to be requested by Lenders hereunder and with a
copy of any Notice of Default or Failure of Condition received by Agent from any
Borrower or any Lender; provided, that, Agent shall not be liable to any Lender
for any failure to do so, except to the extent that such failure is attributable
to Agent's own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent or deemed requested by Lenders hereunder (including the
documents provided for in Section 12.10 hereof), Agent shall not have any duty
or responsibility to provide any Lender with any other credit or other
information concerning the affairs, financial condition or business of any
Borrower or Guarantor that may come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Revolving Loans or Issuing
Bank provide any Letter of Credit to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Revolving Loans or Letter of
Credit would cause the aggregate amount of the total outstanding Revolving Loans
and Letters of Credit to exceed the Borrowing Base, without the prior consent of
all Lenders, except, that, Agent may make such additional Revolving Loans or
Issuing Bank may provide such additional Letter of Credit on behalf of Lenders,
intentionally and with actual knowledge that such Revolving Loans or Letters of
Credit will cause the total outstanding Revolving Loans and Letters of Credit to
exceed the Borrowing Base, as Agent may deem necessary or advisable in its
discretion, provided, that: (a) the total
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principal amount of the additional Revolving Loans or additional Letters of
Credit which Agent may make or Issuing Bank may provide after obtaining such
actual knowledge that the aggregate principal amount of the Revolving Loans
equal or exceed the Borrowing Base, plus the amount of Special Agent Advances
made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed
the aggregate amount equal to five (5%) of the Maximum Credit and shall not
cause the total principal amount of the Loans and Letters of Credit to exceed
the Maximum Credit and (b) no such additional Revolving Loan or Letter of Credit
shall be outstanding more than ninety (90) days after the date such additional
Revolving Loan or Letter of Credit is made or issued (as the case may be),
except as the Required Lenders may otherwise agree. Each Lender shall be
obligated to pay Agent the amount of its Pro Rata Share of any such additional
Revolving Loans or Letters of Credit.
12.9 Concerning the Collateral and the Related Financing Agreements. Each
Secured Party authorizes and directs Agent to enter into this Agreement and the
other Financing Agreements. Each Secured Party agrees that any action taken by
Agent or Required Lenders in accordance with the terms of this Agreement or the
other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all Secured
Parties.
12.10 Field Audit, Examination Reports and other Information; Disclaimer
by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender (and
Agent agrees that it will furnish to such Lender), promptly after it becomes
available, a copy of each field audit or examination report and report with
respect to the Borrowing Base prepared or received by Agent (each field audit or
examination report and report with respect to the Borrowing Base being referred
to herein as a "Report" and collectively, "Reports"), appraisals with respect to
the Collateral and financial statements with respect to Parent and its
Subsidiaries received by Agent;
(b) expressly agrees and acknowledges that Agent (i) does not make
any representation or warranty as to the accuracy of any Report, appraisal or
financial statement or (ii) shall not be liable for any information contained in
any Report, appraisal or financial statement;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers' and
Guarantors' books and records, as well as on representations of Borrowers' and
Guarantors' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
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12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letters of Credit
hereunder, make such disbursements and advances ("Special Agent Advances") which
Agent, in its sole discretion, (i) deems necessary or desirable either to
preserve or protect the Collateral or any portion thereof or (ii) to enhance the
likelihood or maximize the amount of repayment by Borrowers and Guarantors of
the Loans and other Obligations, provided, that, (A) the aggregate principal
amount of the Special Agent Advances pursuant to this clause (ii) outstanding at
any time, plus the then outstanding principal amount of the additional Loans and
Letters of Credit which Agent may make or provide as set forth in Section 12.8
hereof, shall not exceed the amount equal to five (5%) percent of the Maximum
Credit and (B) the aggregate principal amount of the Special Agent Advances
pursuant to this clause (ii) outstanding at any time, plus the then outstanding
principal amount of the Loans, shall not exceed the Maximum Credit, or (iii) to
pay any other amount chargeable to any Borrower or Guarantor pursuant to the
terms of this Agreement or any of the other Financing Agreements consisting of
(A) costs, fees and expenses and (B) payments to Issuing Bank in respect of any
Letter of Credit. The Special Agent Advances shall be repayable on demand and
together with all interest thereon shall constitute Obligations secured by the
Collateral. Special Agent Advances shall not constitute Loans but shall
otherwise constitute Obligations hereunder. Interest on Special Agent Advances
shall be payable at the Interest Rate then applicable to Prime Rate Loans and
shall be payable on demand. Without limitation of its obligations pursuant to
Section 6.11, each Lender agrees that it shall make available to Agent, upon
Agent's demand, in immediately available funds, the amount equal to such
Lender's Pro Rata Share of each such Special Agent Advance. If such funds are
not made available to Agent by such Lender, such Lender shall be deemed a
Defaulting Lender and Agent shall be entitled to recover such funds, on demand
