================================================================================
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
F.A.O., INC.
and
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
as Borrowers,
THE LENDERS THAT ARE SIGNATORIES HERETO
as the Lenders,
and
XXXXX FARGO RETAIL FINANCE, LLC
as Agent
Dated as of April 30, 2002
================================================================================
Table of Contents
Page
1. DEFINITIONS AND CONSTRUCTION...............................................1
1.1. Definitions........................................................1
1.2. Accounting Terms..................................................25
1.3. Bankruptcy Code...................................................25
1.4. Code..............................................................26
1.5. Construction......................................................26
1.6. Schedules and Exhibits............................................26
2. LOAN AND TERMS OF PAYMENT.................................................26
2.1. Revolving Advances; Swing Loans...................................26
2.2. Special Term Subline..............................................28
2.3. Borrowing Procedures and Settlements..............................28
2.4. Letters of Credit.................................................33
2.5. Payments..........................................................37
2.6. Overadvances......................................................38
2.7. Interest and Letter of Credit Fees:
Rates, Payments, and Calculations.................................38
2.8. Collection of Accounts............................................39
2.9. Crediting Payments; Application of Collections....................40
2.10. Designated Account................................................40
2.11. Maintenance of Loan Account; Statements of Obligations............40
2.12. Fees..............................................................41
2.13. LIBOR Option......................................................41
2.14. Capital Requirements..............................................44
2.15. Joint and Several Liability of Borrowers..........................44
3. CONDITIONS; TERM OF AGREEMENT.............................................47
3.1. Conditions Precedent to the Initial Advance and Issuance of the
Initial Letter of Credit..........................................47
3.2. Conditions Precedent to all Advances and all Letters of Credit....49
3.3. Conditions Subsequent.............................................50
3.4. Term..............................................................50
3.5. Effect of Termination.............................................50
3.6. Early Termination by Borrowers....................................51
3.7. Termination of Special Term Subline...............................51
4. CREATION OF SECURITY INTEREST.............................................52
4.1. Grant of Security Interest........................................52
4.2. Leasehold Interests...............................................52
4.3. Negotiable Collateral.............................................53
4.4. Control of Collateral.............................................53
4.5. Collection of Accounts, General Intangibles, and Negotiable
Collateral........................................................53
4.6. Delivery of Additional Documentation Required.....................54
4.7. Power of Attorney.................................................54
4.8. Right to Inspect; Inventories, Appraisals, Audits.................55
5. REPRESENTATIONS AND WARRANTIES............................................55
5.1. No Encumbrances...................................................56
5.2. Reserved..........................................................56
5.3. Eligible Inventory................................................56
i
Table of Contents
(continued)
Page
5.4. Equipment.........................................................56
5.5. Location of Inventory and Equipment...............................56
5.6. Inventory Records.................................................56
5.7. Legal Status......................................................56
5.8. Due Organization and Qualification; Subsidiaries..................56
5.9. Due Authorization; No Conflict....................................57
5.10. Litigation........................................................57
5.11. No Material Adverse Change........................................58
5.12. Fraudulent Transfer...............................................58
5.13. Employee Benefits.................................................58
5.14. Environmental Condition...........................................58
5.15. Licenses..........................................................59
5.16. Leases............................................................59
5.17. DDAs..............................................................59
5.18. Credit Card Receipts..............................................59
5.19. Brokerage Fees....................................................59
5.20. Payment of Taxes..................................................59
5.21. Bankruptcy Court Disclosures......................................59
5.22. Updates...........................................................60
5.23. Post-Closing Payments.............................................60
5.24. Complete Disclosure...............................................60
6. AFFIRMATIVE COVENANTS.....................................................60
6.1. Accounting System.................................................60
6.2. Collateral and Financial Reporting................................60
6.3. Tax Returns.......................................................64
6.4. Reserved..........................................................64
6.5. Returns...........................................................64
6.6. Title to Equipment................................................64
6.7. Maintenance of Equipment..........................................64
6.8. Taxes.............................................................64
6.9. Insurance.........................................................65
6.10. No Setoffs or Counterclaims.......................................66
6.11. Location of Inventory and Equipment...............................66
6.12. Compliance with Laws..............................................66
6.13. Employee Benefits.................................................66
6.14. Leases............................................................67
6.15. Mailing Lists, Advertising........................................67
6.16. Payroll and Operating Accounts....................................67
6.17. Rent and Lease Obligations........................................67
