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EXHIBIT 10(d)
Annex I
CONFORMED
COPY
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CREDIT AGREEMENT
dated as of
September 26, 1997,
as amended and restated as of December 31, 1998,
among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
as Borrower,
CENTERS HOLDINGS, INC.,
BSQ ACQUISITION, INC.,
BSQ TRANSFEREE CORP.,
HECHINGER COMPANY,
HECHINGER STORES COMPANY,
HECHINGER STORES EAST COAST COMPANY,
The LENDERS Party Hereto,
THE CHASE MANHATTAN BANK,
as Administrative Agent, Collateral Agent, Issuing Bank and Swingline Lender,
BANKAMERICA BUSINESS CREDIT, INC.,
as Documentation Agent and Borrowing Base Audit Agent
and
CITICORP USA, INC.,
as Syndication Agent
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CHASE SECURITIES INC.,
as Arranger and Sole Book Manager
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
SECTION 1.01. Defined Terms.................................................................1
SECTION 1.02. Classification of Loans and Borrowings.......................................17
SECTION 1.03. Terms Generally..............................................................17
SECTION 1.04. Accounting Terms; GAAP.......................................................17
ARTICLE II
The Credits
SECTION 2.01. Commitments..................................................................17
SECTION 2.02. Loans and Borrowings.........................................................17
SECTION 2.03. Requests for Borrowings......................................................18
SECTION 2.04. Swingline Loans..............................................................18
SECTION 2.05. Letters of Credit............................................................19
SECTION 2.06. Funding of Borrowings........................................................22
SECTION 2.07. Interest Elections...........................................................22
SECTION 2.08. Termination and Reduction of Commitments.....................................23
SECTION 2.09. Repayment of Loans; Evidence of Debt.........................................23
SECTION 2.10. Prepayment of Loans..........................................................24
SECTION 2.11. Fees.........................................................................25
SECTION 2.12. Interest.....................................................................26
SECTION 2.13. Alternate Rate of Interest...................................................27
SECTION 2.14. Increased Costs..............................................................27
SECTION 2.15. Break Funding Payments.......................................................28
SECTION 2.16. Taxes........................................................................28
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Setoffs...................29
SECTION 2.18. Mitigation Obligations; Replacement of Lenders...............................30
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers.........................................................30
SECTION 3.02. Authorization; Enforceability................................................30
SECTION 3.03. Governmental Approvals; No Conflicts.........................................31
SECTION 3.04. Financial Condition; No Material Adverse Change..............................31
SECTION 3.05. Properties...................................................................31
SECTION 3.06. Litigation and Environmental Matters.........................................31
SECTION 3.07. Compliance with Laws and Agreements..........................................32
SECTION 3.08. Investment and Holding Company Status........................................32
SECTION 3.09. Taxes........................................................................32
SECTION 3.10. ERISA........................................................................32
SECTION 3.11. Disclosure...................................................................32
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Contents, p.
SECTION 3.12. Subsidiaries.................................................................32
SECTION 3.13. Insurance....................................................................32
SECTION 3.14. Labor Matters................................................................32
SECTION 3.15. Solvency.....................................................................33
SECTION 3.16. Security Documents...........................................................33
SECTION 3.17. Federal Reserve Regulations..................................................33
SECTION 3.18. Year 2000 Compliance.........................................................33
ARTICLE IV
Conditions
SECTION 4.01. Restatement Closing Date.....................................................34
SECTION 4.02. Each Credit Event............................................................36
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information...................................36
SECTION 5.02. Notices of Material Events...................................................38
SECTION 5.03. Information Regarding Collateral.............................................38
SECTION 5.04. Existence; Conduct of Business...............................................38
SECTION 5.05. Payment of Obligations.......................................................38
SECTION 5.06. Maintenance of Properties....................................................39
SECTION 5.07. Insurance....................................................................39
SECTION 5.08. Casualty and Condemnation....................................................39
SECTION 5.09. Books and Records; Inspection and Audit Rights...............................39
SECTION 5.10. Compliance with Laws.........................................................40
SECTION 5.11. Use of Proceeds and Letters of Credit........................................40
SECTION 5.12. Additional Borrower Subsidiaries.............................................40
SECTION 5.13. Further Assurances...........................................................40
SECTION 5.14. Cash Management Procedures...................................................40
SECTION 5.15. Delivery of Business Plan....................................................41
SECTION 5.16. Independent Financial Advisor................................................41
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness; Certain Equity Securities......................................41
SECTION 6.02. Liens........................................................................42
SECTION 6.03. Fundamental Changes..........................................................43
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions....................44
SECTION 6.05. Asset Sales..................................................................45
SECTION 6.06. Hedging Agreements...........................................................46
SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness........................46
SECTION 6.08. Transactions with Affiliates.................................................46
SECTION 6.09. Restrictive Agreements.......................................................46
SECTION 6.10. Amendment of Material Documents..............................................47
SECTION 6.11. Capital Expenditures.........................................................47
SECTION 6.12. Minimum Consolidated EBITDA..................................................47
SECTION 6.13. Additional Subsidiaries......................................................47
ARTICLE VII Events of Default
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Contents, p.4
ARTICLE VIII
The Administrative Agent, the Collateral Agent,
the Documentation Agent, the Borrowing Base
Audit Agent and the Syndication Agent
ARTICLE IX Miscellaneous
SECTION 9.01. Notices......................................................................51
SECTION 9.02. Waivers; Amendments..........................................................52
SECTION 9.03. Expenses; Indemnity; Damage Waiver...........................................52
SECTION 9.04. Successors and Assigns.......................................................53
SECTION 9.05. Survival.....................................................................54
SECTION 9.06. Counterparts; Integration; Effectiveness.....................................55
SECTION 9.07. Severability.................................................................55
SECTION 9.08. Right of Setoff..............................................................55
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process...................55
SECTION 9.10. WAIVER OF JURY TRIAL.........................................................55
SECTION 9.11. Headings.....................................................................56
SECTION 9.12. Confidentiality..............................................................56
SECTION 9.13. Interest Rate Limitation.....................................................56
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.03(c) -- Defaults
Schedule 3.04(c) -- Material Adverse Change (Hechinger and Hechinger Entities)
Schedule 3.04(f) -- Material Adverse Change (Builders Square)
Schedule 3.05 -- Properties
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.03(e) -- Real and Personal Property (BSQ Newco)
Schedule 6.03(f) -- Real and Personal Property (Hechinger)
Schedule 6.03(g) -- Real and Personal Property (Hechinger Stores)
Schedule 6.03(h) -- Real and Personal Property (Hechinger East Coast)
Schedule 6.04 -- Investments
Schedule 6.05 -- Asset Sales
Schedule 6.08 -- Affiliate Transactions
Schedule 6.09 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Counsel for the Transaction Parties and GEI II
Exhibit C-1 -- Form of Opinion of New York Counsel for the Transaction Parties
Exhibit C-2 -- Form of Opinion of Counsel for Kmart
Exhibit D -- Form of Parent Guarantee Agreement
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Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Indemnity, Subrogation and
Contribution Agreement
Exhibit G -- Form of Pledge Agreement
Exhibit H -- Form of Security Agreement
Exhibit I -- Form of Borrowing Base Certificate
Exhibit J -- Form of Intercreditor Agreement
CREDIT AGREEMENT dated as of September 26,
1997, as amended and restated as of December 31,
1998, among HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC., as Borrower, CENTERS HOLDINGS, INC.,
BSQ ACQUISITION, INC., BSQ TRANSFEREE CORP.,
HECHINGER COMPANY, HECHINGER STORES COMPANY,
HECHINGER STORES EAST COAST COMPANY, the LENDERS
party hereto, THE CHASE MANHATTAN BANK, as
Administrative Agent, Collateral Agent, Issuing Bank
and Swingline Lender, BANKAMERICA BUSINESS CREDIT,
INC., as Documentation Agent and Borrowing Base
Audit Agent, and CITICORP USA, INC., as Syndication
Agent.
The Borrower, Centers Holdings, Inc., BSQ Acquisition, Inc., BSQ
Transferee Corp., Hechinger Company, Hechinger Stores Company, Hechinger Stores
East Coast Company, the Lenders party thereto, The Chase Manhattan Bank,
BankAmerica Business Credit, Inc. and Citicorp USA, Inc. are parties to a Credit
Agreement dated as of September 26, 1997 (as in effect immediately before the
Restatement Closing Date, the "Original Credit Agreement"), pursuant to which
(a) the Swingline Lender committed to make Swingline Loans to the Borrower, at
any time and from time to time prior to the Maturity Date, in an aggregate
principal amount at any time outstanding not in excess of $25,000,000, (b) such
Lenders committed to make Revolving Loans to the Borrower, at any time and from
time to time prior to the Maturity Date, in an aggregate principal amount at any
time outstanding not in excess of $600,000,000 minus the sum of (i) the
aggregate principal amount of Swingline Loans outstanding at such time and (ii)
the LC Exposure at such time, and (c) the Issuing Bank committed to issue
Letters of Credit, in an aggregate face amount at any time outstanding not in
excess of $125,000,000. The Letters of Credit and the proceeds of the Revolving
Loans and Swingline Loans shall be used solely for the purposes set forth in
Section 5.11.
The Borrower has requested that the Original Credit Agreement be amended
and restated in order to, among other changes, permit the Supplemental Facility
Lenders to make, pursuant to the Supplemental Credit Agreement and subject to
the conditions set forth therein, Supplemental Revolving Loans to the Borrower,
at any time and from time to time prior to the Supplemental Facility Termination
Date, in an aggregate amount at any time outstanding not in excess of
$50,000,000 (including the amount of accrued and unpaid interest thereon and
fees and expenses in connection therewith).
The parties to the Original Credit Agreement are willing to amend and
restate the Original Credit Agreement in the form hereof for such purposes, and
the Lenders and the Swingline Lender are willing to extend credit to the
Borrower and the Issuing Bank is willing to issue Letters of Credit for the
account of the Borrower, in each case on the terms and subject to the conditions
set forth herein. Accordingly, the parties hereto agree as follows:
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ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"Account" shall mean any right to payment for goods sold or leased or for
services rendered, whether or not earned by performance.
"Account Debtor" shall mean, with respect to any Account, the obligor
with respect to such Account.
"Additional Financing Transactions" means (a) the execution, delivery and
performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans, the use of the proceeds thereof and the issuance
of Letters of Credit hereunder and (b) the execution, delivery and performance
by each Loan Party of the Supplemental Loan Documents to which it is to be a
party.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Chase, in its capacity as administrative
agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Advance Rate Percentage" means (a) 70.0% during the period from and
including the Restatement Closing Date to and including Xxxxx 00, 0000, (x)
68.5% during the period from and including April 30, 1999, to and including May
30, 1999, (c) 67.0% during the period from and including May 31, 1999, to and
including June 20, 1999, and (d) 65% from and after June 21, 1999.
"Advance Rate Reduction Amount" means, with respect to an Advance Rate
Reduction Date, the amount by which the aggregate Total Exposures exceeds the
Borrowing Base on such Advance Rate Reduction Date after giving effect to the
reduction in the Borrowing Base resulting from the reduction in the Advance Rate
Percentage on such date.
"Advance Rate Reduction Dates" shall mean April 30, 1999, May 31, 1999,
and June 21, 1999.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" has the meaning assigned to such term in Article VIII.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective
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from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the percentage
of the total Revolving Commitments represented by such Lender's Revolving
Commitment. If the Revolving Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Revolving Commitments
most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day with respect to any ABR Loan, 1.25%,
or any Eurodollar Loan, 2.75%.
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States, provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"BABC" means BankAmerica Business Credit, Inc., a Delaware corporation.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America.
"Borrower" means Hechinger Investment Company of Delaware, Inc., a
Delaware corporation and a direct wholly owned subsidiary of Hechinger Stores.
"Borrower Subsidiary" means any subsidiary of the Borrower.
"Borrowing" means (a) Loans of the same Class and Type, made, converted
or continued on the same date and, in the case of Eurodollar Loans, as to which
a single Interest Period is in effect or (b) a Swingline Loan.
"Borrowing Base" means, at any time, an amount equal to the Advance Rate
Percentage of Eligible Inventory Minus Reserves minus the sum of (a) Gift
Certificate Liability and (b) Special Order Deposit Liability, in each case as
in effect at such time. The Borrowing Base shall be calculated weekly in
accordance with Section 5.01(g). The Borrowing Base at any time in effect shall
be determined at such time in the Borrowing Base Audit Agent's and the
Collateral Agent's reasonable judgment by reference to the Borrowing Base
Certificate most recently delivered hereunder, it being understood that the
information contained in such Borrowing Base Certificate shall not be conclusive
in calculating the Borrowing Base and, after consultation with the Borrower, the
Collateral Agent shall be entitled to adjust the amounts and other criteria
contained therein to the extent that the Borrowing Base Audit Agent and the
Collateral Agent believe in their reasonable judgment that such adjustment is
appropriate to cause the Borrowing Base to
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reflect the standards set forth in the definitions of the terms "Eligible
Inventory" and "Eligible Inventory Minus Reserves".
"Borrowing Base Audit Agent" means BABC, in its capacity as borrowing
base audit agent under this Agreement.
"Borrowing Base Certificate" has the meaning assigned to such term in
Section 5.01(g).
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
"BSQ Acqco" means BSQ Acquisition, Inc., a Delaware corporation and a
wholly owned subsidiary of Holdings.
"BSQ Acqco/Holdings Note" means the promissory note issued on September
25, 1997, by BSQ Acqco to Holdings in the principal amount of $8,000,000.
"BSQ Newco/Builders Square Note" means the promissory note issued on
September 25, 1997, by BSQ Newco to Builders Square in the principal amount of
$10,700,000.
"BSQ Newco" means BSQ Transferee Corp., a Delaware corporation and a
wholly owned subsidiary of BSQ Acqco.
"BSQ Newco Asset Acquisition" means the acquisition by the Borrower on
the Effective Date of the Acquired BSQ Newco Assets (as such term is defined in
the Original Credit Agreement) in exchange for (a) the payment by the Borrower
to BSQ Newco of $243,000,000 in cash, (b) the assumption of the existing
Indebtedness of BSQ Newco and (c) the issuance by the Borrower to BSQ Newco of
the BSQ Newco Note.
"BSQ Newco Note" means the promissory note issued on the Effective Date
by the Borrower to BSQ Newco in the principal amount of $0 in connection with
the BSQ Newco Asset Acquisition.
"Builders Square" means Builders Square, Inc., a Delaware corporation.
"Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by law to
remain closed, provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Holdings
Group that are (or would be) set forth in a consolidated statement of cash flows
of the Holdings Group for such period prepared in accordance with GAAP and (b)
Capital Lease Obligations incurred by the Holdings Group during such period;
provided, however, the term "Capital Expenditures" shall not include (i) any
such expenditure made with (or in the amount of) the proceeds of insurance,
condemnation awards (or payment in lieu thereof) or indemnity payments received
from third parties for purposes of replacing or repairing the assets in respect
of which such proceeds, awards or payments were received, so long as such
expenditures are made within 18 months of the occurrence of the damage to or
loss of the assets being repaired or replaced and (ii) any such expenditures
made during such period for the acquisition of real estate (and fixtures
relating to such real estate) through a tax-free exchange pursuant to Section
1031 of the Internal Revenue Code.
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"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. Section 9601 et seq.
"Change in Control" means, at any time, (a) the failure by GEI II to own,
directly or indirectly, beneficially or of record, shares representing in excess
of 50% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of Holdings; (b) the failure of LG&P (or any Affiliate
thereof) to act as the sole general partner of GEI II; (c) occupation of a
majority of the seats (other than vacant seats) on the board of directors of
Holdings by Persons who were neither (i) nominated by the board of directors of
Holdings nor (ii) appointed by directors so nominated; (d) the acquisition of
direct or indirect Control of Holdings by any Person or group other than LG&P
(or another limited partnership fund for which LG&P or any Affiliate thereof
acts as the sole general partner) provided that such Control by LG&P may be
subject to the rights of Builders Square under the Securityholders Agreement
dated September 25, 1997, by and among GEI II, Builders Square and Holdings; (e)
failure by Holdings to own directly or indirectly 100% of the outstanding
capital stock of BSQ Acqco free and clear of all Liens (other than Liens under
the Loan Documents); (f) failure by BSQ Acqco to own directly or indirectly 100%
of the outstanding stock of BSQ Newco and Hechinger free and clear of all Liens
(other than Liens under the Loan Documents); (g) failure by Hechinger to own
directly or indirectly 100% of the outstanding capital stock of Hechinger Stores
free and clear of all Liens (other than Liens under the Loan Documents); (h)
failure by Hechinger Stores to own directly or indirectly 100% of the
outstanding capital stock of the Borrower free and clear of all Liens (other
than Liens under the Loan Documents); or (i) the occurrence of any change of
control (or similar event, however denominated) with respect to any Transaction
Party under any indenture or agreement in respect of Indebtedness with respect
to which any member of the Holdings Group is an obligor.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Chase" means The Chase Manhattan Bank, a New York banking corporation.
"Citicorp USA" means Citicorp USA, Inc., a Delaware corporation.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means any and all "Collateral", as defined in any applicable
Security Document.
"Collateral Agent" means Chase, in its capacity as collateral agent under
the Security Documents.
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"Commitments" means the Revolving Commitments.
"Company Owned Life Insurance Program" means (a) the Confederation Life
Insurance Company whole life insurance policies (as assigned to Pacific Mutual
Life Insurance Company) naming Hechinger as beneficiary and certain employees of
Hechinger as insureds and (b) the General American Life Insurance Company whole
life insurance policies naming Hechinger as beneficiary and certain employees of
Hechinger as insureds.
"Commercial Letter of Credit" means any Letter of Credit issued for the
purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or services by the Borrower or any Borrower
Subsidiary in the ordinary course of business of the Borrower or such Borrower
Subsidiary.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus, without duplication and to the extent deducted from revenues
in determining Consolidated Net Income, the sum of (a) the aggregate amount of
Consolidated Interest Expense for such period, (b) the aggregate amount of
letter of credit fees paid during such period, (c) the aggregate amount of
income tax expense for such period, (d) all amounts attributable to depreciation
and amortization (including the amortization of the write-up of assets effected
in connection with the Transactions) for such period and (e) all extraordinary
and non-cash charges (including the amount of any deduction to net income as a
result of any grant to, or repurchase from, directors, officers or employees of
Holdings, BSQ Newco, the Borrower or any Borrower Subsidiary, of stock, stock
equivalents or stock options of Holdings, and all non-cash losses) during such
period and (f) any non-recurring costs specified on Schedule 6.13, and minus,
without duplication and to the extent added to revenues in determining
Consolidated Net Income for such period, all extraordinary and non-cash gains
during such period, all as determined on a consolidated basis with respect to
the Holdings Group in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the interest
expense, both expensed and capitalized (including amortization of debt issuance
costs, original issue discount, interest paid in kind and the interest component
in respect of Capital Lease Obligations), accrued or paid by the Holdings Group
during such period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income or loss of
the Holdings Group for such period determined on a consolidated basis in
accordance with GAAP, provided that there shall be excluded (a) the income of
any Person in which any other Person (other than any member of the Holdings
Group or any director holding qualifying shares in compliance with applicable
law) has a joint interest, except to the extent of the amount of dividends or
other distributions actually paid to any member of the Holdings Group by such
Person during such period and (b) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary or is merged into or consolidated with
any member of the Holdings Group or the date that Person's assets are acquired
by any member of the Holdings Group.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "Controlling" and "Controlled" have meanings correlative thereto.
"December 1998 Bank Presentation" means the confidential written
presentation regarding the Holdings Group, dated December 23, 1998, prepared by
Holdings for the Lenders.
"Default" means any event or condition that constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
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"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Discontinued Inventory and Aged Goods Reserve" means, at any time, with
respect to Inventory recorded on the Borrower's SMO Report, (a) an amount equal
to the value of all such Inventory purchased prior to August 20, 1994, plus (b)
an amount equal to 25% of Eligible Inventory purchased on or after August 20,
1994, that has been designated as "discontinued" or that will be removed from
the Borrower's current merchandise assortment by the Borrower on a basis
consistent with the current and historical accounting practice of the Borrower
and of Hechinger under the perpetual weighted average cost ledger system
associated with such SMO Report.
"Documentation Agent" means BABC, in its capacity as documentation agent
for the Lenders.
"dollars" or "$" refers to lawful money of the United States of America.
"Effective Date" means September 26, 1997.
"Eligible Inventory Minus Reserves" means, at any time, (a) Eligible
Inventory at such time minus (b) the sum of (i) the Shrink Reserve at such time,
(ii) Discontinued Inventory and Aged Goods Reserve at such time, (iii) the
Excess Inventory, Slow-moving and Markdown Reserve at such time and (iv) any
modifications to the reserves specified in clause (i), (ii) or (iii) above or
any additional reserves deemed necessary at such time by the Borrowing Base
Audit Agent and the Collateral Agent based upon the results of periodic audits
or appraisals of the Inventory, provided that such reserves are consistent with
the customary practices of lenders in similar transactions.