from such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the Federal Funds
Rate for each day during such period (as published by the Federal Reserve Bank
of New York or at Agent's option based on the arithmetic mean determined by
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and if
such amounts are not paid within three (3) days of Agent's demand, at the
highest Interest Rate provided for in Section 3.1 hereof applicable to Prime
Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Administrative Borrower or any Borrower or Guarantor
certifies to Agent that the sale or disposition is made in compliance with
Section 9.7 hereof (and Agent may rely conclusively on any such certificate,
without further inquiry), or (iii) constituting property in which any Borrower
or Guarantor did not own an interest at the time the security interest, mortgage
or lien was granted or at any time thereafter, or (iv) having a value in the
aggregate in any twelve (12) month period of less than $5,000,000, and to the
extent Agent may release its security interest in and lien upon any such
Collateral pursuant to the sale or other disposition thereof, such sale or other
disposition shall be deemed consented to by Lenders, or
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(v) if required or permitted under the terms of any of the other Financing
Agreements, including any intercreditor agreement, or (vi) approved, authorized
or ratified in writing by all of Lenders. Except as provided above, Agent will
not release any security interest in, mortgage or lien upon, any of the
Collateral without the prior written authorization of all of Lenders. Upon
request by Agent at any time, Lenders will promptly confirm in writing Agent's
authority to release particular types or items of Collateral pursuant to this
Section. In no event shall the consent or approval of Issuing Bank to any
release of Collateral be required. Nothing contained herein shall be construed
to require the consent of any Bank Product Provider to any release of any
Collateral or termination of security interests in any Collateral.
(c) Without any manner limiting Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of any Borrower or
Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.
(d) Agent shall have no obligation whatsoever to any Lender, Issuing
Bank or any other Person to investigate, confirm or assure that the Collateral
exists or is owned by any Borrower or Guarantor or is cared for, protected or
insured or has been encumbered, or that any particular items of Collateral meet
the eligibility criteria applicable in respect of the Loans or Letters of Credit
hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto,
subject to the other terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its discretion, given Agent's own interest in
the Collateral as a Lender and that Agent shall have no duty or liability
whatsoever to any other Lender or Issuing Bank.
12.12 Agency for Perfection. Each Secured Party hereby appoints Agent and
each other Secured Party as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Secured Party
hereby acknowledges that it holds possession of any such Collateral for the
benefit of Agent as secured party. Should any Secured Party obtain possession of
any such Collateral, such Lender
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shall notify Agent thereof, and, promptly upon Agent's request therefor shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days'
notice to Lenders and Parent. If Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with Lenders and
Parent, a successor agent from among Lenders. Upon the acceptance by the Lender
so selected of its appointment as successor agent hereunder, such successor
agent shall succeed to all of the rights, powers and duties of the retiring
Agent and the term "Agent" as used herein and in the other Financing Agreements
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 12 shall inure to its benefit
as to any actions taken or omitted by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is thirty (30) days after the date of a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
12.14 Other Agent Designations. Agent may at any time and from time to
time determine that a Lender may, in addition, be a "Co-Agent", "Syndication
Agent", "Documentation Agent" or similar designation hereunder and enter into an
agreement with such Lender to have it so identified for purposes of this
Agreement. Any such designation shall be effective upon written notice by Agent
to Administrative Borrower of any such designation. Any Lender that is so
designated as a Co-Agent, Syndication Agent, Documentation Agent or such similar
designation by Agent shall have no right, power, obligation, liability,
responsibility or duty under this Agreement or any of the other Financing
Agreements other than those applicable to all Lenders as such. Without limiting
the foregoing, the Lenders so identified shall not have or be deemed to have any
fiduciary relationship with any Lender and no Lender shall be deemed to have
relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation in deciding
to enter into this Agreement or in taking or not taking action hereunder.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date five (5) years from the
date hereof (the "Maturity Date"), unless sooner terminated pursuant to the
terms hereof. In addition, Borrowers may terminate this Agreement at any time
upon ten (10) days prior written notice to Agent (which notice shall be
irrevocable) and Agent may, at its option, and shall at the direction of
Required Lenders, terminate this Agreement at any time on or after an Event of
Default. Upon the Maturity Date or any other effective date of termination of
the Financing Agreements, Borrowers shall pay to Agent all outstanding and
unpaid Obligations and shall furnish cash collateral to Agent (or at Agent's
option, a letter of credit issued for the account of Borrowers and at Borrowers'
expense,