7. NEGATIVE COVENANTS........................................................68
7.1. Indebtedness......................................................68
7.2. Liens.............................................................69
7.3. Restrictions on Fundamental Changes...............................69
ii
Table of Contents
(continued)
Page
7.4. Disposal of Assets................................................69
7.5. Change of Name or Address.........................................69
7.6. Guarantee.........................................................70
7.7. Nature of Business; Suspension....................................70
7.8. Prepayments and Amendments........................................70
7.9. Change of Control.................................................70
7.10. Consignments......................................................70
7.11. Restricted Payments and Distributions.............................70
7.12. Accounting Methods................................................71
7.13. Investments.......................................................71
7.14. Transactions with Affiliates......................................71
7.15. Store Openings....................................................71
7.16. Compensation......................................................71
7.17. Use of Proceeds...................................................71
7.18. Inventory and Equipment with Bailees..............................72
7.19. No Prohibited Transactions Under ERISA............................72
7.20. Minimum EBITDA....................................................73
7.21. Retail Performance and Other Covenants............................73
7.22. Capital Expenditures..............................................73
8. EVENTS OF DEFAULT.........................................................73
9. THE LENDER GROUP'S RIGHTS AND REMEDIES....................................75
9.1. Rights and Remedies...............................................75
9.2. Remedies Cumulative...............................................78
10. TAXES AND EXPENSES.......................................................78
11. WAIVERS; INDEMNIFICATION.................................................78
11.1. Demand; Protest; etc..............................................78
11.2. The Lender Group's Liability for Collateral.......................79
11.3. Indemnification...................................................79
11.4. Damages...........................................................79
12. NOTICES..................................................................79
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...............................80
14. DESTRUCTION OF BORROWERS' DOCUMENTS......................................81
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...............................81
15.1. Assignments and Participations....................................81
15.2. Successors........................................................84
16. AMENDMENTS; WAIVERS......................................................84
16.1. Amendments and Waivers............................................84
16.2. No Waivers; Cumulative Remedies...................................85
17. AGENT; THE LENDER GROUP..................................................85
17.1. Appointment and Authorization of Agent............................85
17.2. Delegation of Duties..............................................86
17.3. Liability of Agent-Related Persons................................86
17.4. Reliance by Agent.................................................86
iii
Table of Contents
(continued)
Page
17.5. Notice of Default or Event of Default.............................87
17.6. Credit Decision...................................................87
17.7. Costs and Expenses; Indemnification...............................88
17.8. Agent in Individual Capacity......................................89
17.9. Successor Agent...................................................89
17.10. Withholding Tax...................................................89
17.11. Collateral Matters................................................90
17.12. Restrictions on Actions by Lenders; Sharing of Payments...........91
17.13. Agency for Perfection.............................................92
17.14. Payments by Agent to the Lenders..................................92
17.15. Concerning the Collateral and Related Loan Documents..............92
17.16. Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information.............93
17.17. Several Obligations; No Liability.................................94
18. GENERAL PROVISIONS.......................................................94
18.1. Effectiveness.....................................................94
18.2. Section Headings..................................................94
18.3. Interpretation....................................................94
18.4. Severability of Provisions........................................95
18.5. Counterparts; Telefacsimile Execution.............................95
18.6. Revival and Reinstatement of Obligations..........................95
18.7. Integration.......................................................95
18.8. Right to Publish Notice...........................................95
18.9. Parent as Agent for Borrowers.....................................95
iv
Exhibits
A-1 Form of Assignment and Acceptance Agreement
B-1 Business Plan
C-1 Form of Compliance Certificate
L-1 Form of LIBOR Notice
S-1 Form of Solvency Certificate
W-1 Collateral Activity Summary
6.2 Form of Borrowing Base Certificate
Schedules
C-1 Commitments
E-1 Borrowers' Locations
P-1 Liens
R-1 Real Property Collateral
T-1 Tax Liens and Judgments
5.7 Legal Status
5.8 Direct and Indirect Subsidiaries
5.10 Litigation
5.11 Material Changes
5.13 Benefit Plans
5.16 Leases and Capital Leases
5.17 DDAs
5.18 Credit Card Receipts
6.11 Location of Inventory and Equipment
7.1 Indebtedness
7.3 Permitted Transactions
7.4 Disposal of Assets
7.21 Retail Performance Covenants
v
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is entered into as of April 30, 2002, by and among F.A.O., Inc., a
California corporation ("Parent"), FAO Xxxxxxx, Inc., a Delaware corporation
("FAO Xxxxxxx"), and ZB Company, Inc., a Delaware corporation ("ZB" and,
collectively with Parent and FAO Xxxxxxx, "Borrowers" and each a "Borrower"), on
the one hand, and the financial institutions listed on the signature pages
hereof (such financial institutions, together with their respective successors
and assigns, collectively, the "Lenders" and each a "Lender"), and XXXXX FARGO
RETAIL FINANCE, LLC, as agent for the Lenders and any other holder of
Obligations referred to below (in such capacity, "Agent"), on the other hand.