"Eligible Inventory" means, at any time, an amount equal to the aggregate
Inventory Value at such time of all Inventory of the Borrower that consists of
finished goods available for sale to customers and is not ineligible for
inclusion in the calculation of the Borrowing Base pursuant to any of clauses
(a) through (i) below or otherwise deemed by the Borrowing Base Audit Agent in
good faith to be ineligible for inclusion in the calculation of the Borrowing
Base. Without limiting the foregoing, in order for Inventory to qualify as
Eligible Inventory, no person other than the Borrower shall have any direct or
indirect ownership interest or title to such Inventory. Standards of eligibility
may be fixed from time to time solely by the Borrowing Base Audit Agent and the
Collateral Agent in the exercise of their reasonable judgment. Unless otherwise
from time to time approved in writing by the Borrowing Base Audit Agent and the
Collateral Agent, Inventory shall be deemed not to constitute Eligible Inventory
if:
(a) such Inventory is not owned solely by the Borrower, or is
leased or on consignment or the Borrower does not have good and valid
title thereto;
(b) such Inventory (including any portion thereof in transit from
vendors) is not located at property that is owned or leased by the
Borrower and is therefore not in the possession or under the control of
the Borrower (including timber reload facilities, flow-through centers or
publicly held warehouses) unless a landlord waiver, satisfactory to the
Borrowing Base Audit Agent, is in effect with respect to such property;
(c) such Inventory is located at pool points operated by third
parties;
(d) such Inventory (exclusive of Inventory that has been
designated as "discontinued" or that will be removed from the Borrower's
current merchandise assortment pursuant to the standards described in
"Discontinued Inventory and Aged Goods Reserve") represents (i) goods
damaged, defective or otherwise unmerchantable, (ii) goods that do not
conform in all material
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respects to the representations and warranties contained in this
Agreement or any of the Security Documents, (iii) goods that were
returned or rejected by the Borrower's customers or (iv) goods to be
returned to the vendor;
(e) such Inventory is subject to a layaway purchase by any
customer;
(f) such Inventory (i) is not located in the United States of
America (excluding territories and possessions thereof) or (ii) is
located in Puerto Rico;
(g) such Inventory is not subject to a perfected first-priority
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties;
(h) such Inventory consists of perishable items, including live
plants but excluding bulbs, seeds and artificial plants; or
(i) such Inventory is located at a store at which the Borrower has
been conducting a going-out- of-business or similar sale for 60 days or
more or title has transferred to a third party for the purpose of
conducting a going-out-of-business or similar sale.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, handling, treatment, storage, disposal, Release or
threatened Release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, natural resource damage, costs
of environmental remediation, administrative oversight costs, fines, penalties
or indemnities), of any member of the Holdings Group directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower
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9
or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan
from the Borrower or any ERISA Affiliate of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article VII.
"Excess Inventory, Slow-moving and Markdown Reserve" means, at any
time, a reserve established pursuant to GAAP to reflect the difference between
(a) the weighted average cost of Borrower's Eligible Inventory determined on a
basis consistent with the Borrower's historical accounting practices and (b) the
net realizable value of the Borrower's Eligible Inventory, assuming for purposes
of establishing such reserve that the Borrower uses a first-in, first-out method
of accounting for its Inventory, provided that such reserve shall not be less
than (i) prior to June 30, 1999, $10,000,000 or (ii) such other greater or
lesser amount determined in the Borrowing Base Audit Agent's and the Collateral
Agent's reasonable discretion to reflect excess, slow-moving or "marked-down"
inventory.
"Excluded Taxes" means, with respect to the Agents, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.16(a).
"Existing Hechinger Public Debt" means, collectively, (a) the
9.45% Senior Debentures Due 2012 of Hechinger in an aggregate principal amount
of $100,000,000, issued under the Indenture dated as of October 1, 1992, between
Hechinger and First Union National Bank of North Carolina, as trustee, (b) the
6.95% Senior Notes Due 2003 of Hechinger in an aggregate principal amount of
$100,000,000, issued under the Indenture dated as of October 1, 1992, between
Hechinger and First Union National Bank of North Carolina, as trustee, and (c)
the 5.5% Convertible Subordinated Debentures Due 2012 of Hechinger in an
aggregate principal amount of $132,000,000, issued under the Indenture dated as
of March 15, 1987, between Hechinger and First Union National Bank of North
Carolina, as trustee.
"Existing Letters of Credit" means all the letters of credit that
(a) were issued under the Existing Credit Agreements (as such term is defined in
the Original Credit Agreement) and (b) were outstanding on the Effective Date.
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if
necessary, to the next 1/100 of 1%) of the
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quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Financial Officer" means, with respect to any Transaction Party,
the chief financial officer or treasurer of such Transaction Party.
"Foreign Lender" means any Lender that is organized under the laws
of a jurisdiction other than that in which the Borrower is located. 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.
"Foreign Subsidiary" means any Subsidiary that is organized under
the laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"Fronting Fee" has the meaning assigned to such term in Section
2.11(b).
"GAAP" means generally accepted accounting principles in the
United States of America.
"GEI II" means Green Equity Investors II, L.P., an investment fund
controlled by an Affiliate of LG&P.
"Gift Certificate Liability" means, at any time, the aggregate
face value at such time of outstanding gift certificates of the Borrower
entitling the holder thereof to use all or a portion of the certificate to pay
all or a portion of the purchase price for any Inventory.
"GOB Prepayment Event" means any Prepayment Event resulting from
the sale, transfer or other disposition of inventory located at any store where
the Borrower is conducting a going-out-of-business or similar sale in connection
with the closing of such store.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreements" means, collectively, the Parent Guarantee
Agreement and the Subsidiary Guarantee Agreement.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates,
15
11
asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law, including any material listed as a
hazardous substance under Section 101(14) of CERCLA.
"Hechinger" means Hechinger Company, a Delaware corporation and a
wholly owned subsidiary of BSQ Acqco.
"Hechinger Acqco" means Hechinger Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of BSQ Acqco, which merged with and
into Hechinger pursuant to the Hechinger Merger on the "Effective Date" (as such
term is defined in the Hechinger Stores Credit Agreement), with Hechinger as the
surviving corporation.
"Hechinger Asset Acquisition" means the acquisition by the
Borrower on the Second Credit Event Date of the Acquired Hechinger Assets (as
such term is defined in the Original Credit Agreement) in exchange for (i) the
assumption of existing Indebtedness of Hechinger Stores and Hechinger East
Coast, (ii) the assumption by the Borrower of reimbursement obligations in
respect of Existing Letters of Credit issued under the Hechinger Stores Credit
Agreement, (iii) the satisfaction of certain intercompany Indebtedness of
Hechinger Stores and Hechinger East Coast to the Borrower in the principal
amounts of $150,000,000 and $2,500,000, respectively, and (iv) the issuance by
the Borrower to Hechinger East Coast of the Hechinger East Coast Note.
"Hechinger East Coast" means Hechinger Stores East Coast Company,
a Delaware corporation and a wholly owned subsidiary of Hechinger Stores.
"Hechinger/East Coast Note" means the promissory note issued on
September 29, 1997, by the Borrower to Hechinger East Coast in the principal
amount of $47,500,000.
"Hechinger Entities" means Hechinger Stores and Hechinger East
Coast.
"Hechinger Merger Agreement" means the Agreement and Plan of
Merger dated as of July 17, 1997, among Hechinger Acqco, BSQ Acqco and
Hechinger.
"Hechinger Stores" means Hechinger Stores Company, a Delaware
corporation and a wholly owned subsidiary of Hechinger.
"Hechinger Stores Credit Agreement" means the credit agreement
dated as of September 25, 1997, among Hechinger Stores, Holdings, BSQ Acqco,
Hechinger, Hechinger East Coast, the lenders party thereto, Chase, as
administrative agent and collateral agent, BABC, as documentation agent and
borrowing base audit agent, and Citicorp USA, as syndication agent.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Holdings" means Centers Holdings, Inc., a Delaware corporation.
"Holdings Group" means, collectively, Holdings and the
Subsidiaries, including BSQ Acqco, BSQ Newco, Hechinger, Hechinger Stores and
the Borrower.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
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12
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the Borrower, the Subsidiary Loan Parties and the Agents.
"Information Memorandum" means the Confidential Information
Memorandum dated August 1997, relating to the Borrower and the Transactions
(other than the Additional Financing Transactions).
"Intercreditor Agreement" means the Intercreditor Agreement,
substantially in the form of Exhibit J, among the Borrower, Holdings, the other
Subsidiary Loan Parties, GEI II, Kmart, the Agents and Chase, as administrative
agent, as collateral agent and as borrowing base audit agent on behalf of the
Supplemental Facility Lenders.
"Interest Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Consolidated Interest Expense for such
period.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan
(other than a Swingline Loan), the last day of each calendar month, (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and in the case of a Eurodollar
Borrowing with an Interest Period of more than one month's duration, each day
prior to the last day of such Interest Period that occurs at intervals of one
month's duration after the first day of such interest period, and (c) with
respect to any Swingline Loan, the day that such Loan is required to be repaid.
"Interest Period" means, with respect to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two or three
months thereafter, as the Borrower may elect, provided that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
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"Inventory" has the meaning assigned to such term in the Security
Agreement.
"Inventory Value" means, at any time, with respect to Inventory
recorded on the Borrower's SMO Report, the recorded inventory value of such
Inventory on such Report at such time.
"Issuing Bank" means Chase, in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.05(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term "Issuing Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"Kmart" means Kmart Corporation, a Michigan corporation.
"LC Availability Period" means the period from and including the
Effective Date to but excluding the earlier of (a) the date that is five
Business Days prior to the Maturity Date and (b) the date of termination of the
Revolving Commitments.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender
at any time shall be its Applicable Percentage of the total LC Exposure at such
time.
"Lenders" means the Revolving Lenders.
"Letter of Credit" means any letter of credit issued or deemed to
have been issued pursuant to this Agreement, including each Existing Letter of
Credit.
"LG&P" means Xxxxxxx Xxxxx & Partners, L.P., a Delaware limited
partnership.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for
any Interest Period, the rate appearing on Page 3750 of the Dow Xxxxx Markets
service (or on any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and
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(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan Documents" means this Agreement, the Letters of Credit, the
Guarantee Agreements, the Indemnity, Subrogation and Contribution Agreement and
the Security Documents.
"Loan Parties" means the Transaction Parties and the Subsidiary
Loan Parties.
"Loans" means the Revolving Loans.
"Management Agreement" means the Management Services Agreement
dated September 25, 1997, between LG&P, the Borrower and the Subsidiaries.
"Margin Stock" has the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property, assets, prospects or condition, financial or
otherwise, of Holdings, the Borrower and the Subsidiaries taken as a whole or
(b) the validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Administrative Agent,
the Collateral Agent or the Lenders hereunder or thereunder.
"Material Indebtedness" means Indebtedness (other than the Loans
and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Holdings, the Borrower and the Subsidiaries in
an aggregate principal amount exceeding $5,000,000. For purposes of determining
the amount of Material Indebtedness at any time, the "principal amount" of the
obligations of Holdings, the Borrower or any Subsidiary in respect of any
Hedging Agreement at such time shall be the maximum aggregate amount (giving
effect to any netting agreements) that Holdings, the Borrower or such Subsidiary
would be required to pay if such Hedging Agreement were terminated at such time.
"Maturity Date" means September 26, 2002.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event, (a) the cash
proceeds received in respect of such event, including (i) any cash received in
respect of any non-cash proceeds, but only as and when received, (ii) in the
case of a casualty, insurance proceeds, and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, in each case net of
(b) the sum of (i) all reasonable fees and out-of-pocket expenses (including
appraisals, and legal, title and recording tax expenses and commissions) paid by
any Transaction Party or Subsidiary to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale or other disposition of
an asset (including pursuant to a casualty or condemnation), the amount of all
payments required to be made by the Transaction Parties and the Subsidiaries as
a result of such event to repay Indebtedness (other than Loans and Supplemental
Revolving Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event, and (iii) the amount of all taxes
(including sales and value added taxes and including taxes payable in connection
with the transfer of funds to the Borrower or any of its Subsidiaries in
connection with a prepayment pursuant to this Agreement) paid (or reasonably
estimated to be payable) by the Transaction Parties and the Subsidiaries, and
the amount of any reserves (whether or not contained in an escrow or other
similar arrangements) established by the Transaction Parties and the
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case during the year that such event
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occurred or the next succeeding year and that are directly attributable to such
event (as determined reasonably and in good faith by the chief financial officer
of Holdings).
"Obligations" has the meaning assigned to such term in the
Security Agreement.
"Original Credit Agreement" has the meaning assigned to such term
in the introductory paragraphs of this Agreement.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"Parent Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Transaction Parties (other
than the Borrower) and each of the Subsidiaries of Hechinger listed on Schedule
I thereto in favor of the Agents for the benefit of the Secured Parties.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex
1 to the Security Agreement or any other form approved by the Collateral Agent.
"Permitted Acquisition" means any acquisition of assets from, or
shares or other equity interests in, any Person if (a) immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (b) such acquisition shall not have been
preceded by an unsolicited tender offer for such Person by the Borrower or any
of its Affiliates, (c) all transactions related thereto shall be consummated in
accordance with applicable laws, (d) in the case of any acquisition of shares or
other equity interests in any Person, such acquisition is an acquisition of 100%
of the shares or other equity interests of such Person (or is an acquisition of
at least 90% of the outstanding shares of each class of the stock of such
Person, provided that such person shall be merged with the acquiror pursuant to
Section 253 of the Delaware General Corporation Law (or an analogous short-form
merger provision of another state of the United States) within 30 days of such
acquisition), (e) all actions required to be taken, if any, with respect to any
acquired or newly formed Subsidiary under subsection 5.12 shall have been taken,
(f) such assets, shares or other equity interests pertain to a line of business
related to the businesses of the Borrower and its Subsidiaries as of the
Effective Date, (g) after giving effect to such acquisition, the Borrower shall
be in compliance, on a pro forma basis, with all the covenants set forth in this
Agreement and (h) neither the Borrower nor any of its subsidiaries shall assume
or otherwise become liable for any Indebtedness in connection with such
acquisition (except for Indebtedness permitted by Section 6.01).
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 60 days or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
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(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business;
(e) judgment liens in respect of judgments that do not constitute
an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Borrower
Subsidiary,
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Xxxxx'x;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of
not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above (without
regard to the limitation on maturity contained in such clause) and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means the Pledge Agreement, substantially in
the form of Exhibit G, among the Transaction Parties, the other Subsidiaries
party thereto and the Collateral Agent for the benefit of the Secured Parties.
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"Prepayment Event" means any of the following events so long as
such event occurs prior to the Supplemental Facility Termination Date:
(a) any sale, transfer or other disposition (including pursuant to
a sale and leaseback transaction) of any property or asset of a
Transaction Party or any Subsidiary, other than any sale, transfer or
other disposition permitted by Section 6.05(a), (c), or (f);
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding of, any
property or asset of a Transaction Party or any Subsidiary;
(c) the issuance by a Transaction Party or any Subsidiary of any
equity securities, other than any such issuance of equity securities to
the Borrower or a Subsidiary; or
(d) the incurrence by a Transaction Party or any Subsidiary of any
Indebtedness of the type described in clause (a), (b) or (c) of the
definition of the term "Indebtedness", other than Indebtedness permitted
by Section 6.01(a)(i) through (x) and Section 6.01(a)(xii).
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Chase as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Real Estate Prepayment Event" means any Prepayment Event
resulting from the sale, transfer or other disposition (including due to
casualty or condemnation) of real estate and fixtures relating to such real
estate.
"Receivables Purchase Agreements" means (a) the Business Revolving
Charge Program Agreement dated April 3, 1992, as amended, by and among
Hechinger, Home Quarters Warehouse, Inc. and General Electric Capital
Corporation and (b) the GE Capital Program Agreement, dated April 12, 1996, by
and between General Electric Capital Corporation and Builders Square.
"Register" has the meaning set forth in Section 9.04(c).
"Regulation U" means Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" means Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Release" has the meaning set forth in Section 101(22) of CERCLA.
"Required Lenders" means, at any time, Lenders having Total
Exposures and unused Revolving Commitments representing more than 50% of the sum
of the Total Exposures and unused Revolving Commitments at such time.
"Restatement Closing Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).
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"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of any Transaction Party or any Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any such shares of capital stock of a
member of any Transaction Party or any Subsidiary or any option, warrant or
other right to acquire any such shares of capital stock of any Transaction Party
or any Subsidiary.
"Revolving Availability Period" means the period from and
including the Effective Date to but excluding the earlier of the Maturity Date
and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Letters of Credit and Swingline Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Total Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount of
each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Revolving Commitment, as applicable (and the initial aggregate amount of the
Lenders' Revolving Commitments is $600,000,000).
"Revolving Lenders" means the Persons listed on Schedule 2.01 as
having Revolving Commitments and any other Person that shall have become a party
hereto and have Revolving Commitments pursuant to an Assignment and Acceptance,
other than any such Person that ceases to have a Revolving Commitment pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Revolving Lenders" includes the Swingline Lender.
"Revolving Loans" means Loans made by the Lenders to the Borrower
pursuant to Section 2.01.
"S&P" means Standard & Poor's.
"Second Credit Event Date" means October 3, 1997.
"Secured Parties" has the meaning assigned to such term in the
Security Agreement.
"Security Agreement" means the Security Agreement, substantially
in the form of Exhibit H, among the Transaction Parties, the other Subsidiary
Loan Parties and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the Pledge
Agreement and each other security agreement or other instrument or document
executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the
Obligations.
"Shrink" means Inventory identified by the Borrower as lost,
misplaced or stolen Inventory.
"Shrink Reserve" means, at any time, an amount equal to accruals
for Shrink recorded by the Borrower at such time, which accruals have been
determined on a basis consistent with the current and historical accounting
practice of the Borrower of accruing for Shrink as a percentage of Inventory
Value (which percentage will equal the average of the percentage that Shrink
represents of total Inventory Value
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based on the results of the two most recent semi-annual physical inventories
conducted with respect to such Inventory), provided that such reserve shall not
be less than 4% of the Inventory Value recorded on the Borrower's SMO Report or
such other greater or lesser amount determined in the Borrowing Base Audit
Agent's and the Collateral Agent's reasonable discretion to reflect Shrink.
"SMO Report" means the Statement of Merchandising Operations
Report issued in connection with the Borrower's perpetual weighted average cost
ledger system.
"Special Order Deposit Liability" (a) means, at any time, with
respect to Inventory recorded on the Borrower's SMO Report, the excess at such
time of (i) the aggregate amount of deposits with respect to special order
merchandise over (ii) the corresponding decrease recorded in Eligible Inventory
and (b) shall be calculated in accordance with Schedule A to Exhibit I.
"Specified Event of Default" means (a) any Event of Default
described in paragraph (a), (b), (h) or (i) of Article VII, (b) pursuant to
Article VII, the termination by the Administrative Agent of the Commitments and
the declaration by the Administrative Agent that the Loans then outstanding are
immediately due and payable in whole, (c) any "Event of Default" described in
paragraph (a), (b), (h) or (i) of Article VII of the Supplemental Credit
Agreement or (d) pursuant to Article VII of the Supplemental Credit Agreement,
the termination of the Supplemental Facility and the declaration that the
Supplemental Revolving Loans then outstanding are immediately due and payable in
whole.
"Standby Letter of Credit" means any Letter of Credit other than a
Commercial Letter of Credit.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal to
three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at
any date, any corporation, limited liability company, partnership, association
or other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of Holdings.
"Subsidiary Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit E, made by the Borrower Subsidiaries in
favor of the Agents for the benefit of the Secured Parties.
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"Subsidiary Loan Party" means any Subsidiary that is not a Foreign
Subsidiary.
"Supplemental Credit Agreement" means the Credit Agreement dated
as of the date hereof among the Borrower, the other Transaction Parties, the
lenders from time to time party thereto and Chase, as administrative agent and
as collateral agent on behalf of such lenders.
"Supplemental Facility" means the revolving credit facility in an
aggregate principal amount of $50,000,000 made available to the Borrower by the
Supplemental Facility Lenders pursuant to the Supplemental Credit Agreement.
"Supplemental Facility Lenders" means the lenders from time to
time party to the Supplemental Credit Agreement.
"Supplemental Facility Termination Date" means June 30, 1999.
"Supplemental Loan Documents" means the Supplemental Credit
Agreement and the related "Loan Documents" (as such term is defined in the
Supplemental Credit Agreement).
"Supplemental Revolving Borrowings" means a "Revolving Borrowing"
(as such term is defined in the Supplemental Credit Agreement).
"Supplemental Revolving Commitments" means "Revolving Commitments"
(as such term is defined in the Supplemental Credit Agreement).
"Supplemental Revolving Loans" means a "Revolving Loan" (as such
term is defined in the Supplemental Credit Agreement).
"Supplemental Swingline Loans" means a "Swingline Loan" (as such
term is defined in the Supplemental Credit Agreement).
"Swingline Exposure" means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Revolving Lender at any time shall be its Applicable Percentage of the
total Swingline Exposure at such time.
"Swingline Lender" means Chase, in its capacity as lender of
Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
"Syndication Agent" means Citicorp USA, in its capacity as
syndication agent for the Lenders hereunder.
"Taxes" means any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received
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at approximately 10:00 a.m., New York City time, on such day (or, if such day is
not a Business Day, on the next preceding Business Day) by the Administrative
Agent from three negotiable certificate of deposit dealers of recognized
standing selected by it.
"Total Exposure" means, with respect to any Lender at any time,
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure and Swingline Exposure at such time.
"Transaction Parties" means Holdings, BSQ Acqco, BSQ Newco,
Hechinger, Hechinger Stores, Hechinger East Coast and the Borrower.
"Transactions" means the Acquisitions (as such term is defined in
the Original Credit Agreement), the Financing Transactions (as such term is
defined in the Original Credit Agreement) and the Additional Financing
Transactions.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time, provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the
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operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, each Lender agrees to make Revolving Loans to the Borrower from
time to time during the Revolving Availability Period in an aggregate principal
amount that will not result in such Lender's Total Exposure exceeding the lesser
of (a) such Lender's Revolving Commitment and (b) such Lender's Applicable
Percentage of the Borrowing Base in effect at such time. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder, provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.13, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at
its option may make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan, provided that any exercise
of such option shall not affect the obligation of the Borrower to repay such
Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000, provided that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Revolving Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each
Swingline Loan shall be in an amount that is an integral multiple of $100,000
and not less than $1,000,000. Borrowings of more than one Type and Class may be
outstanding at the same time, provided that there shall not at any time be more
than a total of 12 Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
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SECTION 2.03. Requests for Borrowings. To request a Revolving
Borrowing, the Borrower shall notify the Administrative Agent of such request
by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00
a.m., New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m.,
New York City time, one Business Day before the date of the proposed Borrowing,
provided that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be
given not later than 10:00 a.m., New York City time, on the date of the
proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) subject to the second sentence of Section 2.02(b), whether
such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Revolving Availability
Period, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans
exceeding $25,000,000 or (ii) the sum of the Total Exposures exceeding the
lesser of (A) the total Revolving Commitments and (B) the Borrowing Base in
effect at such time, provided that the Swingline Lender shall not be required
to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline
Loan. The Administrative Agent will promptly advise the Swingline Lender of any
such notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m.,
New York City time, on the requested date of such Swingline Loan.