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in form and substance satisfactory to Agent, by an issuer acceptable to Agent
and payable to Agent as beneficiary) in such amounts as Agent determines are
reasonably necessary to secure Agent, Lenders and Issuing Bank from loss, cost,
damage or expense, including attorneys' fees and expenses, in connection with
any contingent Obligations, including issued and outstanding Letter of Credit
Obligations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment (and including any contingent liability of Agent to any
bank at which deposit accounts of Borrowers and Guarantors are maintained under
any Deposit Account Control Agreement) and for any of the Obligations arising
under or in connection with any Bank Products in such amounts as the party
providing such Bank Products may require (unless such Obligations arising under
or in connection with any Bank Products are paid in full in cash and terminated
in a manner satisfactory to such other party). The amount of such cash
collateral (or letter of credit, as Agent may determine) as to any Letter of
Credit Obligations shall be in the amount equal to one hundred ten (110%)
percent of the amount of the Letter of Credit Obligations plus the amount of any
fees and expenses payable in connection therewith through the end of the latest
expiration date of the then outstanding Letters of Credit. Such payments in
respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to the Agent Payment Account or such other bank
account of Agent, as Agent may, in its discretion, designate in writing to
Administrative Borrower for such purpose. Interest shall be due until and
including the next Business Day, if the amounts so paid by Borrowers to the
Agent Payment Account or other bank account designated by Agent are received in
such bank account later than 12:00 noon, Dallas, Texas time.
(b) No termination of the Commitments, this Agreement or any of the
other Financing Agreements shall relieve or discharge any Borrower or Guarantor
of its respective duties, obligations and covenants under this Agreement or any
of the other Financing Agreements until all Obligations have been fully and
finally discharged and paid, and Agent's continuing security interest in the
Collateral and the rights and remedies of Agent and Lenders hereunder, under the
other Financing Agreements and applicable law, shall remain in effect until all
such Obligations have been fully and finally discharged and paid. Accordingly,
each Borrower and Guarantor waives any rights it may have under the UCC to
demand the filing of termination statements with respect to the Collateral and
Agent shall not be required to send such termination statements to Borrowers or
Guarantors, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations paid and satisfied in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to the
second anniversary of the date hereof, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Agent's and each Lender's lost profits as a
result thereof, Borrowers agree to pay to Agent, for the benefit of Lenders,
upon the effective date of such termination, an early termination fee in the
amount equal to
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Amount Period
------ ------
(i) .50% of Maximum Credit From the date hereof to and excluding the first
anniversary of the date hereof
(ii) .25% of Maximum Credit From and after the first anniversary of the
date hereof to and including the second
anniversary of the date hereof
Such early termination fee shall be presumed to be the amount of damages
sustained by Agent and Lenders as a result of such early termination and
Borrowers and Guarantors agree that it is reasonable under the circumstances
currently existing (including, but not limited to, the borrowings that are
reasonably expected by Borrowers hereunder and the interest, fees and other
charges that are reasonably expected to be received by Agent and Lenders
pursuant to the Credit Facility). In addition, Agent and Lenders shall be
entitled to such early termination fee upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent and
Lenders do not exercise the right to terminate this Agreement, but elect, at
their option, to provide financing to any Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 13.1 shall be deemed included in the Obligations.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article 8
or Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to any Borrower, Guarantor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation" and the word "will" when used in this Agreement
shall be construed to have the same meaning and effect as the word "shall".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined by Agent.
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(g) All references to the term "good faith" used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent most recently received
by Agent prior to the date hereof. Notwithstanding anything to the contrary
contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term "unqualified
opinion" as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is unqualified and also does not include
any explanation, supplemental comment or other comment concerning the ability of
the applicable person to continue as a going concern or the scope of the audit.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their preparation.
13.3 Notices.
(a) All notices, requests and demands hereunder shall be in writing
and deemed to have been given or made: if delivered in person, immediately upon
delivery; if by
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telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing by deposit (postage prepaid) in the U.S. mail. Notices delivered through
electronic communications shall be effective to the extent set forth in Section
13.3(b) below. All notices, requests and demands upon the parties are to be
given to the following addresses (or to such other address as any party may
designate by notice in accordance with this Section):
If to any Borrower or Guarantor: Xxxxxxx Fabrics, Inc.