INTRODUCTION
Parent, FAO Xxxxxxx and WFRF, as Lender, are parties to a Loan and
Security Agreement dated as of January 23, 2001, as amended by (i) the First
Amendment to Loan and Security Agreement dated as of September 5, 2001 by and
between Parent and the Lender, (ii) the Second Amendment to Loan and Security
Agreement dated as of December 14, 2001 by and between Parent and the Lender,
(iii) the Third Amendment to Loan and Security Agreement dated as of January 6,
2002 by and among Borrowers and the Lender and (iv) the Fourth Amendment to Loan
and Security Agreement dated as of March 12, 2002 (as so amended, the "TRS Loan
Agreement"). ZB has entered into a Loan and Security Agreement dated as of
September 5, 2001 with Agent and the lenders party thereto, as amended by (i)
the First Amendment to Loan and Security Agreement dated as of October 31, 2001
and (ii) the Second Amendment dated as of April 11, 2002 (as so amended, the "ZB
Loan Agreement").
In connection with the corporate restructuring of, and the related
consolidation of operations by, Parent and its Subsidiaries, the parties hereto
desire to amend and restate each of the TRS Loan Agreement and the ZB Loan
Agreement in their entireties on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties signatory
hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account.
"Accounts" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as such term is defined
from time to time in the Code), and any and all supporting obligations in
respect thereof.
1
"Advances" has the meaning set forth in Section 2.1(a).
"Administrative Borrower" has the meaning set forth in Section 18.9.
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 5%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"Agent" means Xxxxx Fargo Retail Finance, LLC, solely in its capacity
as agent for the Lenders and any other holder of Obligations, and shall include
any successor agent.
"Agent Advance" has the meaning set forth in Section 2.3(d).
"Agent-Related Persons" means Agent, together with its Affiliates, and
the officers, directors, employees, counsel, agents, and attorneys-in-fact of
Agent and such Affiliates.
"Agent's Account" has the meaning set forth in Section 2.8.
"Agent's Discretion" means:
(a) Each reference in the Loan Documents to the exercise
of discretion or the like by Agent shall be to Agent's exercise of its
commercially reasonable judgment, in good faith (which shall be presumed), from
the perspective of a secured asset-based lender, based upon Agent's
consideration of any factor as Agent, taking into account information of which
the Agent then has knowledge, believes:
(i) Will or reasonably could be expected to
materially affect the value of the Collateral, the enforceability or
priority of Agent's security and collateral interests therein, or the
amount which Agent would likely realize therefrom (taking into account
delays which may reasonably be expected to be encountered in Agent's
realizing upon the Collateral and likely Lender Group Expenses in
connection with the enforcement of remedies and associated costs of
collection in each case in any material respect);
(ii) Indicates that any report or financial
information delivered to Agent by or on behalf of Borrowers are
incomplete, inaccurate, or misleading in any material manner or was not
prepared substantially in accordance with the requirements of this
Agreement;
(iii) Suggests a material increase in the likelihood
that a Borrower will become the subject of a bankruptcy or insolvency
proceeding; and/or
(iv) Constitutes a Default or an Event of Default.