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(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Revolving Lender,
specifying in such notice such Revolving Lender's Applicable Percentage of such
Swingline Loan or Loans. Each Revolving Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Revolving
Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving
Lender acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Revolving Lender shall comply with
its obligation under this paragraph by wire transfer of immediately available
funds, in the same manner as provided in Section 2.06 with respect to Loans
made by such Revolving Lender (and Section 2.06 shall apply, mutatis mutandis,
to the payment obligations of the Revolving Lenders), and the Administrative
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Revolving Lenders. The Administrative Agent shall notify the Borrower
of any participations in any Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender. Any amounts
received by the Swingline Lender from the Borrower (or other party on behalf of
the Borrower) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Revolving Lenders that shall have made their payments pursuant to this
paragraph and to the Swingline Lender, as their interests may appear. The
purchase of participations in a Swingline Loan pursuant to this paragraph shall
not relieve the Borrower of any default in the payment thereof.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, (i) each of the Existing Letters of Credit
shall, without any further action on the part of the Issuing Bank or any other
Person, be deemed for all purposes to have been issued by the Issuing Bank on
the Effective Date as a Letter of Credit hereunder and (ii) the Borrower may
request the issuance of additional Letters of Credit for its own account, in a
form reasonably acceptable to the Administrative Agent and the Issuing Bank, at
any time and from time to time during the LC Availability Period. In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with,
the Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
of this Section), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the Borrower also shall submit a letter of credit application on
the Issuing Bank's standard form in connection with any request for a Letter of
Credit. A
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Letter of Credit shall be issued, amended, renewed or extended only if (and
upon issuance, amendment, renewal or extension of each Letter of Credit the
Borrower shall be deemed to represent and warrant that), afte giving effect to
such issuance, amendment, renewal or extension (i) the LC Exposure shall not
exceed $125,000,000 and (ii) the aggregate Total Exposures shall not exceed
the lesser of (A) the aggregate Revolving Commitments and (B) the Borrowing
Base in effect at such time.
(c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension)
and (ii) the date that is five Business Days prior to the Maturity Date,
provided that each Letter of Credit may, upon the request of the Borrower,
include a provision whereby such Letter of Credit shall be renewed
automatically for additional consecutive periods of 12 months or less (but not
beyond the date that is five Business Days prior to the Maturity Date) unless
the Issuing Bank notifies the beneficiary thereof at least 30 days prior to
the then-applicable expiration date that such Letter of Credit will not be
renewed.
(d) Participations. By the issuance (or, in the case of the
Existing Letters of Credit, deemed issuance) of a Letter of Credit (or a
amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the Issuing Bank or the
Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each
Revolving Lender hereby acquires from the Issuing Bank, a participation in
such Letter of Credit equal to such Revolving Lender's Applicable Percentage
of the aggregate amount available to be drawn unde such Letter of Credit. In
consideration and in furtherance of the foregoing, each Revolving Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuin Bank, such Revolving Lender's Applicable Percentage
of each LC Disbursement made by the Issuing Bank and not reimbursed by the
Borrower on the date due as provided in paragraph (e) of this Section, or of
any reimbursement payment required to be refunded to the Borrower for any
reason. Each Revolving Lender acknowledges and agrees that its obligatio to
acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affecte by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount
equal to such LC Disbursement not later than 12:00 noon, New York City time, on
the date that such LC Disbursement is made, if the Borrowe shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time, on suc
date, or, if such notice has not been received by the Borrower prior to such
time on such date, then not later than 12:00 noon, New York City time, on
(i) the Business Day that the Borrower receives such notice, if such notice
is received prior to 10:00 a.m., New York City time, on the day of receipt, or
(ii) the Business Da immediately following the day that the Borrower receives
such notice, if such notice is not received prior to such time on the day of
receipt, provided that the Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.03 or 2.04
that such payment be financed with an ABR Revolving Borrowing or Swingline
Loan in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to
make such payment when due, the Administrative Agent shall notify each
Revolving Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Revolving Lender's Applicable
Percentage thereof. Promptly following receipt of such notice, each Revolving
Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section
2.06 with respect to Loans made by such Revolving Lender (and Section 2.06
shall apply, mutatis mutandis, to the payment obligations of the Revolving
Lenders), and the Administrative Agent shall promptly pay to the Issuing
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Bank the amounts so received by it from the Revolving Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Revolving Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Revolving Lenders and the Issuing Bank as their interests may appear. Any
payment made by a Revolving Lender pursuant to this paragraph to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving
Loans or a Swingline Loan as contemplated above) shall not constitute a Loan
and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section 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 and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower's obligations
hereunder. None of the Administrative Agent, the Lenders, the Issuing Bank or
any of their Related Parties shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank, provided that the foregoing shall not be
construed to excuse the Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Bank's
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or wilful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented that appear on their face to be in compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an
LC Disbursement thereunder, provided that any failure to give or delay in
giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per
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annum then applicable to ABR Revolving Loans, provided that, if the Borrower
fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of
this Section, then Section 2.12(c) shall apply. Interest accrued pursuant to
this paragraph shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Revolving Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall
be for the account of such Revolving Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant
to Section 2.11(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term "Issuing Bank" shall
be deemed to refer to such successor or to any previous Issuing Bank, or to
such successor and all previous Issuing Banks, as the context shall require.
After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Collateral Agent, in the name of the Collateral Agent and for the benefit of
the Revolving Lenders, an amount in cash equal to 105% of the LC Exposure as of
such date plus any accrued and unpaid interest thereon, provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. Each
such deposit shall be held by the Collateral Agent as collateral for the
payment and performance of the obligations of the Borrower under this
Agreement. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the Collateral Agent at the request
of the Borrower and at the Borrower's risk and expense, such deposits shall not
bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the
Collateral Agent to reimburse the Issuing Bank for LC Disbursements for which
it has not been reimbursed and, to the extent not so applied, shall be held for
the satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Revolving Lenders with LC Exposure representing
greater than 50% of the total LC Exposure), be applied to satisfy other
obligations of the Borrower under this Agreement. If the Borrower is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events
of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by the
Administrative Agent for such purpose by notice to the Lenders, provided that
Swingline Loans shall be made as provided in Section 2.04. The Administrative
Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in
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like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request, provided that ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
Periods therefor, all as provided in this Section. The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
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(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein,
at the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Revolving Commitments shall terminate on the
Maturity Date.
(b) The Borrower may at any time after the Supplemental Facility
Termination Date terminate, or from time to time reduce, the Revolving
Commitments, provided that (i) each reduction of the Revolving Commitments
shall be in an amount that is an integral multiple of $1,000,000 and not less
than $5,000,000 and (ii) the Borrower shall not terminate or reduce the
Revolving Commitments if and to the extent that, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.10,
the sum of the Total Exposures would exceed the total Revolving Commitments.
(c) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (b) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable, provided that a notice of termination of
the Revolving Commitments delivered by the Borrower may state that such notice
is conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments of any Class shall
be permanent. Each reduction of the Revolving Commitments shall be made ratably
among the Lenders in accordance with their respective Revolving Commitments.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Maturity Date and (ii) to the Swingline Lender the then
unpaid principal amount of each Swingline Loan on the earlier of the Maturity
Date and the first date after such Swingline Loan is made that is the 15th or
last day of a calendar month and is at least two Business Days after such
Swingline Loan is made, provided that on each date that a Revolving Borrowing
is made, the Borrower shall repay all Swingline Loans then outstanding.
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(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein, provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).
SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) Subject to Section 2.10(g), in the event of any termination of all
the Revolving Commitments, the Borrower shall repay or prepay all outstanding
Revolving Borrowings and all outstanding Swingline Loans on the date of such
termination. In the event of any partial reduction of the Revolving
Commitments, then (i) at or prior to the effective date of such reduction or
termination, the Administrative Agent shall notify the Borrower and the Lenders
of (A) the amount of any reduction in the Revolving Commitments and (B) the
aggregate Total Exposure after giving effect to such reduction and (ii) if the
aggregate Total Exposure would exceed the aggregate Revolving Commitments after
giving effect to such reduction or termination, then the Borrower shall, on the
date of such reduction or termination, prepay Revolving Borrowings or Swingline
Loans (or a combination thereof) in an amount sufficient to eliminate such
excess.
(c) If on any date the aggregate Total Exposure exceeds the Borrowing
Base in effect on such date, the Borrower shall on such date apply an amount
equal to such excess, first, to prepay the then-outstanding Revolving
Borrowings (if any) and Swingline Loans (if any) and, second, to the extent of
any remaining excess (after the prepayment of Revolving Borrowings and
Swingline Loans), to cash-collateralize outstanding Letters of Credit by
depositing, in an account with the Collateral Agent, in the name of the
Collateral Agent and for the benefit of the Lenders, an amount in cash equal to
such remaining excess. The provisions of the second, third, fourth and fifth
sentences of Section 2.05(j) shall be applicable to any amounts so deposited.
(d) Subject to Section 2.10(g), prior to any optional or mandatory
prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or
Borrowings to be prepaid and shall
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specify such selection in the notice of such prepayment pursuant to paragraph
(e) of this Section, provided that each prepayment of Borrowings shall be
applied to prepay ABR Borrowings before any other Borrowings.
(e) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon, New York City time,
on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date, the principal amount of each Borrowing or portion
thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably
detailed calculation of the amount of such prepayment, provided that, if a
notice of optional prepayment is given in connection with a conditional notice
of termination of the Revolving Commitments as contemplated by Section 2.08,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08. Promptly following receipt of any such
notice (other than a notice relating solely to Swingline Loans), the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02, except as necessary to apply fully the required amount of a
mandatory prepayment. Subject to Section 2.10(g), each prepayment of a
Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing. Prepayments shall be accompanied by accrued interest to the extent
required by Section 2.12.
(f) In the event and on each occasion that any Net Proceeds are
received by or on behalf of a Transaction Party or any Subsidiary in respect of
any Prepayment Event on or prior to the Supplemental Facility Termination Date,
the Borrower shall, immediately after such Net Proceeds are received, prepay
Revolving Borrowings and Swingline Loans and Supplemental Revolving Borrowings
and Supplemental Swingline Loans in an aggregate principal amount equal to such
Net Proceeds and in the priority provided for in Section 2.10(g), provided that
if a Specified Event of Default has occurred and is continuing under this
Agreement or the Supplemental Credit Agreement, such Net Proceeds shall be
applied to prepay Revolving Borrowings and Swingline Loans until the aggregate
Total Exposures of the Revolving Lenders is zero and then to prepay
Supplemental Revolving Borrowings and Supplemental Swingline Loans.
(g) Notwithstanding any provisions to the contrary in the Loan
Documents or the Supplemental Loan Documents (and unless the "Specified
Lenders" (as such term is defined in the Intercreditor Agreement) shall
otherwise agree), (i) on or prior to the Supplemental Facility Termination Date
and (ii) so long as no Specified Event of Default has occurred and is
continuing under this Agreement or under the Supplemental Credit Agreement, any
amount to be applied by the Borrower to the voluntary or mandatory prepayment
of Revolving Borrowings and Swingline Loans, or to the voluntary or mandatory
prepayment of Supplemental Revolving Borrowings and Supplemental Swingline
Loans, instead shall be applied to the prepayment of Revolving Borrowings,
Swingline Loans, Supplemental Revolving Borrowings and Supplemental Swingline
Loans in the following order of priority:
(A) first, to prepay any outstanding Revolving Borrowings and interest
or principal. All dividends, Swingline Loans, ratably among the Lenders
entitled thereto, until the Borrowing Base is not less than the aggregate
Total Exposure of the Lenders,
(B) second, to prepay any outstanding Supplemental Revolving Borrowings
and Supplemental Swingline Loans, ratably among the Supplemental Facility
Lenders entitled thereto, and
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(C) third, to prepay any outstanding Revolving Borrowings and
Swingline Loans, ratably among the Lenders entitled thereto.
(h) Any Net Proceeds from a Prepayment Event available to be applied
pursuant to Section 2.10(f) or (g) to prepay Supplemental Revolving Borrowings
and Supplemental Swingline Loans, whether or not any Supplemental Revolving
Borrowings or Supplemental Swingline Loans are actually outstanding and
prepaid, shall result in the permanent reduction of the Supplemental Revolving
Commitments in the amount of such Net Proceeds, provided that (i) all Net
Proceeds from GOB Prepayment Events and (ii) up to an aggregate amount of
$25,000,000 of Net Proceeds from Real Estate Prepayment Events, in each case
available to be applied pursuant to Section 2.10(f) and (g) during the term of
this Agreement to prepay Supplemental Revolving Borrowings and Supplemental
Swingline Loans, (i) shall not result in corresponding permanent reductions of
the Supplemental Revolving Commitments and (ii) to the extent any such
prepayments are actually made, may be reborrowed by the Borrower, subject to
the terms and conditions of the Supplemental Credit Agreement.
(i) This Section 2.10 shall be subject to the terms and conditions of
the Intercreditor Agreement.
(j) Unless the Specified Lenders shall otherwise agree, any
Supplemental Revolving Loans and Supplemental Swingline Loans made by the
Supplemental Facility Lenders in response to a "Borrowing Notice" deemed
delivered to the "Administrative Agent" (as such terms are defined in the
Supplemental Credit Agreement) on an Advance Rate Reduction Date pursuant to
Section 2.10(j) of the Supplemental Credit Agreement shall be used by the
Borrower on such date to fund the mandatory prepayment of Revolving Loans and
Swingline Loans in an aggregate principal amount equal to the Advance Rate
Reduction Amount as required by Section 2.10(c) and 2.10(g)(ii)(A).
SECTION 2.11. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall continue to accrue at the rate of .50% per annum on the average daily
unused amount of the Revolving Commitment of such Lender during the period from
and including October 1, 1998, to but excluding the date on which such
Commitment terminates. Accrued commitment fees shall be payable in arrears on
the last day of March, June, September and December of each year and on the
date on which the Revolving Commitments, terminate, commencing on the first
such date to occur after the date hereof. All commitment fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number
of days elapsed (including the first day but excluding the last day). For
purposes of computing commitment fees with respect to Revolving Commitments, a
Revolving Commitment of a Lender shall be deemed to be used to the extent of
the outstanding Revolving Loans and LC Exposure of such Lender (and the
Swingline Exposure of such Lender shall be disregarded for such purpose).
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations
in Letters of Credit, which shall continue to accrue at a rate equal to (i) in
the case of the portion of such Lender's LC Exposure that is attributable to
Standby Letters of Credit, the excess of (A) the same Applicable Rate as
interest on Eurodollar Revolving Loans on the average daily amount of such
portion of such Lender's LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) over (B) the Fronting Fee, in
each case during the period from and including October 1, 1998, to but
excluding the later of the date on which such Lender's Revolving Commitment
terminates and the date on which such Lender ceases to have any such LC
Exposure, and (ii) in the case of the portion of such Lender's LC Exposure that
is attributable to Commercial Letters of Credit, the excess of (A) one-half of
the same Applicable Rate as interest on Eurodollar Revolving Loans on the
average daily amount of such portion of such Lender's LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) over (B) the
Fronting Fee,
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in each case during the period from and including October 1, 1998, to but
excluding the later of the date on which such Lender's Revolving Commitment
terminates and the date on which such Lender ceases to have any such LC
Exposure. The Borrower also agrees to pay to the Issuing Bank a fronting fee
(the "Fronting Fee"), which shall continue to accrue at the rate of 1/4 of 1%
per annum on the average daily amount of the LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period from
and including October 1, 1998, to but excluding the later of the date of
termination of the Revolving Commitments and the date on which there ceases to
be any LC Exposure, as well as the Issuing Bank's standard fees with respect to
the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date, provided
that all such fees shall be payable on the date on which the Revolving
Commitments terminate and any such fees accruing after the date on which the
Revolving Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand. All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate (including margin) otherwise applicable to such Loan as provided in
the preceding paragraphs of this Section or (ii) in the case of any other
amount, 2% plus the rate (including margin) applicable to ABR Revolving Loans
as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments, provided that (A) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (B) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Revolving Loan prior to the end of the Revolving Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (C) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
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(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate
or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.14. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender or any holding company of any Lender
(except any such reserve requirement reflected in the Adjusted LIBO Rate)
or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such
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Change in Law (taking into consideration such Lender's or the Issuing Bank's
policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender's or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b)
of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or the Issuing Bank,
as the case may be, the amount shown as due on any such certificate within 10
days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation, provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 90 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor, and provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 90-day period referred to above shall be extended to include the
period of retroactive effect thereof.
SECTION 2.15. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.10(e) and is revoked in accordance therewith), or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.18, then, in any such event, the Borrower shall compensate each
Lender for the loss, cost and expense attributable to such event. In the case
of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed
to include an amount determined by such Lender to be the excess, if any, of (i)
the amount of interest that would have accrued on the principal amount of such
Loan had such event not occurred, at the Adjusted LIBO Rate that would have
been applicable to such Loan, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest that would
accrue on such principal amount for such period at the interest rate that such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.
SECTION 2.16. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes, provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such
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deductions been made, (ii) the Borrower shall make such deductions and (iii)
the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender
and the Issuing Bank, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, such Lender or the Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrower hereunder or
under any other Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Foreign Lender's claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Foreign Lender
delivers a Form W-8, a certificate representing that such Foreign Lender is not
a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Foreign Lender claiming complete exemption from or
reduced rate of, U.S. Federal withholding tax on payments by the Borrower under
this Agreement and the other Loan Documents. Such forms shall be delivered by
each Foreign Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participation holder, on or before
the date such participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Foreign Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, each Foreign Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Foreign
Lender. Notwithstanding any other provision of this Section 2.16(e), a Foreign
Lender shall not be required to deliver any form pursuant to this 2.16(e) that
such Foreign Lender is not legally able to deliver.
(f) The Borrower shall not be required to indemnify any Foreign Lender
or to pay any additional amounts to any Foreign Lender in respect of U.S.
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that the obligation to pay such additional amounts would not have arisen but
for a failure by such Foreign Lender to comply with the provisions of paragraph
(e) above. Should a Lender become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall, at Lender's expense, take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
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SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Setoffs. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest,
fees or reimbursement of LC Disbursements, or of amounts payable under Section
2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New York City time, on
the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, except payments to be made directly to the
Issuing Bank or Swingline Lender as expressly provided herein and except that
payments pursuant to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly
to the Persons entitled thereto and payments pursuant to other Loan Documents
shall be made to the Persons specified therein. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
under any Loan Document shall be due on a day that is not a Business Day, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments under each Loan Document shall
be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Revolving Loans and participations in LC Disbursements and Swingline Loans of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements and Swingline Loans, provided that (i) if
any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and
the purchase price restored to the extent of such recovery, without interest,
and (ii) the provisions of this paragraph shall not be construed to apply to
any payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than
to the Borrower or any Borrower Subsidiary or Affiliate thereof (as to which
the provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may
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assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders
or the Issuing Bank, as the case may be, the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be
made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or
9.03(c), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are
fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a)
If any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable and documented costs and expenses incurred
by any Lender in connection with any such designation or assignment; provided,
however, that the Borrower shall not be liable for such costs and expenses of a
Lender requesting compensation if (i) such Lender becomes a party to this
Agreement on a date after the Effective Date and (ii) the relevant Change in
Law occurs on a date prior to the date such Lender becomes a party hereto.
(b) If any Lender requests compensation under Section 2.14, or if
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment), provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, the Issuing Bank and Swingline Lender, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Revolving Loans and
participations in LC Disbursements and Swingline Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.14 or payments required to be made pursuant to Section 2.16, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
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ARTICLE III
Representations and Warranties
Each Transaction Party represents and warrants to the Lenders
that:
SECTION 3.01. Organization; Powers. Each member of the Holdings
Group is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, has all requisite power and authority
to carry on its business as now conducted and, except where the failure to do
so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, is qualified to do business in, and is in
good standing in, every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions to
be entered into by each Loan Party are within such Loan Party's corporate
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each Loan Party that is a party hereto and constitutes, and each
other Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation of such Loan Party (as the case may be), enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any member of the Holdings Group or any order of
any Governmental Authority, (c) except as set forth in Schedule 3.03(c), will
not violate or result in a default under any indenture, agreement or other
instrument binding upon any member of the Holdings Group or its assets, or give
rise to a right thereunder to require any payment to be made by any member of
the Holdings Group, and (d) will not result in the creation or imposition of
any Lien on any asset of any member of the Holdings Group, except Liens created
under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
Hechinger has heretofore furnished to the Lenders its consolidated balance
sheet and statements of income, stockholders' equity and cash flows (i) as of
and for each of the fiscal years in the three year period ended February 1,
1997, reported on by Ernst & Young LLP, independent public accountants, and
(ii) as of and for the two fiscal quarters and the portion of the fiscal year
ended August 2, 1997, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of Hechinger and its consolidated
subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the statements referred to in clause (ii) above.
(b) Holdings has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders' equity and
cash flows as of and for each of the fiscal years in the three year period
ended October 3, 1998, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of Holdings and its consolidated
subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes.