Xxx Xxxxxxx Xxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to: Baker, Donelson, Bearman, Xxxxxxxx
& Xxxxxxxxx, PC
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
If to Agent: Wachovia Bank, National Association
Heritage Square II, Suite 1050
0000 XXX Xxxxxxx
Xxxxxx, XX 00000
Attention: Portfolio Manager
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) Notices and other communications to Lenders and Issuing Bank
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by
Agent or as otherwise determined by Agent, provided, that, the foregoing shall
not apply to notices to any Lender pursuant to Section 2 hereof if such Lender
or Issuing Bank, as applicable, has notified Agent that it is incapable of
receiving notices under such Section by electronic communication. Unless Agent
otherwise requires, (i) notices and other communications sent to an e-mail
address shall be deemed received upon the sender's receipt of an acknowledgement
from the intended recipient (such as by the "return receipt requested" function,
as available, return e-mail or other written acknowledgement), provided, that,
if such notice or other communication is not given during the normal business
hours of the recipient, such notice shall be deemed to have been sent at the
opening of business on the next Business Day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the
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deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communications is
available and identifying the website address therefor.
13.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 Confidentiality.
(a) Agent, each Lender and Issuing Bank shall use all reasonable
efforts to keep confidential, in accordance with its customary procedures for
handling confidential information and safe and sound lending practices, any
non-public information supplied to it by any Borrower pursuant to this Agreement
which is clearly and conspicuously marked as confidential at the time such
information is furnished by such Borrower to Agent, such Lender or Issuing Bank,
provided, that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii) to bank examiners and other regulators, auditors and/or
accountants, in connection with any litigation to which Agent, such Lender or
Issuing Bank is a party, (iii) to any Lender or Participant (or prospective
Lender or Participant) or to any Affiliate of any Lender or Issuing Bank so long
as such Lender, Participant (or prospective Lender or Participant or Issuing
Bank) shall have agreed to treat such information as confidential in accordance
with this Section 13.5 and such Lender, Participant (or prospective Lender or
Participant or Issuing Bank) shall have caused such Affiliate to treat such
information as confidential in accordance with this Section 13.5, or (iv) to
counsel for Agent, any Lender, Issuing Bank or Participant (or prospective
Lender or Participant).
(b) In the event that Agent, any Lender or Issuing Bank receives a
request or demand to disclose any confidential information pursuant to any
subpoena or court order, Agent, such Lender or Issuing Bank, as the case may be,
agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent, such Lender or Issung Bank determines in
good faith that it will not create any risk of liability to Agent, Issuing Bank
or such Lender, Agent or such Lender or Issuing Bank will promptly notify
Administrative Borrower of such request so that Administrative Borrower may seek
a protective order or other appropriate relief or remedy and (ii) if disclosure
of such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent's or Issuing Bank's or such Lender's
expenses, cooperate with Administrative Borrower in the reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the disclosed information which Administrative
Borrower so designates, to the extent permitted by applicable law or if
permitted by applicable law, to the extent Agent, such Lender or Issuing Bank
determines in good faith that it will not create any risk of liability to Agent,
such Lender or Issuing Bank.
(c) In no event shall this Section 13.5 or any other provision of
this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to
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or restrict disclosure of information that has been or is made public by any
Borrower, Guarantor or any third party or otherwise becomes generally available
to the public other than as a result of a disclosure in violation hereof, (ii)
to apply to or restrict disclosure of information that was or becomes available
to Agent, any Lender, Issuing Bank (or any Affiliate of any Lender or Issuing
Bank) on a non-confidential basis from a person other than a Borrower or
Guarantor (unless Agent, Issuing Bank or such Lender knows that such information
was disclosed in violation of a confidentiality agreement or applicable law),
(iii) to require Agent, any Lender or Issuing Bank to return any materials
furnished by a Borrower or Guarantor to Agent, a Lender or Issuing Bank or
prevent Agent, a Lender or Issuing Bank from responding to routine informational
requests in accordance with the Code of Ethics for the Exchange of Credit
Information promulgated by The Xxxxxx Xxxxxx Associates or other applicable
industry standards relating to the exchange of credit information. The
obligations of Agent, Lenders and Issuing Bank under this Section 13.5 shall
supersede and replace the obligations of Agent, Lenders or Issuing Bank under
any confidentiality letter signed prior to the date hereof or any other
arrangements concerning the confidentiality of information provided by any
Borrower or Guarantor to Agent, any Lender or Issuing Bank. In addition, Agent,
Lenders and Issuing Bank may disclose information relating to the Credit
Facility to Gold Sheets and other similar publications with such information to
consist of deal terms and other information customarily found in such
publications and that Agent and its affiliates may otherwise use the corporate
name and logo of Borrowers and Guarantors in "tombstones" or other
advertisements or public statements.