(b) In the exercise of such judgment, Agent also may take
into account any of the following factors:
2
(i) Those included in, or tested by, the
definitions of "Eligible Inventory" and "Cost";
(ii) The current financial and business climate
of the industry in which Borrowers compete (having regard for Borrowers'
position in that industry);
(iii) General economic conditions which have a
material adverse effect on Borrowers' cost structure;
(iv) Material changes in or to the mix of the
Borrowers' Inventory;
(v) Seasonality with respect to the Borrowers'
Inventory and the pattern of the Borrowers' retail sales versus that which was
projected by Borrowers;
(vi) Material changes in Availability versus that
which was projected by Borrowers in the Business Plan; and/or
(vii) Such other factors as Agent reasonably
determines as having a material bearing on credit risks associated with
the providing of loans and financial accommodations to Borrowers.
"Agent's Liens" means the Liens granted by Borrowers to Agent for the
benefit of the Lender Group under this Agreement and/or the other Loan
Documents.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of determination,
an amount equal to (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to the first anniversary of the
Closing Date, 2.0% of the Maximum Standard Line Amount, (b) during the period of
time from and including the first anniversary of the Closing Date up to the
second anniversary of the Closing Date, 1.0% of the Maximum Standard Line
Amount, (c) during the period of time from and including the second anniversary
of the Closing Date up to the date which is ninety days before the Maturity
Date, 0.5% of the Maximum Standard Line Amount, and (d) thereafter, zero.
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" has the meaning set forth in Section 15.1
(a) and shall be in the form of Exhibit A-1.
"Athanor" means Athanor Holdings, LLC, a Delaware limited liability
company.
3
"Athanor Indebtedness" means Indebtedness owing by Parent to Athanor
under the Athanor Note or any extension, renewal, replacement, substitution or
refinancing thereof consented to by Agent under the Athanor Intercreditor
Agreement.
"Athanor Intercreditor Agreement" means an amendment and restatement of
the Subordination and Intercreditor Agreement dated as of September 5, 2001 by
and among Athanor, Parent and WFRF in form and substance satisfactory to Agent.
"Athanor Note" means the Subordinated Redeemable Pay-In-Kind Note Due
September 4, 2004 dated September 5, 2001 in the original principal amount of
$4,900,000 issued by Parent to Athanor.
"Authorized Person" means any officer or other employee of the
Administrative Borrower.
"Availability" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount available for Borrowers to borrow under Section 2.1(a) (after giving
effect to all then outstanding Obligations (other than Bank Product Obligations)
and all sublimits and reserves applicable hereunder, including reserves with
respect to Letters of Credit).
"Availability Reserves" means such reserves as Agent from time to time
determines in Agent's Discretion as being appropriate to reflect the impediments
to the Agent's ability to realize upon the Collateral. Without limiting the
generality of the foregoing, Availability Reserves may include (but are not
limited to) reserves based on (but in each case not greater than) the following:
(a)......one-month's rent for any leased store location in a
Landlord Lien State for which an acceptable Collateral Access Agreement has not
been received by Agent (irrespective of whether any rent is currently due);
(b)......in-store customer credits and gift certificates;
(c)......payables (based upon payables which are 30 days or
more past due);
(d)......frequent shopper programs;
(e)......special orders and customer deposits;
(f)......taxes and other governmental charges, including tax
Liens, ad valorem, personal property, sales, and other taxes which may have
priority over the security interests of the Lender Group in the Collateral;
(g)......held or post-dated checks;
(h)......the Lease Reserve;
(i)......the applicable minimum availability requirement; and
(j)......any judgment lien against Borrower or Collateral,
including those listed on Schedule
T-1.
4
"Bailee Acknowledgment" means a record in form and substance
satisfactory to Agent authenticated by any bailee, warehouseman or other third
party in possession of any Equipment or Inventory acknowledging that it holds
possession of the applicable Inventory and/or Equipment for the benefit of
Agent, on behalf of the Lenders.
"Bank Product Agreements" means those certain cash management service
agreements entered into from time to time by Administrative Borrower or its
Subsidiaries in connection with any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Administrative
Borrower or its Subsidiaries to Xxxxx Fargo or its Affiliates pursuant to or
evidenced by the Bank Product Agreements and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all such amounts
that a Borrower is obligated to reimburse to Agent or any member of the Lender
Group as a result of Agent or such member of the Lender Group purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to Administrative Borrower or its
Subsidiaries pursuant to the Bank Product Agreements.