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(c) Except as disclosed in Schedule 3.04(c) or in the December
1998 Bank Presentation,since February 1, 1997, there has been no material
adverse change in the business, assets, operations, material agreements,
prospects or condition, financial or otherwise, of Hechinger and the Hechinger
Entities, taken as a whole.
(d) The Borrower has heretofore furnished to the Lenders Builders
Square's unaudited balance sheet and statements of income, stockholders' equity
and cash flows (i) as of and for each of the fiscal years in the three year
period ended January 26, 1997, and (ii) as of and for the two fiscal quarters
and the portion of the fiscal year ended July 26, 1997. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of Builders Square as of such dates and
for such periods in accordance with GAAP, subject to year-end audit
adjustments.
(e) Each of Holdings and the Borrower has heretofore furnished to
the Lenders its pro forma consolidated balance sheet as of the Restatement
Closing Date, prepared giving effect to the Additional Financing Transactions
as if the Additional Financing Transactions had occurred on such date. Each
such pro forma consolidated balance sheet (i) was prepared in good faith based
on assumptions that were, at the time of preparation of such pro forma
financial statements, and are, as of the date hereof, believed by Holdings and
the Borrower to be reasonable), (ii) was based on the best information
available to Holdings and the Borrower after due inquiry at the date thereof,
(iii) accurately reflects all adjustments necessary to give effect to the
Additional Financing Transactions and (iv) presents fairly, in all material
respects, the pro forma financial position of each of Holdings and its
consolidated subsidiaries and of the Borrower and its consolidated subsidiaries
as of the Restatement Closing Date, as if the Additional Financing Transactions
had occurred on such date.
(f) Except as disclosed in Schedule 3.04(f) or in the December
1998 Bank Presentation, since January 26, 1997, there has been no material
adverse change in the business, assets, operations, material agreements,
prospects or condition, financial or otherwise, of Builders Square.
(g) Except as disclosed in the financial statements referred to
above or the notes thereto or in the Information Memorandum or the December
1998 Bank Presentation and except for the Disclosed Matters, after giving
effect to the Transactions, no member of the Holdings Group has, as of the
Restatement Closing Date, any material contingent liabilities, unusual
long-term commitments or unrealized losses.
(h) Except as disclosed in the December 1998 Bank Presentation,
since October 3, 1998, there has been no material adverse change in the
business, assets, operations, material agreements, prospects or condition,
financial or otherwise, of the Holdings Group, taken as a whole, or of the
Borrower and the Borrower Subsidiaries, taken as a whole.
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SECTION 3.05. Properties. (a) Except as disclosed in Schedule
3.05, each member of the Holdings Group has good title to, or valid leasehold
interests in, all its real and personal property material to its business,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for
their intended purposes.
(b) Each member of the Holdings Group owns, or is licensed to use,
all trademarks, trade names, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Holdings Group
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(c) Schedule 3.05 sets forth the address (including county) of
each real property that is owned or leased by the Holdings Group as of the
Restatement Closing Date.
SECTION 3.06. Litigation and Environmental Matters. (a) There are
no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Transaction Party,
threatened against or affecting any member of the Holdings Group (i) as to
which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
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(b) Except for the Disclosed Matters and except with respect to
any other matters that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, no member of the Holdings
Group (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under
any Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each member of
the Holdings Group is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
SECTION 3.08. Investment and Holding Company Status. No member of
the Holdings Group is (a) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
SECTION 3.09. Taxes. Each member of the Holdings Group has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such member, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the most recent financial statements reflecting such amounts,
exceed by more than $500,000 the fair market value of the assets of such Plan,
and the present value of all accumulated benefit obligations of all underfunded
Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $1,000,000
the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. The Transaction Parties have disclosed
to the Lenders all agreements, instruments and corporate or other restrictions
to which any member of the Holdings Group is subject, and all other matters
known to any of them, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. None of the Information
Memorandum, the December 1998 Bank Presentation or any of the other reports,
financial statements, certificates or other information furnished by or on
behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, provided
that, with respect to projected financial information, the members of the
Holdings Group
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represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.
SECTION 3.12. Subsidiaries. Holdings does not have any
subsidiaries other than the Borrower and the other Subsidiaries. Schedule 3.12
sets forth the name of, and the ownership interest of Holdings in, each
Subsidiary of Holdings and identifies each Subsidiary that is a Subsidiary Loan
Party, in each case as of the Restatement Closing Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of
all insurance maintained by or on behalf of Holdings and the Subsidiaries as of
the Restatement Closing Date. As of the Restatement Closing Date, all premiums
in respect of such insurance that are due and payable have been paid.
SECTION 3.14. Labor Matters. As of the Restatement Closing Date,
there are no strikes, lockouts or slowdowns against any member of the Holdings
Group pending or, to the knowledge of the Transaction Parties, threatened. The
hours worked by and payments made to employees of the Holdings Group have not
been in violation of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters. All payments
due from any member of the Holdings Group, or for which any claim may be made
against any member of the Holdings Group, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of such member. The consummation of the Transactions
will not give rise to any right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which any member
of the Holdings Group is bound.
SECTION 3.15. Solvency. Immediately after the consummation of the
Additional Financing Transactions and immediately following the making of each
Loan made on the Restatement Closing Date, the making of each "Loan" (as such
term is defined in the Supplemental Credit Agreement) made on the Restatement
Closing Date and after giving effect to the application of the proceeds of such
Loans, (a) the fair value of the assets of each Transaction Party on a
consolidated basis with its subsidiaries, at a fair valuation, will exceed its
debts and liabilities, subordinated, contingent or otherwise; (b) the present
fair saleable value of the property of each Transaction Party on a consolidated
basis with its subsidiaries will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Transaction Party on a consolidated basis
with its subsidiaries will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) each Transaction Party on a consolidated basis
with its subsidiaries will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted following the Restatement Closing Date.
SECTION 3.16. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a
fully perfected first priority Lien on, and security interest in, all right,
title and interest of the pledgor thereunder in such Collateral, in each case
prior and superior in right to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are
filed in the offices specified on Schedule 6 to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
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Collateral (other than the Intellectual Property (as defined in the Security
Agreement), in each case prior and superior in right to any other person, other
than with respect to Liens expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States
Patent and Trademark Office and the United States Copyright Office, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in the
Intellectual Property (as defined in the Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other person (it
being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired by the Loan Parties after the date hereof).
SECTION 3.17. Federal Reserve Regulations. (a) No member of the
Holdings Group is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of buying or carrying
Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit
will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to buy or carry Margin Stock or to extend
credit to others for the purpose of buying or carrying Margin Stock or to
refund indebtedness originally incurred for such purpose or (ii) for any
purpose that entails a violation of, or that is inconsistent with, the
provisions of the Regulations of the Board, including Regulation U or X.
(c) Less than 25% of the assets of Holdings Group on a
consolidated basis consist of Margin Stock.
SECTION 3.18. Year 2000 Compliance. To the best knowledge of any
Transaction Party, any reprogramming required to permit the proper functioning,
in and following the year 2000, of (a) the computer systems of each member of
the Holdings Group and (b) equipment containing embedded microchips and the
testing of all such systems and equipment, as so reprogrammed, will be
completed in all material respects by June 30, 1999. To the best knowledge of
any Transaction Party, the cost to the Holdings Group of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to any
member of the Holdings Group (including reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material
Adverse Effect.
ARTICLE IV
Conditions
SECTION 4.01. Restatement Closing Date. This amendment and
restatement shall not become effective until the date (the "Restatement Closing
Date") on which each of the following conditions is satisfied (or waived in
accordance with Section 9.02):
(a) The Agents (or their counsel) shall have received from each
party hereto other than the Revolving Lenders either (i) a counterpart
of this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Agents (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
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(b) The Agents shall have received a favorable written opinion
(addressed to each Agent and the Lenders and dated the Restatement
Closing Date) of each of (i) Irell & Xxxxxxx LLP, counsel for the
Transaction Parties and for GEI II, substantially in the form of Exhibit B,
(ii) Kramer, Levin, Naftalis & Xxxxxxx, New York counsel for the Transaction
Parties, substantially in the form of Exhibit C-1, and (iii) Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, counsel for Kmart, substantially in the form of
Exhibit C-2, and, in the case of each such opinion required by this
paragraph, covering such other matters relating to the Loan Parties, the
Loan Documents or the Transactions as the Required Lenders shall reasonably
request. The Transaction Parties, GEI II and Kmart hereby request such
counsel to deliver such opinions.
(c) The Agents shall have received such documents and certificates
as the Agents or their counsel may reasonably request relating to the
organization, existence and good standing of each Loan Party, the
authorization of the Transactions and any other legal matters relating to
the Loan Parties, the Loan Documents or the Transactions, all in form and
substance satisfactory to the Agents and their counsel.
(d) The Agents shall have received a certificate, dated the
Restatement Closing Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the conditions
set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Agents shall have received all fees and other amounts due
and payable on or prior to the Restatement Closing Date, including, to the
extent invoiced, reimbursement or payment of all reasonable and documented
out-of-pocket expenses required to be reimbursed or paid by any Loan Party
hereunder or under any other Loan Document.
(f) To the extent not already received on the Effective Date, the
Agents shall have received counterparts of the Pledge Agreement signed on
behalf of the Borrower and each other Loan Party, together with stock
certificates representing all the outstanding shares of capital stock of
each member of the Holdings Group owned by or on behalf of any Loan Party as
of the Restatement Closing Date after giving effect to the Transactions
(except that stock certificates representing shares of common stock of a
Foreign Subsidiary may be limited to 65% of the outstanding shares of common
stock of such Foreign Subsidiary), promissory notes evidencing all
intercompany Indebtedness owed to any Loan Party by any member of the
Holdings Group as of the Restatement Closing Date after giving effect to the
Transactions and stock powers and instruments of transfer, endorsed in
blank, with respect to such stock certificates and promissory notes.
(g) To the extent not already received on the Effective Date, the
Agents shall have received counterparts of the Security Agreement (including
any amendments thereto reasonably requested by the Agents) signed on behalf
of the Transaction Parties and each other Loan Party, together with the
following:
(i) all documents and instruments, including Uniform
Commercial Code financing statements, required by law or
reasonably requested by the Agents to be filed, registered or
recorded to create or perfect the Liens intended to be created
under the Security Agreement; and
(ii) a completed Perfection Certificate dated the
Restatement Closing Date and signed by an executive officer or
Financial Officer of Holdings, together with all attachments
contemplated thereby.
(h) To the extent not already received on the Effective Date, the
Agents shall have received (i) counterparts of the Guarantee Agreements
signed on behalf of each party thereto other
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than the Agents and (ii) counterparts of the Indemnity, Subrogation and
Contribution Agreement signed on behalf of the Borrower and each Subsidiary
Loan Party.
(i) The Lenders shall be satisfied with (i) the Supplemental Loan
Documents and any waivers or amendments thereto, (ii) the corporate and
capital structure of the Loan Parties after giving effect to the Additional
Financing Transactions and (iii) all legal, tax and accounting matters
relating to the Additional Financing Transactions.
(j) After giving effect to the Additional Financing Transactions
and the other transactions contemplated hereby, the Holdings Group shall
have outstanding no indebtedness or preferred stock other than (i)
Indebtedness created under the Loan Documents or the Supplemental Loan
Documents, (ii) the Existing Hechinger Public Debt, (iii) the BSQ Acqco/
Holdings Note, (iv) the BSQ Newco/Builders Square Note, (v) the BSQ Newco
Note, (vi) the Hechinger/East Coast Note and (vii) Indebtedness set forth on
Schedule 6.01. The terms and conditions of all indebtedness that will remain
outstanding after the Restatement Closing Date shall be satisfactory in all
respects to the Lenders.
(k) The Lenders shall be satisfied with the sufficiency of amounts
available under this Agreement and the Supplemental Credit Agreement to meet
the ongoing working capital requirements of the Borrower and the Borrower
Subsidiaries following the Additional Financing Transactions and the
consummation of the other transactions contemplated hereby.
(l) The Lenders shall have received a pro forma consolidated
balance sheet of each of (i) Holdings and its subsidiaries and (ii) the
Borrower and its subsidiaries as of the date hereof, reflecting all pro
forma adjustments as if the Additional Financing Transactions had been
consummated on such date, and such pro forma consolidated balance sheets
shall be consistent in all material respects with the forecasts and other
information previously provided to the Lenders.
(m) The Agents shall have received a certificate, in form and
substance reasonably satisfactory to the Lenders, from the chief financial
officer of Holdings (i) with respect to the solvency of Hechinger and its
subsidiaries on a consolidated basis as of the Restatement Closing Date,
(ii) the Borrower and the Borrower Subsidiaries on a consolidated basis as
of the Restatement Closing Date and (iii) Holdings and the Subsidiaries on a
consolidated basis as of the Restatement Closing Date.
(n) The Agents shall have received a Borrowing Base Certificate
dated the Restatement Closing Date, relating to the calendar week ended on
December 18, 1998, and executed by a Financial Officer of the Borrower.
(o) The Lenders shall be satisfied that substantially all the
inventory, accounts receivable and equipment of Builders Square and
Hechinger and their respective subsidiaries are held by the Borrower and the
Borrower Subsidiaries.
(p) The Lenders shall have received audits, in form and substance
satisfactory to the Agents, from Alco Capital Group Inc., the Administrative
Agent's asset-based evaluation group, and the Borrowing Base Audit Agent, in
each case of the accounts receivable and inventory of the Borrower and the
Borrower Subsidiaries after giving effect to the Transactions.
(q) The Lenders shall be satisfied with the management of
Holdings, the Borrower and the other Subsidiaries.
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(r) The Supplemental Credit Agreement and each other Supplemental
Loan Document shall have been executed and delivered to the
Administrative Agent by each party thereto and the Additional Financing
Transactions shall have been consummated in accordance with applicable
law, the applicable Loan Documents and Supplemental Loan Documents and
the related agreements and documentation.
(s) The Lenders shall be satisfied with the capitalization,
structure and equity ownership of Holdings and the Borrower.
(t) The consummation of the Additional Financing Transactions and
the other transactions contemplated hereby shall not (a) violate any
applicable law, statute, rule or regulation or (b) conflict with, or
result in a default or event of default under, any material agreement of
any member of the Holdings Group (including the Existing Hechinger Public
Indebtedness), and the Lenders shall have received one or more legal
opinions to such effect, satisfactory to the Agents, from counsel to the
Transaction Parties satisfactory to the Agents.
(u) There shall be no litigation or administrative proceeding that
could reasonably be expected to have a Material Adverse Effect or to
adversely affect the ability of the parties to consummate the Additional
Financing Transactions.
(v) The Lenders shall be reasonably satisfied in all respects with
the tax position and the contingent tax and other liabilities of
Holdings, its Affiliates and the Subsidiaries, and with the plans of
Holdings with respect thereto.
(w) The Lenders shall have received a detailed business plan and
financial projections of the Borrower and its subsidiaries for fiscal
years 1999 through 2001, in form and substance reasonably satisfactory to
the Agents.
(x) The Agents (or their counsel) shall have received such
documents as they may require that are sufficient to approve the
amendment and restatement of the Original Credit Facility by the
Revolving Lenders under Section 9.02 thereof.
The Administrative Agent shall notify the Borrower and the Lenders of the
Restatement Closing Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 12:00 noon, New York City time, on
January 4, 1999, (and, in the event such conditions are not so satisfied or
waived, this Agreement shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct in all material
respects on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable,
as though made on and as of such date, other than any such
representations or warranties that by their terms refer to a date other
than the date of such Borrowing, issuance, amendment, renewal or
extension, in which case such representations and warranties shall be
true and correct as of such other date.
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(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be
continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by each
Transaction Party on the date thereof as to the matters specified in paragraphs
(a) and (b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, each Transaction Party
covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
Transaction Parties will furnish to each Agent and each Lender:
(a) commencing with the fiscal year of Holdings ending October 3,
1998, within 90 days after the end of each fiscal year of Holdings, its
consolidated and consolidating balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all audited (in the case of such consolidated
statements) and reported on by independent public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as
to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the
financial condition and results of operations of Holdings and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) (a) commencing with the fiscal year of Holdings ending October
3, 1998, within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Holdings, its consolidated and
consolidating balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of Holdings and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments, purchase accounting adjustments and
the absence of footnotes;
(c) (a) commencing with the fiscal year of Holdings ending October
3, 1998, within 30 days (or 45 days in the case of the first two fiscal
quarters following the Effective Date) after the end of each of the first
two fiscal months of each fiscal quarter of Holdings, its consolidated
balance sheet and related statements of operations, stockholders' equity
and cash flows as of the end of and for such fiscal month and the then
elapsed portion of the fiscal year, all certified by one of its Financial
Officers as presenting in all material respects the financial condition
and results of operations of Holdings and its consolidated Subsidiaries
on a consolidated basis in accordance
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with GAAP consistently applied, subject to normal year-end audit
adjustments, purchase accounting adjustments and the absence of
footnotes;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of Holdings
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed
to be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 6.11 and Section 6.12
and (iii) stating whether any change in GAAP or in the application
thereof has occurred since the date of Holdings's audited financial
statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial
statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) within 30 days following the commencement of each fiscal year
of Holdings, a detailed consolidated budget for such fiscal year
(including a projected consolidated balance sheet and related statements
of projected operations and cash flow as of the end of and for such
fiscal year) and, promptly when available, any significant revisions of
such budget;
(g) within four Business Days after the end of each calendar week,
a certificate in the form of Exhibit I (a "Borrowing Base Certificate")
showing the Borrowing Base as of the close of business on the last day of
such week, each such Certificate to be certified as complete and correct
on behalf of the Borrower by a Financial Officer of the Borrower;
(h) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials
filed by any member of the Holdings Group with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national securities
exchange, as the case may be;
(i) promptly upon receipt thereof, copies of all reports submitted
to the Borrower by independent certified public accountants in connection
with each annual, interim or special audit of the books of the Borrower
or any of its Subsidiaries made by such accountants, including any
management letter commenting on the Borrower's internal controls
submitted by such accountants to management in connection with their
annual audit;
(j) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of any member of the Holdings Group, or compliance with the
terms of any Loan Document, as the Agents or any Lender may reasonably
request; and
(k) commencing on January 14, 1999, and biweekly thereafter on the
first day of each applicable calendar week, a detailed projection of
Holdings's sources and uses of cash for the next 90 days, prepared in
good faith by Holdings's management, including projected borrowings
hereunder and under the Supplemental Facility and Holdings's projected
consolidated cash balance as of the end of each day during such 90 day
period, and, promptly when available, any significant revisions to such
projections.
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SECTION 5.02. Notices of Material Events. The Transaction Parties
will furnish to each Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or
affecting any member of the Holdings Group or any Affiliate thereof that,
if adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected
to result in a Material Adverse Effect; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of Holdings and the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) The
Transaction Parties will furnish to the Agents prompt written notice of any
change (i) in any Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party's chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility), (iii) in any Loan Party's identity or corporate structure or (iv) in
any Loan Party's Federal Taxpayer Identification Number. The Transaction Parties
agree not to effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or otherwise
that are required in order for the Agents to continue at all times following
such change to have a valid, legal and perfected security interest in all the
Collateral. The Transaction Parties also agree promptly to notify the Agents if
any material portion of the Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, Holdings shall deliver to the Agents a certificate of a Financial
Officer of Holdings setting forth the information required pursuant to Section 2
of the Perfection Certificate or confirming that there has been no change in
such information since the date of the Perfection Certificate delivered on the
Effective Date or the date of the most recent certificate delivered pursuant to
this Section.
SECTION 5.04. Existence; Conduct of Business. Each Transaction
Party will, and will cause each of the Subsidiaries to, do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence and the rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business, provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. Payment of Obligations. Each Transaction Party will,
and will cause each of the Subsidiaries to, pay its Indebtedness and other
obliga-
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tions, including Tax liabilities, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Transaction Party or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, (c) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation
and (d) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. Each Transaction Party
will, and will cause each of the Subsidiaries to, keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.07. Insurance. (a) Each Transaction Party shall (i)
maintain insurance with financially sound and reputable insurers with an A.M.
Best rating of A- or better (or, to the extent consistent with prudent business
practice, a program of self-insurance approved by the Administrative Agent) on
such of its property and in at least such amounts and against at least such
risks as is customary with companies in the same or similar businesses operating
in the same or similar locations, including public liability insurance against
claims for personal injury or death occurring upon, in or about or in connection
with the use of any properties owned, occupied or controlled by it (including
the insurance required pursuant to the Security Documents); (ii) maintain such
other insurance as may be required by law; and (iii) furnish to the
Administrative Agent, upon written request, full information as to the insurance
carried.
(b) Fire and extended coverage policies maintained with respect to
any Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders' loss payable clause (regarding personal property), in form and
substance satisfactory to the Administrative Agent, which endorsements or
amendments shall provide that, from and after the Effective Date, if the insurer
shall have received written notice from the Administrative Agent or the
Borrowing Base Audit Agent of the occurrence of an Event of Default, the insurer
shall pay all proceeds otherwise payable to the Borrower or the other Loan
Parties under the policies directly to the Administrative Agent or the
Collateral Agent, (ii) a provision to the effect that none of the Borrower, the
Administrative Agent or any other party shall be a coinsurer and (iii) such
other provisions as the Administrative Agent may reasonably require from time to
time to protect the interests of the Lenders. Commercial general liability
policies shall be endorsed to name the Administrative Agent as an additional
insured. Business interruption policies shall name the Administrative Agent as a
loss payee and shall be endorsed or amended to include (i) a provision that,
from and after the Effective Date, if the insurer shall have received written
notice from the Administrative Agent or the Collateral Agent of the occurrence
of an Event of Default, the insurer shall pay all proceeds otherwise payable to
the Borrower or the other Loan Parties under the policies directly to the
Administrative Agent or the Collateral Agent, (ii) a provision to the effect
that none of the Borrower, the Administrative Agent or any other party shall be
a co-insurer and (iii) such other provisions as the Administrative Agent may
reasonably require from time to time to protect the interests of the Lenders.