13.6 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Secured Parties, Issuing Bank,
Borrowers, Guarantors and their respective successors and assigns, except that
Borrower may not assign its rights under this Agreement, the other Financing
Agreements and any other document referred to herein or therein without the
prior written consent of Agent and Lenders. Any such purported assignment
without such express prior written consent shall be void. No Lender may assign
its rights and obligations under this Agreement without the prior written
consent of Agent, except as provided in Section 13.7 below. The terms and
provisions of this Agreement and the other Financing Agreements are for the
purpose of defining the relative rights and obligations of Borrowers,
Guarantors, Agent, Issuing Bank and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Financing
Agreements.
13.7 Assignments; Participations.
(a) Each Lender may, with the prior written consent of Agent, assign
all or, if less than all, a portion equal to at least $10,000,000 in the
aggregate for the assigning Lender, of such rights and obligations under this
Agreement to one or more Eligible Transferees (but not including for this
purpose any assignments in the form of a participation), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Acceptance; provided, that, (i) such transfer or assignment will not be
effective until recorded by Agent on the Register and (ii) Agent shall have
received for its sole account payment of a processing fee from the assigning
Lender or the assignee in the amount of $5,000.
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(b) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and any Borrowers,
Guarantors, Agent and Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Administrative Borrower and any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of CreditObligations) of a Lender hereunder and thereunder and the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower, Guarantor or any of their Subsidiaries or the performance or
observance by any Borrower or Guarantor of any of the Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning any Borrower or Guarantor in
the possession of Agent or any Lender from time to time to assignees and
Participants.
119
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Obligations, without the consent of
Agent or the other Lenders); provided, that, (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements, and (iii) the Participant shall not have any rights under this
Agreement or any of the other Financing Agreements (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the Participant relating
thereto) and all amounts payable by any Borrower or Guarantor hereunder shall be
determined as if such Lender had not sold such participation.
(f) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank; provided, that,
no such pledge shall release such Lender from any of its obligations hereunder
or substitute any such pledgee for such Lender as a party hereto.
(g) Borrowers and Guarantors shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents for, and the participation of relevant management in meetings
and conference calls with, potential Lenders or Participants. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such
materials.
(h) Any Lender that is an Issuing Bank may at any time assign all of
its Commitments pursuant to this Section 13.7. If such Issuing Bank ceases to be
Lender, it may, at its option, resign as Issuing Bank and such Issuing Bank's
obligations to issue Letters of Credit shall terminate but it shall retain all
of the rights and obligations of Issuing Bank hereunder with respect to Letters
of Credit outstanding as of the effective date of its resignation and all Letter
of Credit Obligations with respect thereto (including the right to require
Lenders to make Revolving Loans or fund risk participations in outstanding
Letter of Credit Obligations), shall continue.
13.8 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral
120
or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
13.9 USA Patriot Act. Each Lender subject to the USA PATRIOT Act (Title
III of Pub.L. 107-56 (signed into law October 26, 2001) (the "Act") hereby
notifies Borrowers and Guarantors that pursuant to the requirements of the Act,
it is required to obtain, verify and record information that identifies each
person or corporation who opens an account and/or enters into a business
relationship with it, which information includes the name and address of
Borrowers and Guarantors and other information that will allow such Lender to
identify such person in accordance with the Act and any other applicable law.
Borrowers and Guarantors are hereby advised that any Loans or Letters of Credit
hereunder are subject to satisfactory results of such verification.
13.10 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile or other electronic method of
transmission shall have the same force and effect as the delivery of an original
executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile or other electronic method of transmission shall also deliver
an original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
121
IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused
these presents to be duly executed as of the day and year first above written.
BORROWERS
XXXXXXX FABRICS, INC.
By: ____________________________
Title: _________________________
HF MERCHANDISING, INC.
By: __________________________
Title: ________________________
XXXXXXX FABRICS OF MI, INC.
By: __________________________
Title: ________________________
XXXXXXXXXXXXXX.XXX, INC.
By: __________________________
Title: ________________________
XXXXXXX FABRICS, LLC
By: _________________________
Title: ________________________
GUARANTORS
HF ENTERPRISES, INC.
By: ___________________________
Title: ________________________
HF RESOURCES, INC.
By: ___________________________
Title: ________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AGENT
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Agent and Issuing Bank
By: ____________________________
Title: _________________________
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Lender
By: __________________________
Title: ________________________
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lender
By: __________________________
Title: ________________________
2
EXHIBIT A
to
LOAN AND SECURITY AGREEMENT
Form of Assignment and Acceptance Agreement
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of _____________, 200_ is made between
________________________ (the "Assignor") and ____________________ (the
"Assignee").