Each such policy referred to in this paragraph also shall provide that it shall
not be canceled, modified or not renewed (i) by reason of nonpayment of premium
except upon not less than 10 days' prior written notice thereof by the insurer
to the Administrative Agent (giving the Administrative Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than 30 days' prior written notice thereof by the insurer to the
Administrative Agent. The Borrower shall deliver to the Administrative Agent,
prior to the cancelation, modification or nonrenewal of any such policy of
insurance, a copy of a renewal or replacement policy (or other evidence of
renewal of a policy previously delivered to the Administrative Agent) together
with evidence satisfactory to the Administrative Agent of payment of the premium
therefor.
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SECTION 5.08. Casualty and Condemnation. Each Transaction Party
will furnish to the Agents and the Lenders prompt written notice of any casualty
or other insured damage to any material portion of any Collateral or the
commencement of any action or proceeding for the taking of any material portion
of the Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding.
SECTION 5.09. Books and Records; Inspection and Audit Rights. (a)
Each Transaction Party will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. Each Transaction Party will, and will cause each of the Subsidiaries
to, permit any representatives designated by any Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
(b) Each Transaction Party will, and will cause each of the
Subsidiaries to, from time to time upon the request of the Borrowing Base Audit
Agent, the Collateral Agent or the Required Lenders through the Administrative
Agent, permit the Borrowing Base Audit Agent, the Collateral Agent or the
Lenders or professionals (including investment bankers, consultants,
accountants, lawyers and appraisers) retained by the Borrowing Base Audit Agent,
the Collateral Agent, the Administrative Agent or the Lenders to conduct
evaluations and appraisals of (i) the Borrower's practices in the computation of
the Borrowing Base and (ii) the assets included in the Borrowing Base and
related financial information such as, but not limited to, sales, gross margins,
payables, accruals and reserves (it being understood and agreed to that, in the
absence of a Default, the Borrowing Base Audit Agent or the Collateral Agent
will conduct such evaluations and appraisals each quarter), and pay the
reasonable and documented fees and expenses of the Borrowing Base Audit Agent,
the Collateral Agent, the Lenders or such professionals with respect to such
evaluations and appraisals. The Borrower hereby agrees that Alco Capital Group,
Inc. will update its inventory audit report, which is to be delivered to the
Lenders on or before the Restatement Closing Date pursuant to Section 4.01(p),
as of each of March 31, 1999, and June 30, 1999, and that such updated reports
shall be delivered to the Lenders immediately upon their completion.
(c) Each Transaction Party will, and will cause each of the
Subsidiaries to, in connection with any evaluation and appraisal relating to the
computation of the Borrowing Base, maintain such additional reserves (for
purposes of computing the Borrowing Base) in respect of Eligible Inventory and
in respect of Eligible Inventory Minus Reserves and make such other adjustments
to its parameters for including Inventory in the Borrowing Base as the Borrowing
Base Audit Agent and the Collateral Agent or the Required Lenders through the
Administrative Agent shall require based upon the results of such evaluation and
appraisal.
(d) Each Transaction Party will, and will cause each of the
Subsidiaries to, from time to time upon request of the Borrowing Base Audit
Agent, the Collateral Agent or the Required Lenders through the Administrative
Agent, permit its agents or representatives to conduct reviews to determine the
net recovery value of inventory, and pay the reasonable and documented fees and
expenses of such agents or representatives with respect to such reviews.
(e) Not less frequently than each fiscal quarter, Holdings shall
conduct a conference call with the Lenders to update them on the financial
performance and results of operations of the Holdings Group and other related
topics.
(f) Not later than January 29, 1999, Holdings shall host at the
offices of the Administrative Agent in New York, New York a bank meeting to
which each of the Lenders shall be invited to attend.
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SECTION 5.10. Compliance with Laws. Each Transaction Party will,
and will cause each of the Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds
of Loans made hereunder and Letters of Credit issued hereunder will be used only
(a) to finance the working capital needs of the Borrower and the Borrower
Subsidiaries, including the purchase of inventory and equipment, in each case in
the ordinary course of business and (b) to finance capital expenditures of the
Borrower and the Borrower Subsidiaries (it being understood that in no event
will any such proceeds be used to fund any Permitted Acquisition). No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.
SECTION 5.12. Additional Borrower Subsidiaries. If any additional
Borrower Subsidiary is formed or acquired after the Effective Date, Holdings and
the Borrower will notify the Agents and the Lenders thereof and (a) if such
Borrower Subsidiary is a Subsidiary Loan Party, Holdings and the Borrower will
cause such Borrower Subsidiary to become a party to the Subsidiary Guarantee
Agreement, the Indemnity, Subrogation and Contribution Agreement and each
applicable Security Document in the manner provided therein within three
Business Days after such Borrower Subsidiary is formed or acquired and promptly
take such actions to create and perfect Liens on such Borrower Subsidiary's
assets to secure the Obligations as any Agent or the Required Lenders shall
reasonably request and (b) if any shares of capital stock or Indebtedness of
such Borrower Subsidiary are owned by or on behalf of any Loan Party, Holdings
and the Borrower will cause such shares and promissory notes evidencing such
Indebtedness to be pledged pursuant to the Pledge Agreement within three
Business Days after such Borrower Subsidiary is formed or acquired (except that,
if such Borrower Subsidiary is a Foreign Subsidiary, shares of common stock of
such Borrower Subsidiary to be pledged pursuant to the Pledge Agreement may be
limited to 65% of the outstanding shares of common stock of such Borrower
Subsidiary).
SECTION 5.13. Further Assurances. (a) Each Transaction Party will,
and will cause each Subsidiary Loan Party to, execute any and all further
documents, financing statements, agreements and instruments, and take all such
further actions (including the filing and recording of financing statements and
other documents), that may be required under any applicable law, or which any
Agent or the Required Lenders may reasonably request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security Documents
or the validity or priority of any such Lien, all at the expense of the Loan
Parties. The Transaction Parties also agree to provide to the Agents, from time
to time upon request, evidence reasonably satisfactory to the Agents as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
(b) If any material assets (other than real property and personal
property that is not of the type encumbered or to be encumbered by the Lien of
the Security Agreement on the Effective Date) are acquired by the Holdings Group
or any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Transaction
Parties will notify the Agents and the Lenders thereof, and, if requested by any
Agent or the Required Lenders, the Transaction Parties will cause such assets to
be subjected to a Lien securing the Obligations and will take, and cause the
Subsidiary Loan Parties to take, such actions as shall be necessary or
reasonably requested by any Agent to grant and perfect such Liens, including
actions described in paragraph (a) of this Section, all at the expense of the
Loan Parties.
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SECTION 5.14. Cash Management Procedures. As promptly as
practicable, the Holdings Group will establish and maintain (i) the cash
management procedures set forth in the Security Agreement and (ii) the lockbox
arrangements set forth in the Security Agreement (in no event later than 30 days
after the Restatement Closing Date).
SECTION 5.15. Delivery of Business Plan. As promptly as
practicable and in any event on or before March 31, 1999, the Borrower will, in
consultation with the independent financial advisor retained pursuant to Section
5.16, develop and deliver to the Lenders a business plan, satisfactory in form
and substance to the Administrative Agent, with respect to (a) the
two-fiscal-quarter period ending on June 30, 1999, (b) the four-fiscal-quarter
period ending on December 31, 1999, and (c) the period from October 4, 1998, to
September 30, 2002, provided that if the Borrower delivers a business plan
pursuant to this Section 5.15, the failure of such plan to be satisfactory in
form and substance to the Administrative Agent shall not be a Default or an
Event of Default.
SECTION 5.16. Independent Financial Advisor. Promptly following
the Effective Date, the Transaction Parties shall retain an independent
financial consultant reasonably satisfactory to the Administrative Agent, to act
as an independent financial consultant to the Holdings Group and to provide each
of the Holdings Group, the Lenders, the Agents, GEI II and Kmart with monthly
reports (containing such information as is customary for such reports and such
other information as the Administrative Agent shall reasonably request) on the
financial condition and ongoing results of operations of the Holdings Group and
the Borrower.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, each Transaction Party covenants and
agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The
Transaction Parties will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents and, prior to
the Supplemental Facility Termination Date, the Supplemental Loan
Documents;
(ii) Indebtedness existing on September 26, 1997, and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof or result in an earlier maturity date or decreased weighted
average life thereof, provided that the material terms of such
extensions, renewals and replacements are at least as favorable to the
Lenders as those of such Indebtedness;
(iii) Indebtedness of (a) any Loan Party that is not a Foreign
Subsidiary to any other Loan Party that is not a Foreign Subsidiary
(other than the Borrower or the Borrower Subsidiaries) and (b) the
Borrower to any Borrower Subsidiary and of any Borrower Subsidiary to the
Borrower or any other Borrower Subsidiary, provided that Indebtedness of
any Borrower Subsidiary that is not a Loan Party to the Borrower or any
Subsidiary Loan Party shall be subject to Section 6.04;
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(iv) Guarantees by any Subsidiary Loan Party of Indebtedness of
any Borrower Subsidiary and by any Borrower Subsidiary of Indebtedness of
the Borrower or any other such Borrower Subsidiary, provided that
Guarantees by the Borrower or any Subsidiary Loan Party of Indebtedness
of any Borrower Subsidiary that is not a Loan Party shall be subject to
Section 6.04;
(v) Indebtedness of the Borrower, Hechinger, Hechinger East
Coast, BSQ Newco, Hechinger Stores or any Borrower Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured
by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do
not increase the outstanding principal amount thereof or result in an
earlier maturity date or decreased weighted average life thereof,
provided that (A) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of Indebtedness
permitted by this clause (v) shall not exceed $15,000,000 at any time
outstanding;
(vi) Indebtedness of any Person that becomes a Borrower
Subsidiary after the date hereof, provided that (A) such Indebtedness
exists at the time such Person becomes a Borrower Subsidiary and is not
created in contemplation of or in connection with such Person becoming a
Borrower Subsidiary and (B) the aggregate principal amount of
Indebtedness permitted by this clause (vi) shall not exceed $5,000,000 at
any time outstanding;
(vii) the BSQ Newco Note, BSQ Acqco/Holdings Note and BSQ
Newco/Builders Square Note;
(viii) Indebtedness under Hedging Agreements entered into in
accordance with Section 6.06;
(ix) intentionally omitted;
(x) Indebtedness incurred in connection with the Receivables
Purchase Agreements;
(xi) Indebtedness incurred in connection with the Company Owned
Life Insurance Program, provided that the aggregate principal amount of
Indebtedness permitted by this clause (xi) shall not exceed $45,000,000
at any time outstanding;
(xii) the Existing Hechinger Public Indebtedness; and
(xiii) other unsecured Indebtedness in an aggregate principal
amount not exceeding $10,000,000 at any time outstanding, provided that
the aggregate principal amount of Indebtedness of the Borrower
Subsidiaries permitted by this clause (xiii) shall not exceed $2,000,000
at any time outstanding.
(b) Subject to the provisions of Section 6.07, none of the
Transaction Parties will, nor will they permit any Subsidiary to, issue any
preferred stock (except for preferred stock (i) all dividends in respect of
which are to be paid (and all other payments in respect of which are to be made)
in additional shares of such preferred stock, in lieu of cash, until the date
that is at least 360 days following the Maturity Date, (ii) that is not subject
to redemption other than redemption at the option of the Transaction Party
issuing such preferred stock and (iii) all payments in respect of which are
expressly subordinated to the Obligations) or be or become liable in respect of
any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or
make any other payment in respect of (i) any shares of capital stock of any
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member of the Holdings Group or (ii) any option, warrant or other right to
acquire any such shares of capital stock.
SECTION 6.02. Liens. The Transaction Parties will not, and will
not permit any Subsidiary to, create, incur, assume or permit to exist any Lien
on any property or asset now owned or hereafter acquired by it, or assign or
sell any income or revenues (including accounts receivable) or rights in respect
of any thereof, except:
(a) Liens created under the Loan Documents and, prior to the
Supplemental Facility Termination Date, the Supplemental Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of any Loan Party existing
on September 26, 1997, and set forth in Schedule 6.02, provided that (i)
such Lien shall not apply to any other property or asset of any Loan
Party and (ii) such Lien shall secure only those obligations that it
secures on September 26, 1997, and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Borrower Subsidiary or
existing on any property or asset of any Person that becomes a Borrower
Subsidiary after the date hereof prior to the time such Person becomes a
Borrower Subsidiary, provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person
becoming a Borrower Subsidiary, as the case may be, (ii) such Lien shall
not apply to any other property or assets of the Borrower or any Borrower
Subsidiary and (iii) such Lien shall secure only those obligations that
it secures on the date of such acquisition or the date such Person
becomes a Borrower Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower, Hechinger, Hechinger East Coast, BSQ Newco,
Hechinger Stores or any Borrower Subsidiary, provided that (i) such
security interests secure Indebtedness permitted by clause (v) of Section
6.01(a), (ii) such security interests and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed 100% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Borrower, Hechinger, Hechinger East Coast, BSQ Newco,
Hechinger Stores or any Borrower Subsidiary;
(f) the Warrant;
(g) leases and subleases on real property of any of the
Transaction Parties or any Subsidiary, provided that either (i) such
lease or sublease is entered into in the ordinary course of such Person's
business or (ii) such real property is not being used by such Person in
the ordinary course of its business or is being used in a manner not
inconsistent with the granting of such lease or sublease;
(h) Liens on account receivables created in connection with the
Receivables Purchase Agreements;
(i) Liens created in connection with the loans under the Company
Owned Life Insurance Program;
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(j) Liens listed on Schedule 6.02; and
(k) the Lien of The Massachusetts Mutual Life Insurance Company on
the Holdings Group's real property located at 0000 Xxxxxxxxx Xxxxxx XX,
Xxxxxxxxxx, XX (Store #3152), provided that (i) such Lien shall not apply
to any other property or asset of any Loan Party and (ii) such Lien shall
secure only those obligations owed to The Massachusetts Mutual Life
Insurance Company that existed on September 26, 1997 (and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof), and that were secured on such date by the Lien
of The Massachusetts Mutual Life Insurance Company on the Holdings
Group's real property located at 0000 Xxxxxx Xxxxx, Xxxxxxxx, XX.
SECTION 6.03. Fundamental Changes. (a) The Transaction Parties
will not and will not permit any Subsidiary to, merge into or consolidate with
any other Person, or permit any other Person to merge into or consolidate with
it, or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing, (i) any Subsidiary may merge into the Borrower in a transaction in
which the Borrower is the surviving corporation, (ii) any Subsidiary may merge
into any Subsidiary Loan Party in a transaction in which the surviving entity is
a Subsidiary Loan Party, (iii) any Subsidiary that is not a Loan Party may merge
into any Subsidiary that is not a Loan Party and (iv) any Borrower Subsidiary
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lenders, provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of the Borrower
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and such Borrower Subsidiaries
on the date of execution of this Agreement and businesses reasonably related
thereto.
(c) Holdings will not, and will not permit any of the Subsidiaries
to, engage in any business or activity other than the ownership of all the
outstanding shares of capital stock of BSQ Acqco and activities incidental
thereto. Holdings will not own or acquire any assets (other than shares of
capital stock of BSQ Acqco, the BSQ Acqco/Holdings Note, cash and Permitted
Investments) or incur any liabilities (other than liabilities under the Loan
Documents and Supplemental Loan Documents, liabilities imposed by law, including
tax liabilities, and other liabilities incidental to its existence and permitted
business and activities, including intercompany Indebtedness permitted under
Section 6.01(a)(iii)).
(d) BSQ Acqco will not engage in any business or activity other
than the ownership of all the outstanding shares of capital stock of BSQ Newco
and Hechinger and activities incidental thereto. BSQ Acqco will not own or
acquire any assets (other than shares of capital stock of BSQ Newco and
Hechinger, cash and Permitted Investments) or incur any liabilities (other than
liabilities under the Loan Documents, the Supplemental Loan Documents and the
BSQ Acqco/Holdings Note, liabilities imposed by law, including tax liabilities,
and other liabilities incidental to its existence and permitted business and
activities, including intercompany indebtedness permitted under Section
6.01(a)(iii)).
(e) BSQ Newco will not engage in any business or activity other
than being the obligee under the BSQ Newco Note and the obligor under the BSQ
Newco/Builders Square Note and activities incidental thereto and the ownership
of the real and personal property set forth in Schedule 6.03(e) and the
activities incidental thereto. BSQ Newco will not own or acquire any assets
(other than the assets described in the first sentence hereof, cash and
Permitted Investments) or incur any liabilities (other than liabilities under
the Loan Documents, the Supplemental Loan Documents and the BSQ Newco/Builders
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Square Note, liabilities imposed by law, including tax liabilities, and other
liabilities incidental to its existence and permitted business and activities,
including intercompany indebtedness permitted under Section 6.01(a)(iii)).
(f) Hechinger will not engage in any business or activity other
than the ownership of all the outstanding shares of capital stock of Hechinger
Stores, being the obligee under the Existing Hechinger Public Debt and
activities incidental thereto and the ownership of the real and personal
property set forth in Schedule 6.03(f) and the activities incidental thereto.
Hechinger will not own or acquire any assets (other than the assets described in
the first sentence hereof, cash and Permitted Investments) or incur any
liabilities (other than liabilities under the Loan Documents and Supplemental
Loan Documents, the Existing Hechinger Public Debt, liabilities imposed by law,
including tax liabilities, and other liabilities incidental to its existence and
permitted business and activities, including intercompany indebtedness permitted
under Section 6.01(a)(iii)).
(g) Hechinger Stores will not engage in any business or activity
other than the ownership of all the outstanding shares of capital stock of the
Borrower and Hechinger East Coast and activities incidental thereto and the
ownership of the real and personal property set forth in Schedule 6.03(g) and
the activities incidental thereto. Hechinger Stores will not own or acquire any
assets (other than the assets described in the first sentence hereof, cash and
Permitted Investments) or incur any liabilities (other than liabilities under
the Loan Documents and the Supplemental Loan Documents, liabilities imposed by
law, including tax liabilities, and other liabilities incidental to its
existence and permitted business and activities including intercompany
indebtedness permitted under Section 6.01(a)(iii)).
(h) Hechinger East Coast will not engage in any business or
activity other than activities incidental thereto and the ownership of the real
and personal property set forth in Schedule 6.03(h) and the activities
incidental thereto. Hechinger East Coast will not own or acquire any assets
(other than the assets described in the first sentence hereof, cash and
Permitted Investments) or incur any liabilities (other than liabilities under
the Loan Documents and the Supplemental Loan Documents, liabilities imposed by
law, including tax liabilities, and other liabilities incidental to its
existence and permitted business and activities, including intercompany
indebtedness permitted under Section 6.01(a)(iii)).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Transaction Parties will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary 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, Guarantee any obligations of, 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, except:
(a) intentionally omitted;
(b) Permitted Acquisitions, provided that the sum of (i) the
consideration paid in connection with all Permitted Acquisitions and (ii)
the consideration paid in connection with all acquisitions pursuant to
Section 6.04(c) shall not exceed $15,000,000 in the aggregate during the
term of this Agreement;
(c) the acquisition of shares or other equity interests in any
Person in transactions not constituting Permitted Acquisitions, provided
that (i) the criteria set forth in clauses (a), (b), (c), (f), (g) and
(h) of the definition of the term "Permitted Acquisition" shall have been
satisfied in connection with such acquisition, (ii) the consideration
paid in connection with all acquisitions
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pursuant to this clause (c) shall not exceed $7,500,000 during the term
of this Agreement and (iii) the sum of (A) the consideration paid in
connection with all Permitted Acquisitions and (B) the consideration paid
in connection with all acquisitions pursuant to this clause (c) shall not
exceed $15,000,000 in the aggregate during the term of this Agreement;
(d) Permitted Investments;
(e) investments existing on September 26, 1997, and set forth on
Schedule 6.04, to the extent such investments would not be permitted
under any other clause of this Section;
(f) investments by the Transaction Parties in the capital stock of
the Subsidiaries, provided that (i) any such shares of capital stock
shall be pledged pursuant to the Pledge Agreement (subject to the
limitations applicable to common stock of a Foreign Subsidiary referred
to in Section 5.12) and (ii) the amount of investments by the Transaction
Parties in Subsidiaries that are not Loan Parties shall not exceed
$2,000,000 in the aggregate at any time outstanding;
(g) loans or advances made by (i) any Loan Party that is not a
Foreign Subsidiary to any other Loan Party that is not a Foreign
Subsidiary (other than the Borrower or the Borrower Subsidiaries) and
(ii) the Transaction Parties to any Borrower Subsidiary and made by any
Borrower Subsidiary to the Borrower or any other Borrower Subsidiary,
provided that (i) any such loans and advances made by a Loan Party shall
be evidenced by a promissory note pledged pursuant to the Pledge
Agreement and (ii) the amount of all such loans and advances by Loan
Parties to Subsidiaries that are not Loan Parties shall not exceed
$2,000,000 in the aggregate at any time outstanding;
(h) Guarantees constituting Indebtedness permitted by Section
6.01, provided that the amount of Indebtedness that is (i) outstanding
with respect to Subsidiaries that are not Loan Parties and (ii)
Guaranteed by any Loan Party shall not exceed $2,000,000 in the aggregate
at any time outstanding;
(i) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(j) Hedging Agreements permitted under Section 6.06;
(k) loans or advances to employees (i) for the purpose of travel,
entertainment or relocation in the ordinary course of business in an
aggregate amount not to exceed $2,000,000 at any time outstanding and
(ii) for the purpose of enabling such employees to buy stock of Holdings
in an aggregate amount not exceeding $3,000,000 during the term of this
Agreement, provided that loans or advances made under this sub-clause
(ii) shall be collateralized by the stock purchased with the proceeds of
such loans or advances; and
(l) other investments in an aggregate amount not to exceed
$5,000,000 at any time outstanding.
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SECTION 6.05. Asset Sales. The Transaction Parties will not, and
will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise
dispose of any asset, including any capital stock, nor will the Transaction
Parties permit any of the Subsidiaries to issue any additional shares of its
capital stock or other ownership interest in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted
Investments in the ordinary course of business;
(b) sales of inventory located at any store where the Borrower is
conducting a going-out-of-business or similar sale in connection with
the closing of such store;
(c) sales, transfers and dispositions to the Borrower or a
Borrower Subsidiary, provided that any such sales, transfers or
dispositions involving a Borrower Subsidiary that is not a Loan Party
shall be made in compliance with Section 6.08;
(d) sales of assets listed on Schedule 6.05;
(e) sales of real estate (it being understood that "real estate"
as such term is used in this Section 6.05 shall not include real estate
that is leased by a Transaction Party from a third party unless such
lease is a Capital Lease Obligation of a member of the Holdings Group)
and fixtures relating to such real estate, provided that the aggregate
fair market value of all real estate and fixtures sold in reliance upon
this clause (e) (other than the sale of the Holdings Group's real
property located at 0000 Xxxxxx Xxxxx, Xxxxxxxx, MD) shall not exceed
$25,000,000 in the aggregate during the term of this Agreement;
(f) sales of accounts receivables in connection with the
Receivables Purchase Agreements; and
(g) sales, transfers and dispositions of assets (other than
capital stock of a Subsidiary) that are not permitted by any other clause
of this Section, provided that the aggregate fair market value of all
assets sold, transferred or otherwise disposed of in reliance upon this
clause (g) shall not exceed $10,000,000 in the aggregate during the term
of this Agreement,
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other disposition permitted under clause
(b) and (c)) shall be made for fair value and (other than sales, transfers and
other dispositions permitted under clause (c)) solely for cash consideration.
SECTION 6.06. Hedging Agreements. The Transaction Parties will
not, and will not permit any of the Subsidiaries to, enter into any Hedging
Agreement, other than Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which the Borrower or any Borrower
Subsidiary is exposed in the conduct of its business or the management of its
liabilities.
SECTION 6.07. Restricted Payments; Certain Payments of
Indebtedness. (a) The Transaction Parties will not, and will not permit any
Subsidiary to, declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment, except (i) the Transaction Parties may declare and pay
dividends with respect to their capital stock payable solely in additional
shares of their common stock, (ii) the Borrower Subsidiaries may declare and pay
dividends ratably with respect to their capital stock and the Subsidiaries other
than the Borrower may declare and pay dividends ratably with respect to their
capital stock, (iii) the Borrower may make Restricted Payments pursuant to and
in accordance with stock option plans or other benefit plans for management or
employees of the Borrower and the Borrower Subsidiaries in an amount not
exceeding
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during any fiscal year of Holdings (A) $2,000,000 plus (B) the amount by which
(x) the product of $2,000,000 and the number of complete fiscal years during the
period from and after the Effective Date to but excluding the date of such
Restricted Payment exceeds (y) the amount of all such Restricted Payments made
during such fiscal years plus (C) the aggregate cash consideration received by
the Borrower during the period from and after the Effective Date to but
excluding the date of such Restricted Payment from the sale or issuance of
common stock to management or employees of the Borrower to the extent such cash
consideration was not previously taken into account in connection with any
Restricted Payment under this clause (iii), provided all such Restricted
Payments made under this clause (iii) shall not exceed $8,000,000 in the
aggregate plus any amounts permitted under subclause (iii) (C) during the term
of this Agreement, (iv) the Borrower and Hechinger Stores may pay dividends or
make loans to Hechinger to the extent necessary to enable Hechinger to redeem or
purchase any portion of the Existing Hechinger Public Debt to the extent that
the Borrower or Hechinger Stores would have been permitted to redeem or
repurchase such Existing Hechinger Public Debt pursuant to clause (b)(iii) below
and (v) any of the Transaction Parties or Subsidiaries may pay dividends to
enable payment of fees and other amounts owing under any of the transactions
specified in Schedule 6.08.
(b) The Transaction Parties will not, and will not permit any
Subsidiary to, make or agree to pay or make, directly or indirectly, any payment
or other distribution (whether in cash securities or other property) of or in
respect of principal of or interest on any Indebtedness, or any payment or other
distribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancelation or termination of any Indebtedness, except:
(i) payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness;
(ii) refinancings of Indebtedness to the extent permitted by
Section 6.01; and
(iii) after the Second Credit Event Date, redemptions or
repurchases of any portion of the Existing Hechinger Public Debt,
provided that (A) at the time of such redemption or repurchase and after
giving effect thereto, (1) no Default or Event of Default has occurred
and is continuing and (2) the Borrowing Base exceeds the aggregate Total
Exposures by at least $125,000,000 and (B) all such redemptions or
repurchases under this clause (iii) do not exceed in the aggregate
$200,000,000 during the term of this Agreement.
SECTION 6.08. Transactions with Affiliates. The Transaction
Parties will not, and will not permit any Subsidiary to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) transactions in the
ordinary course of business that do not involve Holdings and are at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Subsidiary Loan Parties not involving any
other Affiliate, (c) payments by the Borrower and the Borrower Subsidiaries to
Holdings as common parent (and to any intermediate Subsidiary Loan Party that is
treated as a common parent) in respect of Taxes attributable to the Borrower and
the Borrower Subsidiaries, but not in excess of the amount in respect of Taxes
that the Borrower and the Borrower Subsidiaries would pay in a separate company
return, (d) any Restricted Payment permitted by Section 6.07, (e) any
transactions listed on Schedule 6.08 and (f) the Holdings Group may pay fees
specified in the Management Agreement.
SECTION 6.09. Restrictive Agreements. The Transaction Parties will
not and will not permit any Subsidiary to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Transaction
Parties or any Subsidiary to create, incur or permit to exist any Lien upon
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any of its property or assets or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document or Supplemental Loan Document (but only to the extent
such restriction or condition also is imposed by a Loan Document), (ii) the
foregoing shall not apply to restrictions and conditions existing on September
26, 1997, identified on Schedule 6.09 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases restricting the assignment or subleasing
thereof.
SECTION 6.10. Amendment of Material Documents. The Transaction
Parties will not, and will not permit any Subsidiary to, amend, modify or waive
any of its rights under (a) its certificate of incorporation, by-laws or other
organizational documents, (b) the Management Agreement, (c) the Builders Square
Purchase Agreement (as such term is defined in the Original Credit Agreement),
(d) the Hechinger Merger Agreement, (e) the BSQ Newco Note, (f) the BSQ
Acqco/Holdings Note, (g) the BSQ Newco/Builders Square Note, (h) Existing
Hechinger Public Debt, (i) the Hechinger/East Coast Note, (j) the Supplemental
Credit Agreement or (k) the Receivables Purchase Agreements, in each case to the
extent that such amendment, modification or waiver would be adverse to the
interests of the Lenders.
SECTION 6.11. Capital Expenditures. (a) The Transaction Parties
will not permit the aggregate amount of Capital Expenditures made by the
Borrower and the Borrower Subsidiaries (i) during the fiscal quarter ending on
the Saturday closest to December 31, 1998, to exceed $13,500,000, (ii) during
the two- fiscal-quarter period ending on the Saturday closest to March 31, 1999,
to exceed $22,000,000, and (iii) during the three-fiscal-quarter period ending
on the Saturday closest to June 30, 1999, to exceed $30,000,000.
(b) The Transaction Parties will not permit the aggregate amount
of Capital Expenditures made by the Borrower and the Borrower Subsidiaries in
any fiscal year to exceed the amount set forth below opposite such year:
Fiscal Year Amount
----------- ------
1999 $35,000,000
2000 $35,000,000
2001 $35,000,000
2002 $35,000,000
Notwithstanding anything to the contrary, no Transaction Party (other than the
Borrower) shall be permitted to make any Capital Expenditures, except for any
Capital Expenditures made by BSQ Newco, Hechinger, Hechinger Stores and
Hechinger East Coast pursuant to Section 6.03(e), (f), (g) and (h).
SECTION 6.12. Minimum Consolidated EBITDA. (a) The Transaction
Parties will not permit Consolidated EBITDA (i) for the fiscal quarter ending on
the Saturday closest to December 31, 1998, to be less than $(32,000,000), (ii)
for the fiscal quarter ending on the Saturday closest to March 31, 1999, to be
less than $(4,000,000), (iii) for
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the two-fiscal-quarter period ending on the Saturday closest to June 30, 1999,
to be less than $46,000,000, (iv) for the three-fiscal-quarter period ending on
the Saturday closest to September 30, 1999, to be less than $60,000,000, and (v)
for the four-fiscal-quarter period ending on the Saturday closest to December
31, 1999, to be less than $65,000,000.
(b) The Transaction Parties will not permit Consolidated EBITDA
for any four-fiscal-quarter period ending during any period set forth below to
be less than the amount set forth below opposite such period:
Period Amount
------ ------
The fiscal quarter ending on the Saturday closest to
March 31, 2000 $70,000,000
The fiscal quarter ending on the Saturday closest to
June 30, 2000 $75,000,000
The fiscal quarter ending on the Saturday closest to
September 30, 2000 $75,000,000
The fiscal quarter ending on the Saturday closest to
December 31, 2000 $80,000,000
The fiscal quarter ending on the Saturday closest to
March 31, 2001 $85,000,000
The fiscal quarter ending on the Saturday closest to
June 30, 2001 and thereafter $90,000,000
SECTION 6.13. Additional Subsidiaries. The Transaction Parties
will not, and will not permit any Subsidiary to, create any additional
Subsidiary, unless such Subsidiary is a Borrower Subsidiary.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or
any reimbursement obligation in respect of any LC Disbursement when and
as the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a)
of this Article) payable under this Agreement or any other Loan Document,
when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of any member of the Holdings Group in or in connection with any
Loan Document or any amendment or modification
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thereof or waiver thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with
any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect
when made or deemed made;
(d) the Transaction Parties shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.01(g), 5.02, 5.04
(with respect to the existence of the Transaction Parties), 5.11, 5.15 or
5.16 or in Article VI; provided, however, if such failure arises from a
non-consensual Lien created without the knowledge of, action by or
consent of any Transaction Party in violation of Section 6.02, such
failure shall not constitute an Event of Default unless such failure
shall remain unremedied for 10 days after knowledge thereof by a member
of senior management of Holdings or Borrower;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from any Agent to the Borrower (which notice will be given at the request
of any Lender);
(f) any member of the Holdings Group shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become
due and payable (after giving effect to the expiration of any grace or
cure period set forth therein);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee
or agent on its or their behalf to cause any Material Indebtedness to
become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity, provided that this
clause (g) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets
securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of any member of the Holdings Group or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any member of the
Holdings Group or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;
(i) any member of the Holdings Group shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (h) of this Article, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for any member of the Holdings Group or for a substantial part
of its assets, (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) any member of the Holdings Group shall become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
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(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against any member of
the Holdings Group or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by
a judgment creditor to attach or levy upon any assets of any member of
the Holdings Group to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of
Holdings Group Subsidiaries in an aggregate amount exceeding $5,000,000;
(m) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required by
the applicable Security Document, except (i) as a result of the sale or
other disposition of the applicable Collateral in a transaction permitted
under the Loan Documents or (ii) as a result of the Collateral Agent's
failure to maintain possession of any stock certificates, promissory
notes or other instruments delivered to it under the Pledge Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the
Transaction Parties described in clause (h) or (i) of this Article), and at any
time thereafter during the continuance of such event, the Administrative Agent
may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; and in case of any event with respect to the
Transaction Parties described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent, the Collateral Agent,
the Documentation Agent, the Borrowing Base
Audit Agent and the Syndication Agent
Each of the Lenders and the Issuing Bank hereby (a) irrevocably appoints
Chase as the Administrative Agent and the Collateral Agent, BABC as the
Documentation Agent and the Borrowing Base Audit Agent and Citicorp USA as the
Syndication Agent (collectively, the "Agents") and (b) authorizes each Agent to
take such actions on its behalf and to exercise such powers as are delegated to
such Agent by the terms of the Loan Documents, together with such actions and
powers as are reasonably incidental thereto.
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Each Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Agent, and such Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with any Transaction
Party or any Subsidiary or other Affiliate thereof as if it were not an Agent
hereunder.
The Agents shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) no Agent shall be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) no
Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that such Agent is required to exercise in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.02), and (c) except as expressly set forth in the Loan Documents, no Agent
shall have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to any Transaction Party or any of the
Subsidiaries that is communicated to or obtained by such Agent or any of its
Affiliates in any capacity. No Agent shall be liable for any action taken or not
taken by it with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of such Agent's own
gross negligence or wilful misconduct. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by any Transaction Party or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
Each Agent may perform any and all its duties and exercise its rights and
powers by or through any one or more sub-agents appointed by such Agent. Each
Agent and any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as an Agent.
Subject to the appointment and acceptance of a successor to the
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the
Transaction Parties. Upon any such resignation, the Required Lenders shall have
the right, in consultation with the Transaction Parties, to appoint a successor.
If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent that shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its
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appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed upon between the
Borrower and such successor. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its subagents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as Administrative Agent.
Subject to the appointment and acceptance of a successor to the
Collateral Agent as provided in this paragraph, the Collateral Agent may resign
at any time by notifying the Lenders, the Issuing Bank and the Transaction
Parties. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Transaction Parties, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Collateral Agent
gives notice of its resignation, then the retiring Collateral Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Collateral Agent
that shall be a bank or an Affiliate of a bank. Upon the acceptance of its
appointment as Collateral Agent hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Collateral Agent shall be the same as those payable to
its predecessor unless otherwise agreed upon between the Borrower and such
successor. After the Collateral Agent's resignation hereunder, the provisions of
this Article and Section 9.03 shall continue in effect for the benefit of such
retiring Collateral Agent, its sub-agents and their respective Related Parties
in respect of any actions taken or omitted to be taken by any of them while it
was acting as Collateral Agent.
Subject to the appointment and acceptance of a successor to the Borrowing
Base Audit Agent as provided in this paragraph, the Borrowing Base Audit Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Transaction Parties. Upon any such resignation, the Required Lenders shall have
the right, in consultation with the Transaction Parties, to appoint a successor.
If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Borrowing Base
Audit Agent gives notice of its resignation, then the retiring Borrowing Base
Audit Agent may, on behalf of the Lenders and the Issuing Bank, appoint a
successor Borrowing Base Audit Agent that shall be a bank or an Affiliate of a
bank. Upon the acceptance of its appointment as Borrowing Base Audit Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Borrowing Base
Audit Agent, and the retiring Borrowing Base Audit Agent shall be discharged
from its duties and obligations hereunder. The fees payable by the Borrower to a
successor Borrowing Base Audit Agent shall be the same as those payable to its
predecessor unless otherwise agreed upon between the Borrower and such
successor. After the Borrowing Base Audit Agent's resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Borrowing Base Audit Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Borrowing Base Audit Agent.
Each Lender acknowledges that it has, independently and without reliance
upon any Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the either Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or related agreement or any
document furnished hereunder or thereunder.
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ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to any Transaction Party, to it at Hechinger Investment
Company of Delaware, Inc., 0000 XxXxxxxxx Xxxxx, Xxxxx, XX 00000,
Attention of Xxxx X. Xxxxx, Xx. Vice President, Treasurer and Secretary,
(Telecopy No. (000) 000-0000) with a copy to Centers Holdings, Inc.,
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, XX 00000, Attention of
Xxxxxxx X. Annick (Telecopy No. (000) 000-0000);
(b) if to the Administrative Agent or the Collateral Agent, to The
Chase Manhattan Bank, Loan and Agency Services Group, One Chase Xxxxxxxxx
Xxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention of Xxxxx Xxxx
(Telecopy No. (000) 000-0000), with a copy to The Chase Manhattan Bank,
000 Xxxx Xxxxxx, Xxx Xxxx 00000, Attention of Xxxx Xxxxx (Telecopy No.
(000) 000-0000);
(c) if to the Documentation Agent or the Borrowing Base Audit
Agent, to BankAmerica Business Credit, Inc., 00000 Xxx Xxxxx Xxxx, Xxx
Xxxxx, XX 00000, Attention of Xxxxxx Xxxxxxxxxx, Esq. (Telecopy No. (619)
549-7518);
(d) if to the Syndication Agent, to Citicorp USA, Inc., 000 Xxxxx
Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, XX 00000, Attention of Xxxxx Xxxxxxxxx
(Telecopy No. (000) 000-0000);
(e) if to the Issuing Bank, to The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase Xxxxxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention of Xxxxx Xxxx (Telecopy No.(000) 000-0000) with
a copy to The Chase Manhattan Bank, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention of Xxxx Xxxxx (Telecopy No. (000) 000-0000);
(f) if to the Swingline Lender, to The Chase Manhattan Bank, Loan
and Agency Services Group, Xxx Xxxxx Xxxxxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention of Xxxxx Xxxx (Telecopy No. (000) 000-0000) with a
copy to The Chase Manhattan Bank, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention of Xxxx Xxxxx (Telecopy No. (000) 000-0000); and
(g) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents, the Issuing Bank and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any
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provision of any Loan Document or consent to any departure by any Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Agents, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Transaction Parties and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the Agents and the Loan Party or Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders, provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Revolving Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) change any of the provisions of
this Section or the definition of the term "Required Lenders" or any other
provision of any Loan Document specifying the number or percentage of Lenders
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, (vi) release any member of the Holdings Group or any Subsidiary
Loan Party from its Guarantee under the applicable Guarantee Agreement (except
as expressly provided in such Guarantee Agreement), or limit its liability in
respect of such Guarantee, without the written consent of each Lender, (vii)
release all or any substantial part of the Collateral from the Liens of the
Security Documents, without the written consent of each Lender or (viii) change
the definition of the term "Borrowing Base" without the written consent of
Lenders having Total Exposures and unused Revolving Commitments representing at
least 67% of the sum of the Total Exposures and unused Revolving Commitments at
such time, and provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agents, the Issuing Bank or the
Swingline Lender without the prior written consent of the Agents, the Issuing
Bank or the Swingline Lender, as the case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Transaction Parties shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Agents and their Affiliates, including the reasonable
and documented fees, charges and disbursements of counsel for the Agents,
outside consultants for the Agents and internally allocated charges with respect
to the Administrative Agent's collateral examination group, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable and documented
out-of-pocket expenses incurred by the Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all reasonable and documented out-of-pocket
expenses incurred by the Agents, the Issuing Bank or any Lender, including the
reasonable and documented fees, charges and disbursements of any counsel and any
outside consultants for the Agents, the Issuing Bank or any Lender and the
internally allocated charges with respect to the Administrative Agent's
collateral examination group, in connection with the enforcement or protection
of its rights in connection with the Loan Documents, including its rights under
this Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Transaction Parties shall, jointly and severally,
indemnify the Agents, the Issuing Bank and each Lender, and each Related Party
of any of the foregoing Persons (each such Person being called an
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"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the
reasonable and documented fees, charges and disbursements of any counsel for any
Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of any Loan
Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective obligations
thereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property currently or formerly owned or operated by any
Transaction Party or any of the Subsidiaries, or any Environmental Liability
related in any way to any Transaction Party or any of the Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses resulted from
the gross negligence or wilful misconduct of such Indemnitee or any Affiliate of
such Indemnitee (or of any officer, director, employee, advisor or agent of such
Indemnitee or any such Indemnitee's Affiliates).
(c) To the extent that any Loan Party fails to pay any amount
required to be paid by it to the Agents, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Agents, the Issuing Bank or the Swingline Lender, as the case may
be, such Lender's pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Agents, the Issuing Bank or the Swingline Lender in its capacity as
such. For purposes hereof, a Lender's "pro rata share" shall be determined based
upon its share of the sum of the Total Exposures and unused Revolving
Commitments at the time.
(d) To the extent permitted by applicable law, no Transaction
Party shall assert, and each 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 or any agreement or instrument
contemplated hereby, the Transactions, any Loan or Letter of Credit or the use
of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly
after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that no
Transaction Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
such attempted assignment or transfer without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Agents, the Issuing Bank and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it), provided that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Borrower and the Agents, the Issuing Bank and the Swingline Lender
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Revolving
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Commitment or Loans, the amount of the Revolving Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire, and provided further that
any consent of the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent
of the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Transaction Parties, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Agents, the Issuing Bank or the Swingline Lender, sell participations to one or
more banks or other entities (a "Participant") in all or a portion of such
Lender's rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it), provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Transaction Parties, the Agents, the Issuing Bank
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents, provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled
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to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were
a Lender and had acquired its interest by assignment pursuant to paragraph (b)
of this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.17(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16 unless
(i) the Borrower is notified of the participation sold to such Participant and
such Participant agrees, for the benefit of the Borrower, to comply with Section
2.16(e) as though it were a Lender and (ii) such Participant is eligible for
exemption from the withholding tax referred to therein, following compliance
with Section 2.16(e).
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest, provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agents and when the Administrative Agent shall have
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the
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remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
that such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
(b) Each Transaction Party hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Agents, the Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against any Transaction Party or their properties in the courts of any
jurisdiction.