W I T N E S S E T H:
WHEREAS, Wachovia Bank, National Association, in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the financial institutions which are parties thereto as lenders (in such
capacity, "Agent"), and the financial institutions which are parties to the Loan
Agreement as lenders (individually, each a "Lender" and collectively, "Lenders")
have entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to Xxxxxxx Fabrics, Inc., HF Merchandising, Inc., Xxxxxxx Fabrics
of MI, Inc., xxxxxxxxxxxxxx.xxx, Inc. and Xxxxxxx Fabrics, LLC (collectively,
"Borrowers") as set forth in the Loan and Security Agreement, dated June 29,
2005, by and among Borrowers, certain of their affiliates, Agent and Lenders (as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement"), and the other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto (all of the
foregoing, together with the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the "Financing Agreements");
WHEREAS, as provided under the Loan Agreement, Assignor committed to
making Loans (the "Committed Loans") to Borrowers in an aggregate amount not to
exceed $___________ (the "Commitment");
WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights
and obligations of Assignor under the Loan Agreement in respect of its
Commitment in an amount equal to $______________ (the "Assigned Commitment
Amount") on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and
Assignee hereby purchases,
A-1
assumes and undertakes from Assignor, without recourse and without
representation or warranty (except as provided in this Assignment and
Acceptance) an interest in (i) the Commitment and each of the Committed Loans of
Assignor and (ii) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Loan Agreement and
the other Financing Agreements, so that after giving effect thereto, the
Commitment of Assignee shall be as set forth below and the Pro Rata Share of
Assignee shall be _______ (__%) percent.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed
to all of the rights and be obligated to perform all of the obligations of a
Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Commitment Amount. Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Commitment Amount
and Assignor shall relinquish its rights and be released from its obligations
under the Loan Agreement to the extent such obligations have been assumed by
Assignee; provided, that, Assignor shall not relinquish its rights under
Sections 2.2, 6.4, 6.9, 11.5 and 12.5 of the Loan Agreement to the extent such
rights relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date Assignee's Commitment will be $_____________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date Assignor's Commitment will be $______________ (as
such amount may be further reduced by any other assignments by Assignor on or
after the date hereof).
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, Assignee shall pay to Assignor on the
Effective Date in immediately available funds an amount equal to $____________,
representing Assignee's Pro Rata Share of the principal amount of all Committed
Loans.
(b) Assignee shall pay to Agent the processing fee in the amount
specified in Section 13.7(a) of the Loan Agreement.
3. Reallocation of Payments. Any interest, fees and other payments accrued
to the Effective Date with respect to the Commitment, Committed Loans and
outstanding Letters of Credit shall be for the account of Assignor. Any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Commitment Amount shall be for the account of Assignee.
Each of Assignor and Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.
A-2
4. Independent Credit Decision. Assignee acknowledges that it has received
a copy of the Loan Agreement and the Schedules and Exhibits thereto, together
with copies of the most recent financial statements of _____________ and its
Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit and legal decisions in taking or not taking action under the Loan
Agreement.
5. Effective Date; Notices.
(a) As between Assignor and Assignee, the effective date for this
Assignment and Acceptance shall be _______________, 200_ (the "Effective Date");
provided, that, the following conditions precedent have been satisfied on or
before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by Assignor and Assignee;
(ii) the consent of Agent as required for an effective
assignment of the Assigned Commitment Amount by Assignor to Assignee shall have
been duly obtained and shall be in full force and effect as of the Effective
Date;
(iii) written notice of such assignment, together with payment
instructions, addresses and related information with respect to Assignee, shall
have been given to Administrative Borrower and Agent;
(iv) Assignee shall pay to Assignor all amounts due to
Assignor under this Assignment and Acceptance; and
(v) the processing fee referred to in Section 2(b) hereof
shall have been paid to Agent.
(b) Promptly following the execution of this Assignment and
Acceptance, Assignor shall deliver to Administrative Borrower and Agent for
acknowledgment by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.
6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]
(a) Assignee hereby appoints and authorizes Assignor in its capacity
as Agent to take such action as agent on its behalf to exercise such powers
under the Loan Agreement as are delegated to Agent by Lenders pursuant to the
terms of the Loan Agreement.
(b) Assignee shall assume no duties or obligations held by Assignor
in its capacity as Agent under the Loan Agreement.]
7. Withholding Tax. Assignee (a) represents and warrants to Assignor,
Agent and Borrowers that under applicable law and treaties no tax will be
required to be withheld by Assignee, Agent or Borrowers with respect to any
payments to be made to Assignee hereunder or
A-3
under any of the Financing Agreements, (b) agrees to furnish (if it is organized
under the laws of any jurisdiction other than the United States or any State
thereof) to Agent and Borrowers prior to the time that Agent or Borrowers are
required to make any payment of principal, interest or fees hereunder, duplicate
executed originals of either U.S. Internal Revenue Service Form W-8BEN or
W-8ECI, as applicable (wherein Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new such forms
upon the expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by Assignee, and (c) agrees to comply with all applicable
U.S. laws and regulations with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any security interest, lien, encumbrance or other
adverse claim, (ii) it is duly organized and existing and it has the full power
and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto. Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of Borrowers, Guarantors or any of their
respective Affiliates, or the performance or observance by Borrowers, Guarantors
or any other Person, of any of its respective obligations under the Loan
Agreement or any other instrument or document furnished in connection therewith.
(c) Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder, (ii) no notices to, or consents, authorizations or approvals of, any
Person
A-4
are required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings or filings required by the Loan Agreement, no further
action by, or notice to, or filing with, any Person is required of it for such
execution, delivery or performance; and (iii) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of Assignee, enforceable against Assignee in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights to general equitable principles.
9. Further Assurances. Assignor and Assignee each hereby agree to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to Borrowers or Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other for further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) Assignor and Assignee shall each pay its own costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Assignor and Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in New York County, New York over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court. Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.
ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER,
A-5
OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF
THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.
[ASSIGNOR]
By:___________________________________
Title:________________________________
[ASSIGNEE]
By:___________________________________
Title:________________________________
A-6
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
___, 20__
_______________________________
_______________________________
_______________________________
Attn.: ______________________
Re: Xxxxxxx Fabrics, Inc. et al.
Ladies and Gentlemen:
Wachovia Bank, National Association, in its capacity as agent pursuant to
the Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
"Agent"), and the financial institutions which are parties to the Loan Agreement
as lenders (individually, each a "Lender" and collectively, "Lenders") have
entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to Xxxxxxx Fabrics, Inc., HF Merchandising, Inc., Xxxxxxx Fabrics
of MI, Inc., xxxxxxxxxxxxxx.xxx, Inc. and Xxxxxxx Fabrics, LLC (collectively,
"Borrowers") as set forth in the Loan and Security Agreement, dated June 29,
2005, by and among Borrowers, certain of their affiliates, Agent and Lenders (as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement"), and the other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto (all of the
foregoing, together with the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the "Financing Agreements").
Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed thereto in the Loan Agreement.
We hereby give you notice of, and request your consent to, the assignment
by __________________________ (the "Assignor") to ___________________________
(the "Assignee") such that after giving effect to the assignment Assignee shall
have an interest equal to ________ (__%) percent of the total Commitments
pursuant to the Assignment and Acceptance Agreement attached hereto (the
"Assignment and Acceptance"). We understand that the Assignor's Commitment shall
be reduced by $_____________, as the same may be further reduced by other
assignments on or after the date hereof.
Assignee agrees that, upon receiving the consent of Agent to such
assignment, Assignee will be bound by the terms of the Loan Agreement as fully
and to the same extent as if the Assignee were the Lender originally holding
such interest under the Loan Agreement. The following administrative details
apply to Assignee:
(A) Notice address:
Assignee name: ______________________________
Address: ____________________________________
Attention: __________________________________
Telephone: __________________________________
Telecopier: _________________________________
(B) Payment instructions:
Account No.: ________________________________
At: _________________________________________
Reference: __________________________________
Attention: __________________________________
You are entitled to rely upon the representations, warranties and
covenants of each of Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By: _________________________________
Title: ______________________________
[NAME OF ASSIGNEE]
By: _________________________________
Title: ______________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Agent
By: ___________________________
Title: ________________________
A-8
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
Information Certificate
[See Attached]
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
Form of Borrowing Base Certificate
[See Attached]
EXHIBIT D
TO
LOAN AND SECURITY AGREEMENT
Compliance Certificate
To: Wachovia Bank, National Association, as Agent
Xxxxxxxx Xxxxxx XX, Xxxxx 0000
0000 XXX Xxxxxxx,
Xxxxxx, XX 00000
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as
defined below) as follows:
1. I am the duly elected Chief Financial Officer of Xxxxxxx Fabrics, Inc.,
a Delaware corporation ("Parent"). Capitalized terms used herein without
definition shall have the meanings given to such terms in the Loan and Security
Agreement, dated June 29, 2005, by and among Wachovia Bank, National
Association, as agent for the financial institutions party thereto as lenders
(in such capacity, "Agent") the financial institutions party thereto as lenders
(collectively, "Lenders"), Parent and certain of their affiliates (as such Loan
and Security Agreement is amended, modified or supplemented, from time to time,
the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have made, or have
caused to be made under my supervision, a review in reasonable detail of the
transactions and the financial condition of Borrowers and Guarantors, during the
immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the existence
during or at the end of such fiscal month, and I have no knowledge of the
existence and continuance on the date hereof, of any condition or event which
constitutes a Default or an Event of Default, except as set forth on Schedule I
attached hereto. Described on Schedule I attached hereto are the exceptions, if
any, to this Section 3 listing, in detail, the nature of the condition or event,
the period during which it has existed and the action which any Borrower or
Guarantor has taken, is taking, or proposes to take with respect to such
condition or event.