(c) Each Transaction Party hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section other
than a court referred to in the last sentence of such paragraph (b) that is not
referred to elsewhere in such paragraph (b). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT
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AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Agents, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Agents, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Holdings. For the
purposes of this Section, the term "Information" means all information received
from the Holdings Group relating to the or its business, other than any such
information that is available to the Agents, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Holdings Group, provided that,
in the case of information received from the Holdings Group after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts that are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") that may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
as Borrower,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title Executive Vice President
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HECHINGER STORES EAST COAST COMPANY,
by
/s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent and Collateral Agent,
by
/s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director
BANKAMERICA BUSINESS CREDIT, INC.,
individually and as Documentation Agent
and as Borrowing Base Audit Agent,
by
/s/ Xxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
CITICORP USA, INC., individually and as
Syndication Agent,
by
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
81
EXHIBIT H
CONFORMED COPY
SECURITY AGREEMENT dated as of September 26,
1997, as amended and restated as of December 31, 1998
(as amended, supplemented or otherwise modified from
time to time, the "Security Agreement"), among HECHINGER
INVESTMENT COMPANY OF DELAWARE, INC., a Delaware
corporation (the "Borrower"), CENTERS HOLDINGS, INC., a
Delaware corporation ("Holdings"), BSQ ACQUISITION,
INC., a Delaware corporation ("BSQ Acqco"), BSQ
TRANSFEREE CORP., a Delaware corporation ("BSQ Newco"),
HECHINGER COMPANY, a Delaware corporation ("Hechinger"),
HECHINGER STORES COMPANY, a Delaware corporation
("Hechinger Stores"), HECHINGER STORES EAST COAST
COMPANY, a Delaware corporation ("Hechinger Stores East
Coast"), each other Subsidiary of Holdings listed on
Schedule I hereto (each of Holdings, BSQ Acqco, BSQ
Newco, Hechinger, Hechinger Stores, Hechinger Stores
East Coast and each such other Subsidiary, individually,
a "Guarantor" and, collectively, the "Guarantors"; the
Guarantors and the Borrower are referred to collectively
herein as the "Grantors") and THE CHASE MANHATTAN BANK,
a New York banking corporation ("Chase"), as collateral
agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of September 26,
1997, as amended and restated as of December 31, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among (i) the
Borrower, (ii) Holdings, BSQ Acqco, BSQ Newco, Hechinger, Hechinger Stores,
Hechinger Stores East Coast (collectively, the "Parent Guarantors"), (iii) the
lenders from time to time party thereto (the "Lenders"), (iv) Chase, as issuing
bank (in such capacity, the "Issuing Bank"), as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), as Collateral Agent and
as swingline lender, (v) BankAmerica Business Credit, Inc., a Delaware
corporation ("BABC"), as documentation agent (in such capacity, the
"Documentation Agent") and as borrowing base audit agent (in such capacity, the
"Borrowing Base Audit Agent") for the Lenders and (vi) CITICORP USA, INC., a
Delaware corporation, as syndication agent for the Lenders (in such capacity,
the "Syndication Agent" and, together with the Administrative Agent, the
Documentation Agent, the Borrowing Base Audit Agent and the Collateral Agent,
the "Agents"), (b) the Parent Guarantee Agreement dated as of September 26, 1997
(as amended, supplemented or otherwise modified from time to time, the "Parent
Guarantee Agreement"), among Holdings, BSQ Acqco, BSQ Newco, Hechinger,
Hechinger Stores and the Agents, (c) the Subsidiary Guarantee Agreement dated as
of September 26, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Subsidiary Guarantee Agreement" and, together with the Parent
Guarantee Agreement, the "Guarantee Agreements") among the Guarantors listed on
schedule I hereto and the Agents, (d) the Credit Agreement dated as of December
31, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Supplemental Credit Agreement"), among the Borrower, the Parent Guarantors, the
lenders from time to time party thereto (the "Supplemental Lenders"), and Chase,
as administrative agent and collateral agent thereunder (solely in its capacity
as an agent under the Supplemental Credit Agreement, the "Junior Supplemental
Agent") and (e) the Intercreditor Agreement dated as of December 31, 1998 (as
amended, supplemented or otherwise modified from time to time, the
"Intercreditor Agreement"), among the Borrower, Holdings, the Subsidiary Loan
Parties, the Agents, the Junior Supplemental Agent, Green Equity Investors II,
L.P. and Kmart Corporation.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to guarantee, among other
things, all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon,
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among other things, the execution and delivery by the Grantors of an agreement
in the form hereof to secure (a) the due and punctual payment by the Borrower of
(i) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether such interest is allowed or
allowable as a claim in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether such monetary obligations are allowed or
allowable as a claim in such proceeding), of the Borrower to the Secured Parties
under the Credit Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other Loan
Documents and (c) the due and punctual payment and performance of all the
covenants, agreements, obligations and liabilities of each Loan Party under or
pursuant to this Agreement and the other Loan Documents (all the monetary and
other obligations described in the preceding clauses (a) through (c) being
collectively called the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York as of the date hereof. .
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
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"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts
(including the Collection Deposit Accounts), (g) Investment Property and (h)
Proceeds.
"Collection Deposit Account" shall mean a deposit account of a Grantor
maintained for the benefit of the Secured Parties with the Collateral Agent or
with a Sub-Agent pursuant to a Depository Agreement.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an option
on a commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a contract pursuant to the
federal commodities laws or (b) traded on a foreign commodity board of trade,
exchange or market, and is carried on the books of a Commodity Intermediary for
a Commodity Customer.
"Commodity Customer" shall mean a person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a person who is registered as a
futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Concentration Account" shall mean the cash collateral account
established at the office of The Chase Manhattan Bank located at 000 Xxxx
Xxxxxx, Xxx Xxxx, XX 00000, in the name of the Collateral Agent, Account No.
323-515355.
"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Depository Agreement" shall mean a Depository Agreement substantially in
the form of Annex 1 hereto among the Borrower, the Collateral Agent and a
Sub-Agent.
"Depository System" shall have the meaning assigned to such term in
Section 5.01.
"Documents" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.
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"Entitlement Holder" shall mean a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term "Equipment" shall include Fixtures.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
person (or a share, participation or other interest in a person or in property
or an enterprise of a person), that is, or is of a type, dealt with in or traded
on financial markets, or which is recognized in any area in which it is issued
or dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated security, a certificate
representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Fund Account" shall mean the general fund account established at
the office of The Chase Manhattan located at 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, in the name of the Borrower, Account No. 323-071287.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or lessee,
Hedging Agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts
Receivable.
"Intellectual Property" shall mean all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
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finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof that by their terms prohibit
assignment or a grant of a security interest by such Grantor as licensee
thereunder).
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Original Security Agreement" means the Security Agreement dated as of
September 26, 1997 (as in effect immediately before the Restatement Closing
Date), among the Grantors and the Collateral Agent.
"Overdraft" means, at any time, the amount by which the aggregate amount
debited from any deposit, concentration, operating or disbursement account
(including any Collection Deposit Account, the Concentration Account and the
General Fund Account) maintained by the Borrower or any other Grantor with any
Lender or any Affiliate of any Lender, as a result of processing of payment
orders issued by the Borrower or such Grantor or otherwise, exceeds the
aggregate funds on deposit in such account.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (a) all cash and negotiable instruments received
by or held on behalf of the Collateral Agent, (b) any claim of any Grantor
against any third party for (and the right to xxx and recover for and the rights
to damages or profits due or
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accrued arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by any Grantor, or licensed
under a Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by any
Trademark now or hereafter owned by any Grantor, (iii) past, present or future
breach of any License and (iv) past, present or future infringement of any
Copyright now or hereafter owned by any Grantor or licensed under a Copyright
License and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
Agent, (c) the Collateral Agent, (d) the Documentation Agent, (e) the Borrowing
Base Audit Agent, (f) the Syndication Agent, (g) the Issuing Bank, (h) the
beneficiaries of each indemnification obligation undertaken by any Grantor under
any Loan Document and (i) the successors and assigns of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer that (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains Securities Accounts for others and is acting in that capacity.
"Security Entitlements" shall mean the rights and property interests of
an Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Sub-Agent" shall mean a financial institution which shall have delivered
to the Collateral Agent an executed Depository Agreement.
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of
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the United States or any similar offices in any other country or any political
subdivision thereof, and all extensions or renewals thereof, including those
listed on Schedule V, (b) all goodwill associated therewith or symbolized
thereby and (c) all other assets, rights and interests that uniquely reflect or
embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
Security Interest
-----------------
SECTION 2.01. Security Interest. (a) As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"); provided, however,
that, notwithstanding anything to the contrary contained herein or in any other
Loan Document, the portion of the Obligations attributable to the Loans
(together with interest thereon in accordance with the Credit Agreement) made by
the Lenders the proceeds of which are used by the Borrower to repay the
obligations under the Hechinger Stores Credit Agreement shall be secured only by
so much of the Collateral as shall have secured the obligations to the creditors
under the Hechinger Stores Credit Agreement (the "Hechinger Replacement Loan").
Without limiting the foregoing, the Collateral Agent is hereby authorized to
file one or more financing statements (including fixture filings), continuation
statements, filings with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any
other country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.
(b) Solely for the avoidance of doubt, the parties hereto hereby confirm
their understanding that (i) the phrase "so much of the Collateral as shall have
secured the obligations to the creditors under the Hechinger Stores Credit
Agreement" in paragraph (a) above and in the Original Security Agreement means a
portion of the Collateral that has a value equal to the value of the Collateral
that secured the obligations to the creditors under the Hechinger Stores Credit
Agreement and (ii) for the purposes of paragraph (a) above and the Original
Security Agreement, the principal amount of any Loans that were prepaid by the
Borrower under the Credit Agreement after the Effective Date shall be deemed to
have reduced, on a dollar-for-dollar basis, the portion of the Obligations
attributable to the Hechinger Replacement Loan.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
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ARTICLE III
Representations and Warranties
------------------------------
The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Collateral Agent for filing in each governmental,
municipal or other office specified in Schedule 6 to the Perfection Certificate,
which are all the filings, recordings and registrations (other than filings
required to be made in the United States Patent and Trademark Office and the
United States Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and Copyrights) that
are necessary to publish notice of and protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral in
which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Collateral Agent for recording by the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations
thereunder, as applicable, and otherwise as may be required pursuant to the laws
of any other necessary jurisdiction, to protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, or in
any other necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary (other than
such actions as are necessary to perfect the Security Interest with respect to
any Collateral consisting of Patents, Trademarks and Copyrights (or registration
or application for registration thereof) acquired or developed after the date
hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and
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possessions pursuant to the Uniform Commercial Code or other applicable law in
such jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three month
period (commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15
U.S.C. ss. 1060 or the one month period (commencing as of the date hereof)
pursuant to 17 U.S.C. ss. 205 and otherwise as may be required pursuant to the
laws of any other necessary jurisdiction. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02 of the
Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
---------
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral. Each
Grantor agrees promptly to notify the Collateral Agent if any material portion
of the Collateral owned or held by such Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail satisfactory to the
Collateral Agent showing the identity, amount and location of any and all
Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.01 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by a Financial Officer and the chief
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legal officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02 and (b)
certifying that all Uniform Commercial Code financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest for a period of not less than 18 months after the
date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period and except for any
fixture filings not filed as of the Effective Date). Each certificate delivered
pursuant to this Section 4.02 shall identify in the format of Schedule II, III,
IV or V, as applicable, all Intellectual Property of any Grantor in existence on
the date thereof and not then listed on such Schedules or previously so
identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 10 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. Following an Event of Default
and during the continuance thereof or otherwise in accordance with the Credit
Agreement, the Collateral Agent and such persons as the Collateral Agent may
reasonably designate shall have the right, at the Grantors' own cost and
expense, to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss the Grantors' affairs with the officers of the
Grantors and their independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Collateral, including, in the case of
Accounts or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the purpose
of
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making such a verification. The Collateral Agent shall have the absolute right
to share any information it gains from such inspection or verification with any
Secured Party (it being understood that any such information shall be deemed to
be "Information" subject to the provisions of Section 9.12 of the Credit
Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, on five days' prior
notice to the Borrower, the Collateral Agent may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by Section 6.02 of the Credit Agreement. Except as expressly
permitted in the Credit Agreement, none of the Grantors shall make or permit to
be made any transfer of the Collateral and each Grantor shall remain at all
times in possession of the Collateral owned by it, except that (a) Inventory may
be sold in the ordinary course of business and (b) unless and until the
Collateral Agent shall notify the Grantors that an Event of Default shall have
occurred and be continuing and that during the continuance thereof the Grantors
shall not sell, convey, lease, assign, transfer or otherwise dispose of any
Collateral (which notice may be given by telephone if promptly confirmed in
writing), the Grantors may use and dispose of the Collateral in any lawful
manner not inconsistent with the provisions of this Agreement, the Credit
Agreement or any other Loan Document. Without limiting the generality of the
foregoing, each Grantor agrees that it shall not permit any Inventory to be in
the possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the
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Accounts Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for the
payment thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged.
SECTION 4.11. Insurance. (a) The Grantors shall (i) maintain or shall
cause to be maintained insurance with financially sound and reputable insurers
with an A.M. Best rating of A- or better (or, to the extent consistent with
prudent business practice, a program of self-insurance approved by the
Administrative Agent) on such of its property and in at least such amounts and
against at least such risks as is customary with companies in the same or
similar businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury or death occurring upon,
in or about or in connection with the use of any properties owned, occupied or
controlled by it; (ii) maintain such other insurance as may be required by law;
and (iii) furnish to the Collateral Agent, upon written request, full
information as to the insurance carried.
(b) Fire and extended coverage policies maintained with respect to
any Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders' loss payable clause (regarding personal property), in form and
substance satisfactory to the Collateral Agent, which endorsements or amendments
shall provide that, from and after the Effective Date, if the insurer shall have
received written notice from the Administrative Agent or the Collateral Agent of
the occurrence of an Event of Default, the insurer shall pay all proceeds
otherwise payable to the Borrower or the other Loan Parties under the policies
directly to the Administrative Agent or the Collateral Agent, (ii) a provision
to the effect that neither the Grantor, the Collateral Agent nor any other party
shall be a coinsurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Lenders.
Commercial general liability policies shall be endorsed to name the Collateral
Agent as an additional insured. Business interruption policies shall name the
Collateral Agent as loss payee and shall be endorsed or amended to include (i) a
provision that, from and after the Effective Date, if the insurer shall have
received written notice from the Administrative Agent or the Collateral Agent of
the occurrence of an Event of Default, the insurer shall pay all proceeds
otherwise payable to the Borrower or the other Loan Parties under the policies
directly to the Administrative Agent or the Collateral Agent, (ii) a provision
to the effect that none of the Borrower, the Administrative Agent or any other
party shall be a co-insurer and (iii) such other provisions as the
administrative Agent may reasonably require from time to time to protect the
interests of the Lenders. Each such policy referred to in this paragraph also
shall provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium except upon not less than 10 days' prior written
notice thereof by the insurer to the Collateral Agent (giving the Collateral
Agent the right to cure defaults in the payment of premiums) or (ii) for any
other reason except upon not less than 30 days' prior written notice thereof by
the insurer to the Collateral Agent. Such Grantor shall deliver to the
Collateral Agent, prior to the cancelation, modification or nonrenewal of any
such policy of insurance, a copy of a renewal or replacement policy (or other
evidence of renewal of a policy previously delivered to the Collateral Agent)
together with evidence satisfactory to the Collateral Agent of payment of the
premium therefor.
(c) Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required
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hereby or to pay any premium in whole or part relating thereto, the Collateral
Agent may, without waiving or releasing any obligation or liability of the
Grantors hereunder or any Event of Default, in its sole discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable. All sums
disbursed by the Collateral Agent in connection with this Section 4.11,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, upon demand, by the Grantors to the
Collateral Agent and shall be additional Obligations secured hereby.
SECTION 4.12. Intentionally Omitted.
SECTION 4.13. Legend. Subject to the rights and liens of the parties to
the Receivables Purchase Agreements, each Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
SECTION 4.14. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of
its licensees to, do any act, or omit to do any act, whereby any Patent that is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to xxxx any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office or
any court or similar office of any country) regarding such Grantor's ownership
of any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as
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the Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of any Grantor's
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancellation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly xxx for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
ARTICLE V
Collections
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SECTION 5.01. Depository System. (a) To the extent not already
established, within 30 days after the Restatement Closing Date, the Grantors
shall establish, subject to the control of the Collateral Agent pursuant to the
Depository Agreements, for the ratable benefit of the Collateral Agent and the
other Secured Parties, a system of deposit accounts (the "Depository System")
with one or more financial institutions that are reasonably satisfactory to the
Collateral Agent into which the Proceeds of all Accounts Receivable and
Inventory shall be deposited and forwarded to the Collateral Agent in accordance
with the Depository Agreements. To the extent any Grantor's deposit accounts are
not part of the Depository System within 30 days after the Restatement Closing
Date, such Grantor shall move such deposit accounts to a financial institution
designated by the Administrative Agent and such Grantor will use best efforts to
cause such financial institution to enter into a Depository Agreement.
(b) All Proceeds of Inventory and Accounts Receivable that have been
received on any Business Day through the Depository System will be transferred
into the Concentration Account on such Business Day to the extent required by
the applicable Depository Agreement. All Proceeds stemming from the sale of a
substantial portion of the Collateral (other than Proceeds of Accounts) that
have been received by a Grantor on any Business Day will be transferred into the
Concentration Account on such Business Day. All Proceeds received on any
Business Day by the Collateral Agent pursuant to Section 5.02 will be
transferred into the Concentration Account on such Business Day.
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(c) The Concentration Account is, and shall remain, under the sole
dominion and control of the Collateral Agent. Each Grantor acknowledges and
agrees that (i) such Grantor has no right of withdrawal from the Concentration
Account, (ii) the funds on deposit in the Concentration Account shall continue
to be collateral security for all of the Obligations and (iii) upon the
occurrence and during the continuance of an Event of Default, at the Collateral
Agent's election, the funds on deposit in the Concentration Account shall be
applied as provided in Section 6.02. So long as (y) no Event of Default has
occurred and is continuing, and (z) no Reduced Availability Event (as defined
below) has occurred and is continuing, the Collateral Agent shall promptly remit
any funds on deposit in the Concentration Account to the General Fund Account
and the Borrower shall have the right, at any time and from time to time, to
withdraw such amounts from the General Fund Account as it shall deem to be
necessary or desirable.
(d) Effective upon notice to the Grantors from the Collateral Agent (i)
after the occurrence and during the continuance of an Event of Default or (ii)
in the event that the total Borrowing Base (which shall be determined using an
Advance Rate Percentage equal to 65%) does not exceed the sum of the Total
Exposures by at least $30,000,000 ("Reduced Availability Event") (which notice
may be given by telephone if promptly confirmed in writing), the Concentration
Account will, without any further action on the part of any Grantor, the
Collateral Agent or any Sub-Agent, convert into a closed account under the
exclusive dominion and control of the Collateral Agent in which funds are held
subject to the rights of the Collateral Agent hereunder. Each Grantor
irrevocably authorizes the Collateral Agent to notify each Sub-Agent (i) of the
occurrence of an Event of Default or a Reduced Availability Event and (ii) of
the matters referred to in this paragraph (d). Following the occurrence of an
Event of Default or a Reduced Availability Event, the Collateral Agent may
instruct each Sub-Agent to transfer immediately all funds held in each deposit
account to the Concentration Account.
SECTION 5.02. Collections. (a) Subject to the rights and liens of the
parties to the Receivables Purchase Agreements, each Grantor agrees (i) to
notify and direct promptly each Account Debtor and every other person obligated
to make payments on Accounts Receivable or in respect of any Inventory to make
all such payments directly to the Depository System established in accordance
with Section 5.01, (ii) to use all reasonable efforts to cause each Account
Debtor and every other person identified in clause (i) above to make all
payments with respect to Accounts Receivable and Inventory directly to such
Depository System and (iii) promptly to deposit all payments received by it on
account of Accounts Receivable and Inventory, whether in the form of cash,
checks, credit card payments, notes, drafts, bills of exchange, money orders or
otherwise, in the Depository System in precisely the form in which received (but
with any endorsements of such Grantor necessary for deposit or collection), and
until they are so deposited such payments shall be held by such Grantor for the
benefit of the Collateral Agent.
(b) Without the prior written consent of the Collateral Agent, no Grantor
shall, in a manner adverse to the Lenders, change the general instructions given
to Account Debtors in respect of payment on Accounts to be deposited in the
Depository System. Until the Collateral Agent shall have advised the Grantors to
the contrary, each Grantor shall, and the Collateral Agent hereby authorizes
each Grantor to, enforce and collect all amounts owing on the Inventory and
Accounts Receivable, for the benefit and on behalf of the Collateral Agent and
the other Secured Parties; provided, however, that such privilege may at the
option of the Collateral Agent be terminated upon the occurrence and during the
continuance of any Event of Default or Reduced Availability Event.
SECTION 5.03. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent and the
Secured Parties, upon the occurrence and during the
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continuance of an Event of Default or Reduced Availability Event (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to sign the
name of any Grantor on any invoice or xxxx of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent or any Secured Party to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
the Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent or
any Secured Party with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve any Grantor of any of its obligations hereunder or under any other
Loan Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VI
Remedies
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SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained), and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due
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and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply
the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any
of the Obligations, including all court costs and the reasonable and
documented fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Collateral Agent hereunder or under
any other Loan Document on behalf of any Grantor and any other reasonable
and documented costs or expenses incurred in connection with the exercise
of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the date
of any such distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and 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 software and programs used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised, at the option of the Collateral Agent, upon the occurrence
and during the continuation of an Event of Default, provided that any license,
sub-license or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
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ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Guarantor shall be given to it at its address or telecopy
number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This Agreement
shall be construed as a separate agreement with respect to each Grantor and may
be amended, modified, supplemented, waived or released with respect to any
Grantor without the approval of any other Grantor and without affecting the
obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
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SECTION 7.06. Overdrafts. Each Grantor agrees to pay any such Grantor's
Overdrafts. Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents.
SECTION 7.07. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable and documented expenses, including
the reasonable and documented fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable and documented fees, disbursements and other
charges of counsel, incurred by or asserted against any of them arising out of,
in any way connected with, or as a result of, the execution, delivery or
performance of this Agreement or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 7.07
shall be payable on written demand therefor.