4. I further certify that, based on the review described in Section 2
above, no Borrower or Guarantor has at any time during or at the end of such
fiscal month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:
(a) Changed its respective corporate name, or transacted business
under any trade name, style, or fictitious name, other than those previously
described to you and set forth in the Financing Agreements.
(a) Changed the location of its chief executive office, changed its
jurisdiction of incorporation, changed its type of organization or changed the
location of or disposed of any of its properties or assets (other than pursuant
to the sale of Inventory in the ordinary course of
its business or as otherwise permitted by Section 9.7 of the Loan Agreement), or
established any new asset locations.
(b) Materially changed the terms upon which it sells goods
(including sales on consignment) or provides services, nor has any vendor or
trade supplier to any Borrower or Guarantor during or at the end of such period
materially adversely changed the terms upon which it supplies goods to any
Borrower or Guarantor.
(c) Permitted or suffered to exist any security interest in or liens
on any of its properties, whether real or personal, other than as specifically
permitted in the Financing Agreements.
(d) Received any notice of, or obtained knowledge of any of the
following not previously disclosed to Agent: (i) the occurrence of any event
involving the release, spill or discharge of any Hazardous Material in violation
of applicable Environmental Law in a material respect or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by any Borrower or Guarantor in any material respect or (B) the release, spill
or discharge of any Hazardous Material in violation of applicable Environmental
Law in a material respect or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials in violation of applicable Environmental Laws in a material respect or
(D) any other environmental, health or safety matter, which has a material
adverse effect on any Borrower or Guarantor or its business, operations or
assets or any properties at which such Borrower or Guarantor transported, stored
or disposed of any Hazardous Materials.
(e) Become aware of, obtained knowledge of, or received notification
of, any breach or violation of any material covenant contained in any instrument
or agreement in respect of Indebtedness for money borrowed by any Borrower or
Guarantor.
(f) Failed to pay when due any rent or other amounts owing under any
real property lease (or similar agreement).
(g) Failed to pay when due any royalty payment or other amounts
owing under any License Agreement (or similar agreement).
5. Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrowers and Guarantors
are in compliance with the covenants set forth in Section 9.19 of the Loan
Agreement for such fiscal month.
6. Attached hereto as Schedule IV are the calculations used in
determining, as of the end of the most recently ended fiscal quarter, the EBITDA
of the Parent and its Subsidiaries for the four (4) fiscal quarter period ending
on the last day of such fiscal quarter.
The foregoing certifications are made and delivered this day of
___________, 20__.
Very truly yours,
_______________________________
By:____________________________
Title:__________________________
SCHEDULE 1.27
TO
LOAN AND SECURITY AGREEMENT
Lender Commitment
------ -------------
Wachovia Bank, National Association $ 75,000,000
The CIT Group/Business Credit, Inc. $ 35,000,000
TOTAL $ 110,000,000
SCHEDULE 1.35
TO
LOAN AND SECURITY AGREEMENT
Customs Brokers
Xxxxxxx International, LLC
0000 X. Xxxxxxxx Xxxx, Xxxxx X-0
Xxxxxxxxxxx, XX 00000
SCHEDULE 1.55
TO
LOAN AND SECURITY AGREEMENT
Existing Lenders
SouthTrust Bank
Union Planters Bank, National Association
BancorpSouth Bank
SCHEDULE 1.95
TO
LOAN AND SECURITY AGREEMENT
Owned Store Real Properties
Stores
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
000 Xxxx Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
00000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
0000 Xxxxxxx 0
Xxxxx Xxxx, Xxxxx 00000
0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Parking Lot
0000 X. X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
SCHEDULE 8.16
TO
LOAN AND SECURITY AGREEMENT
Credit Card Agreements
Discover Financial Services, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
American Express Travel Related Services Company, Inc.
3 World Financial Center
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
NOVA Information Systems, Inc.
Xxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
BancorpSouth Credit Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
(Former credit card processor, currently servicing 3 locations)