SECTION 7.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.09. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Agents, the Issuing Bank and the Lenders under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Agreement or any
other Loan Document or consent to any departure by any Grantor therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any
Grantor in any case shall entitle such Grantor or any other Grantor to any other
or further notice or demand in similar or other circumstances.
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(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor or Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.02 of the Credit Agreement.
SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.
SECTION 7.11. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.13. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.14. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Agents, the Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against any
Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents
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in any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.15. Termination. (a) This Agreement and the Security Interest
shall terminate when all the Obligations have been indefeasibly paid in full,
the Lenders have no further commitment to lend, the L/C Exposure has been
reduced to zero and the Issuing Bank has no further commitment to issue Letters
of Credit under the Credit Agreement, at which time the Collateral Agent shall
execute and deliver to the Grantors, at the Grantors' expense, all Uniform
Commercial Code termination statements and similar documents that the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 7.15
shall be without recourse to or warranty by the Collateral Agent. A Guarantor
shall automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Guarantor shall be automatically released in
the event that all the capital stock of such Guarantor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition (to the extent required by the Credit Agreement) and the terms of
such consent did not provide otherwise.
(b) The Security Interest in any Fixtures relating to particular real
estate that is sold, transferred, leased or otherwise disposed of by any
Transaction Party in accordance with Section 6.05 or Section 6.06 of the Credit
Agreement shall terminate automatically upon such sale, transfer, lease or other
disposition.
SECTION 7.16. Additional Grantors. Pursuant to Section 5.12 of the Credit
Agreement, each Borrower Subsidiary that was not in existence or not a Borrower
Subsidiary on the date of the Credit Agreement is required to enter into this
Agreement as a Grantor upon becoming a Borrower Subsidiary. Upon execution and
delivery by the Collateral Agent and a Borrower Subsidiary of an instrument in
the form of Annex 3 hereto, such Borrower Subsidiary shall become a Grantor
hereunder with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor as a party to this Agreement.
SECTION 7.17. Intercreditor Agreement. The Agents, on behalf of the
Secured Parties, acknowledge that all the security interests granted pursuant to
this Security Agreement are subject to the provisions of the Intercreditor
Agreement. Notwithstanding anything to the contrary contained herein, the
rights, duties and obligations of the Agents hereunder are subject to the
provisions of the Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC.,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
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HECHINGER STORES EAST COAST COMPANY,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
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EACH OF THE GUARANTORS LISTED ON
SCHEDULE I HERETO,
by
/s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Authorized Officer
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THE CHASE MANHATTAN BANK,
as Collateral Agent,
by
/s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director
107
SCHEDULE I
GUARANTORS
108
SCHEDULE II
COPYRIGHTS
109
SCHEDULE III
LICENSES
110
SCHEDULE IV
PATENTS
111
SCHEDULE V
TRADEMARKS
112
Annex 1 to the
Security Agreement
DEPOSITORY AGREEMENT dated as of [ ], among
[Name of Grantor], a [ ] corporation (the "Grantor"),
THE CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (such term,
and each other capitalized term used but not defined
herein, having the meaning given it in the Security
Agreement referred to below) and [ ], a
[ ] banking corporation (the "Sub-Agent").
A. The Grantor and the Collateral Agent are parties to a Security
Agreement dated as of September 26, 1997, as amended and restated as of December
31, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Security Agreement"). Pursuant to the terms of the Security Agreement, the
Grantor has granted to the Collateral Agent, for the ratable benefit of the
Secured Parties, a security interest in its Accounts Receivable and other
Collateral (including Inventory, cash, cash accounts and Proceeds) to secure the
payment and performance of the Obligations and has irrevocably appointed the
Collateral Agent as its agent to collect amounts due in respect of Accounts
Receivable and Inventory.
B. The Sub-Agent has agreed to act as collection sub-agent of the
Collateral Agent to receive and forward payments with respect to the Accounts
Receivable and Inventory on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Collateral Agent hereby appoints the Sub-Agent as its collection
sub-agent under the Security Agreement and authorizes the Sub-Agent, on the
terms and subject to the conditions set forth herein, to receive payments in
respect of Collateral consisting of Accounts Receivable and Inventory.
2. The Sub-Agent has established and shall maintain deposit account
number [] (including all subaccounts thereof) for the benefit of the Collateral
Agent (such account being called the "Collection Deposit Account"). [Subject to
the Sub-Agent's Terms for Deposit Services attached hereto as Exhibit A, to the
extent that the terms thereof relate to procedures or fees and to the extent not
inconsistent with the terms hereof,] all payments received by the Sub-Agent in
Account Number [ ] and [ ] or any replacements in
respect thereof (the "Accounts") shall be promptly deposited in the Collection
Deposit Account and shall not be commingled with other funds. All funds at any
time on deposit in the Collection Deposit Account shall be held by the Sub-Agent
for application in accordance with the terms of this Agreement. The Sub-Agent
agrees to give the Collateral Agent prompt notice if the Collection Deposit
Account shall become subject to any writ, judgment, warrant of attachment,
execution or similar process. As security for the payment and performance of the
Obligations, the Grantor hereby confirms and pledges, assigns and transfers to
the Collateral Agent, and hereby creates and grants to the Collateral Agent, a
security interest in the Collection Deposit Account, all property and assets
held therein and all Proceeds thereof.
3. Effective upon notice to the Grantors and the Sub-Agent from the
Collateral Agent (i) after the occurrence and during the continuance of any
Event of Default or (ii) after the occurrence and during the continuance of a
Reduced Availability Event, the Collection Deposit Account shall be under the
sole
113
dominion and control of the Collateral Agent, who shall possess all right, title
and interest in all of the items from time to time in the Collection Deposit
Account and their Proceeds. Effective upon such notice, the Sub-Agent shall be
the Collateral Agent's agent for the purpose of holding and collecting such
items and their Proceeds, and neither the Grantor nor any person or entity
claiming by, through or under the Grantor shall have any right, title or
interest in, or control over the use of, or any right to withdraw any amount
from, the Collection Deposit Account, except that the Collateral Agent shall
have the right to withdraw amounts from the Collection Deposit Account.
Effective upon such notice, the Sub-Agent shall be entitled to rely on, and
shall act in accordance with, all instructions given to it by the Collateral
Agent with respect to the Collection Deposit Account. Effective upon such
notice, the Collateral Agent shall have the sole power to agree with the
Sub-Agent as to specifications for Account services.
4. Upon receipt of written, telecopy or telephonic notice (which, in
the case of telephonic notice, shall be promptly confirmed in writing or by
telecopy) from the Collateral Agent, the Sub-Agent shall, if so directed in such
notice (subject to the Sub-Agent's right to request that the Collateral Agent
furnish, in form satisfactory to the Sub-Agent, signature cards and/or other
appropriate documentation), promptly transmit or deliver to the Collateral Agent
at the office specified in paragraph 12 hereof (or such other office as the
Collateral Agent shall specify) (a) all funds, if any, then on deposit in, or
otherwise to the credit of, the Collection Deposit Account (provided that funds
on deposit that are subject to collection may be transmitted promptly upon
availability for withdrawal), (b) all checks, drafts and other instruments for
the payment of money received in the Accounts and in the possession of the
Sub-Agent, without depositing such checks, drafts or other instruments in the
Collection Deposit Account or any other account and (c) any checks, drafts and
other instruments for the payment of money received in the Accounts by the
Sub-Agent after such notice, in whatever form received, provided that the
Sub-Agent may retain a reasonable reserve in a separate deposit account with the
Sub-Agent in respect of unpaid fees and amounts which may be subject to
collection.
5. The Sub-Agent is hereby instructed and authorized to transfer by
wire transfer or Automated Clearing House ("ACH") from the Collection Deposit
Account all funds that are from time to time deposited or otherwise credited to
such account (after such funds become available to the Sub-Agent, either through
the Federal Reserve System or other clearing mechanism used by the Sub-Agent's
branch), to such account as the Collateral Agent may from time to time direct,
provided that, unless the Collateral Agent otherwise instructs, no such transfer
shall be required if such transfer would result in the transfer of an amount
less than $1,000. Unless otherwise directed by the Collateral Agent, such funds
shall be transferred on each business day by wire transfer or ACH and shall be
identified as follows:
The Chase Manhattan Bank
ABA Number
For credit to The Chase Manhattan Bank
New York, NY [ ]
Account Number
Re: Hechinger Investment Company of Delaware, Inc.
Cash Collateral Account
These transfer instructions and authorizations may not be amended,
altered or revoked by the Grantor without the prior written consent of the
Collateral Agent. The Collateral Agent, however, shall have the right to amend
or revoke these transfer instructions and authorizations at any time without the
consent of the Grantor.
6. The Sub-Agent shall furnish the Collateral Agent with monthly
statements setting forth the amounts deposited in the Collection Deposit Account
and all transfers and withdrawals therefrom, and shall furnish such other
information at such times as shall be reasonably requested by the Collateral
Agent.
7. The fees for the services of the Sub-Agent shall be mutually agreed
upon between the Grantor and the Sub-Agent and shall be the obligation of the
Grantor; provided, however, that, notwithstanding the terms of any agreement
under which the Collection Deposit Account shall have been
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4
established with the Sub-Agent, the Grantor and the Sub-Agent agree not to
terminate such Collection Deposit Account for any reason (including the failure
of the Grantor to pay such fees) for so long as this Agreement shall remain in
effect (it being understood that the foregoing shall not be construed to
prohibit the resignation of the Sub-Agent in accordance with paragraph 9 below).
Neither the Collateral Agent nor the Secured Parties shall have any liability
for the payment of any such fees. The Sub-Agent may perform any of its duties
hereunder by or through its agents, officers or employees.
8. The Sub-Agent hereby represents and warrants that (a) it is a
banking corporation duly organized, validly existing and in good standing under
the laws of [] and has full corporate power and authority under such laws to
execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agreement by the Sub-Agent have been
duly and effectively authorized by all necessary corporate action and this
Agreement has been duly executed and delivered by the Sub-Agent and constitutes
a valid and binding obligation of the Sub-Agent enforceable in accordance with
its terms.
9. The Sub-Agent may resign at any time as Sub-Agent hereunder by
delivery to the Collateral Agent of written notice of resignation not less than
thirty days prior to the effective date of such resignation. The Sub-Agent may
be removed by the Collateral Agent at any time, with or without cause, by
written, telecopy or telephonic notice (which, in the case of telephonic notice,
shall be promptly confirmed in writing or by telecopy) of removal delivered to
the Sub-Agent. Upon receipt of such notice of removal, or delivery of such
notice of resignation, the Sub-Agent shall (subject to the Sub-Agent's right to
request that the Collateral Agent furnish, in form satisfactory to the
Sub-Agent, signature cards and/or other appropriate documentation), promptly
transmit or deliver to the Collateral Agent at the office specified in paragraph
12 (or such other office as the Collateral Agent shall specify) (a) all funds,
if any, then on deposit in, or otherwise to the credit of, the Collection
Deposit Account (provided that funds on deposit that are subject to collection
may be transmitted promptly upon availability for withdrawal), (b) all checks,
drafts and other instruments for the payment of money received in the Accounts
and in the possession of the Sub-Agent, without depositing such checks, drafts
or other instruments in the Collection Deposit Account or any other account and
(c) any checks, drafts and other instruments for the payment of money received
in the Accounts by the Sub-Agent after such notice, in whatever form received.
10. The Grantor consents to the appointment of the Sub-Agent and agrees
that the Sub-Agent shall incur no liability to the Grantor as a result of any
action taken pursuant to an instruction given by the Collateral Agent in
accordance with the provisions of this Agreement. The Grantor agrees to
indemnify and defend the Sub-Agent against any loss, liability, claim or expense
(including reasonable attorneys' fees) arising from the Sub-Agent's entry into
this Agreement and actions taken hereunder, except to the extent resulting from
the Sub-Agent's gross negligence or willful misconduct.
11. The term of this Agreement shall extend from the date hereof until
the earlier of (a) the date on which the Sub-Agent has been notified in writing
by the Collateral Agent that the Sub-Agent has no further duties under this
Agreement and (b) the date of termination specified in the notice of removal
given by the Collateral Agent, or notice of resignation given by the Sub-Agent,
as the case may be, pursuant to paragraph 9. The obligations of the Sub-Agent
contained in the last sentence of paragraph 9 and in paragraph 15, and the
obligations of the Grantor contained in paragraphs 7 and 10, shall survive the
termination of this Agreement.
12. All notices and communications hereunder shall be in writing and
shall be delivered by hand or by courier service, mailed by certified or
registered mail or sent by telecopy (except where telephonic instructions or
notices are authorized herein) and shall be effective on the day on which
received (a) in the case of the Collateral Agent, to The Chase Manhattan Bank,
[ ], Attention of [ ], and
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(b) in the case of the Sub-Agent, addressed to [ ], Attention
of [ ]. For purposes of this Agreement, any officer of the Collateral
Agent shall be authorized to act, and to give instructions and notices, on
behalf of the Collateral Agent hereunder.
13. The Sub-Agent will not assign or transfer any of its rights or
obligations hereunder (other than to the Collateral Agent) without the prior
written consent of the other parties hereto, and any such attempted assignment
or transfer shall be void.
14. Except as provided in paragraph 5 above, this Agreement may be
amended only by a written instrument executed by the Collateral Agent, the
Sub-Agent and the Grantor, acting by their duly authorized representative
officers.
15. Except as otherwise provided in the Credit Agreement with respect
to rights of set off available to the Sub-Agent in its capacity as a Lender (if
and so long as the Sub-Agent is a Lender thereunder), the Sub-Agent hereby
irrevocably waives any right to set off against, or otherwise deduct from, any
funds held in the Collection Deposit Account and all items (and Proceeds
thereof) that come into its possession in connection with the Collection Deposit
Account any indebtedness or other claim owed by the Grantor or any affiliate
thereof to the Sub-Agent; provided, however, that this paragraph shall not limit
the ability of the Sub-Agent to, and the Sub-Agent may, (a) exercise any right
to set off against, or otherwise deduct from, any such funds to the extent
necessary for the Sub-Agent to collect any fees owed to it by the Grantor in
connection with the Collection Deposit Account, (b) charge back and net against
the Collection Deposit Account any returned or dishonored items or other
adjustments in accordance with the Sub-Agent's usual practices and (c) (i)
establish the reserves contemplated in paragraph 4 in respect of unpaid fees and
amounts which may be subject to collection and (ii) transfer funds in respect of
such reserves from the Collection Deposit Account to the separate deposit
account with the Sub-Agent as contemplated in paragraph 4.
16. This Agreement shall inure to the benefit of and be binding upon
the Collateral Agent, the Sub-Agent, the Grantor and their respective permitted
successors and assigns.
17. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
18. EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ] GOVERN THE
COLLECTION DEPOSIT ACCOUNT, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. The Sub-Agent shall be an independent contractor. This Agreement
does not give rise to any partnership, joint venture or fiduciary relationship.
20. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
[Name of Grantor],
by
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by
---------------------------------
Name:
Title:
[Sub-Agent],
by
---------------------------------
Name:
Title:
117
Annex 2 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of September 26,
1997, as amended and restated as of December 31, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among
Hechinger Investment Company of Delaware, Inc., a Delaware corporation (the
"Borrower"), Centers Holdings, Inc., a Delaware corporation, BSQ Acquisition,
Inc., a Delaware corporation, BSQ Transferee Corp., a Delaware corporation,
Hechinger Company, a Delaware corporation, Hechinger Stores Company, a Delaware
corporation, Hechinger Stores East Coast Company, a Delaware corporation, the
lenders from time to time party thereto (the "Lenders"), The Chase Manhattan
Bank, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), and as collateral agent (in such capacity, the
"Collateral Agent") for the Lenders, BankAmerica Business Credit, Inc., as
documentation agent for the Lenders (in such capacity, the "Documentation
Agent"), and as borrowing base audit agent for the Lenders (in such capacity,
the "Borrowing Base Audit Agent"), Citicorp USA, Inc., as syndication agent for
the Lenders (in such capacity, the "Syndication Agent", and together with the
Administrative Agent, the Documentation Agent, the Borrowing Base Audit Agent
and the Collateral Agent, the "Agents") and The Chase Manhattan Bank, as issuing
bank (in such capacity, the "Issuing Bank") and as swingline lender, (b) the
Parent Guarantee Agreement dated as of September 26, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Parent Guarantee
Agreement") among the Guarantors (as defined therein) and the Agents and (c) the
Subsidiary Guarantee Agreement dated as of September 26, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Guarantee
Agreement" and, collectively with the Parent Guarantee Agreement, the "Guarantee
Agreements"), among the Subsidiary Guarantors (as defined therein) and the
Agents.
The undersigned, a Financial Officer and a Legal Officer, respectively,
of the Borrower, hereby certify to the Agents and each other Secured Party as
follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification Number of each
Grantor:
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2
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been originated by
the Grantors and all Inventory has been acquired by the Grantors in the ordinary
course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true copies
of file search reports from the Uniform Commercial Code filing offices where
filings described in Section 3.16 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
119
3
7. Filing Fees. All filing fees and taxes payable in connection with the
filings described in Section 5 above have been paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule 8
is each equity Investment of the Borrower and each Subsidiary that represents
50% or less of the equity of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct list of all
notes held by the Borrower and each Subsidiary and all intercompany notes
between the Borrower and each Subsidiary of the Borrower and between each
Subsidiary of the Borrower and each other such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by the Borrower to any Subsidiary of the Borrower or
made by any Subsidiary of the Borrower to the Borrower or any other Subsidiary
of the Borrower, which advances will be on and after the date hereof evidenced
by one or more intercompany notes pledged to the Collateral Agent under the
Pledge Agreement, and (b) a true and correct list of all unpaid intercompany
transfers of goods sold and delivered by or to the Borrower or any Subsidiary of
the Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in which
a Mortgage with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this certificate
on this [ ] day of [ ].
HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC.,
by
-------------------------------
Name:
Title:[Financial Officer]
by
-------------------------------
Name:
Title: [Legal Officer]
120
Annex 3 to the
Security Agreement
SUPPLEMENT NO. __ dated as of
, to the Security Agreement dated as
of September 26, 1997, as amended and restated
as of December 31, 1998, among HECHINGER INVESTMENT
COMPANY OF DELAWARE, INC., a Delaware corporation (the
"Borrower"), CENTERS HOLDINGS, INC., a Delaware
corporation ("Holdings"), BSQ ACQUISITION, INC., a
Delaware corporation ("BSQ Acqco"), BSQ TRANSFEREE
CORP., a Delaware corporation ("BSQ Newco"), HECHINGER
COMPANY, a Delaware corporation ("Hechinger"), HECHINGER
STORES COMPANY, a Delaware corporation ("Hechinger
Stores"), HECHINGER STORES EAST COAST COMPANY, a
Delaware corporation ("Hechinger Stores East Coast""),
each other Subsidiary of Holdings listed on Schedule I
thereto (each of Holdings, BSQ Acqco, BSQ Newco,
Hechinger, Hechinger Stores and each such other
Subsidiary individually a "Guarantor" and collectively,
the "Guarantors"; the Guarantors and the Borrower are
referred to collectively herein as the "Grantors") and
THE CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined
herein).
A. Reference is made to (a) the Credit Agreement dated as of September
26, 1997, as amended and restated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among (i) the Borrower, (ii) Holdings, BSQ Acqco, BSQ Newco, Hechinger,
Hechinger Stores, Hechinger Stores East Coast (collectively, the "Parent
Guarantors"), (iii) the lenders from time to time party thereto (the "Lenders"),
(iv) Chase, as issuing bank (in such capacity, the "Issuing Bank"), as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as Collateral Agent and as swingline lender, (v) BankAmerica Business
Credit, Inc., a Delaware corporation ("BABC"), as documentation agent (in such
capacity, the "Documentation Agent") and as borrowing base audit agent (in such
capacity, the "Borrowing Base Audit Agent") for the Lenders and (vi) CITICORP
USA, INC., a Delaware corporation, as syndication agent for the Lenders (in such
capacity, the "Syndication Agent" and, together with the Administrative Agent,
the Documentation Agent, the Borrowing Base Audit Agent and the Collateral
Agent, the "Agents"), (b) the Parent Guarantee Agreement dated as of September
26, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Parent Guarantee Agreement"), among Holdings, BSQ Acqco, BSQ Newco, Hechinger,
Hechinger Stores and the Agents, (c) the Subsidiary Guarantee Agreement dated as
of September 26, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Subsidiary Guarantee Agreement" and, together with the Parent
Guarantee Agreement, the "Guarantee Agreements") among the Guarantors listed on
schedule I hereto and the Agents, (d) the Credit Agreement dated as of December
31, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Supplemental Credit Agreement"), among the Borrower, the Parent Guarantors, the
lenders from time to time party thereto (the "Supplemental Lenders"), and Chase,
as administrative agent and collateral agent thereunder (solely in its capacity
as an agent under the Supplemental Credit Agreement, the "Senior Supplemental
Agent") and (e) the Intercreditor Agreement dated as of December 31, 1998 (as
amended, supplemented or otherwise modified from time to time, the
"Intercreditor Agreement"), among the Borrower, Holdings, the Subsidiary Loan
Parties, the Agents, the Senior Supplemental Agent, Green Equity Investors II,
L.P. and Kmart Corporation.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.16 of Security Agreement provides that additional Borrower
Subsidiaries may become Grantors under the Security Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Borrower Subsidiary (the "New Grantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans
121
the Issuing Bank to issue additional Letters of Credit and as consideration
for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.16 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
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SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable and documented out-of-pocket expenses in connection with this
Supplement, including the reasonable and documented fees, other charges and
disbursements of counsel for the Collateral Agent.
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IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name Of New Grantor],
by
--------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by
--------------------------------
Name:
Title:
124
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
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Description Location
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