"Bank Products" means any service or facility extended to
Administrative Borrower or its Subsidiaries by Xxxxx Fargo or any Affiliate of
Xxxxx Fargo including: (a) credit cards, (b) credit card processing services,
(c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management,
including controlled disbursement, accounts or services, or (g) Hedge
Agreements.
"Bank Product Reserves" means, as of any date of determination, the
amount of reserves that Agent has established (based upon Xxxxx Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.
"Bankruptcy Case" means, collectively, the jointly-administered cases
filed by the Debtors under Chapter 11 of the Bankruptcy Code with the Bankruptcy
Court, with a lead case no. 01-1749, or any successor case thereto.
"Bankruptcy Code" means the United States Bankruptcy Code (11 X.X.X.xx.
101 et seq.), as amended, and any successor statute.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, or such other successor court where the Bankruptcy Case is
pending.
"Base LIBOR Rate" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/16%), on the basis of the rates at which Dollar deposits are offered
to major banks in the London interbank market on or about 2:00 p.m. (Eastern
time) 2 Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Loan requested by Administrative Borrower in accordance with
this Agreement, which determination shall be conclusive in the absence of
manifest error.
5
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any of the Borrowers, any Subsidiary of Borrowers, or
any ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Blocked Account" means any deposit account established by any
Borrower, including the Concentration Account, at a Blocked Account Bank
pursuant to a Blocked Account Agreement.
"Blocked Account Agreements" means those certain Blocked Account
Agreements, each in form and substance satisfactory to Agent and each of which
is among Borrowers, Agent, and one of the Blocked Account Banks.
"Blocked Account Banks" means those banks or financial institutions
listed on Schedule 5.17.
"Books" means all of each Borrower's and its Subsidiaries' now owned or
hereafter acquired books and records including: ledgers; records indicating,
summarizing, or evidencing such Borrower's or Subsidiary's properties or assets
(including the Collateral) or liabilities; all information relating to such
Borrower's or Subsidiary's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowers" have the meanings set forth in the preamble to this
Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances made on
the same day by the Lenders, or by Agent in the case of an Agent Advance, or by
Swing Lender in the case of a Swing Loan.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Borrowing Base Certificate" has the meaning set forth in Section
6.2(a).
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
"Business Plan" means Borrowers' business plan in form and substance
(including as to scope and underlying assumptions) satisfactory to Agent and
attached hereto as Exhibit B-1, together with any amendment, modification, or
revision to such business plan that has been approved by Agent in the Agent's
Discretion and is attached to this Agreement as a new Exhibit B-1.
"Capital Lease" means any lease which may be capitalized in accordance
with GAAP.
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), other than the Kayne
Holders, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 35%, or more, of the Stock of Parent
having the right to vote for the election of members of Parent's Board of
Directors, (b) the Kayne Holders cease to own or have the right to vote at least
6
15% of the Stock of Parent having the right to vote for the election of members
of Parent's Board of Directors, or (c) any Borrower ceases to own and control
(or, as applicable, Borrowers cease to collectively own and control), directly
or indirectly, 100% of the outstanding capital Stock of each of its Subsidiaries
existing as of the Closing Date or to be created pursuant to a Permitted
Transaction.
"Chattel Paper" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "chattel paper", including, without
limitation, "tangible chattel paper" and "electronic chattel paper", as such
terms are defined from time to time in the Code, and any and all supporting
obligations in respect thereof.
"Closing Date" means the date on which Agent sends Administrative
Borrower an authenticated notice that all of the conditions precedent set forth
in Section 3.1 either have been satisfied or waived.
"Code" means the Uniform Commercial Code as in effect in the State of
New York.
"Collateral" means all Borrowers' now owned or hereafter acquired
right, title, and interest in and to each of the following:
(a) Accounts,
(b) Chattel Paper,
(c) DDAs,
(d) Documents,
(e) General Intangibles,
(f) Goods (including, without limitation, Inventory and
Equipment),
(g) Instruments,
(h) Investment Property,
(i) Letter of Credit Rights,
(j) Real Property Collateral,
(k) the Commercial Tort Claims set forth on Schedule
5.10(b),
(l) money or other assets of each such Borrower that now
or hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(m) any and all proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books,
Chattel Paper, General Intangibles, Goods (including without limitation
7
Equipment and Inventory), Investment Property, Instruments, Letter of
Credit Rights, Real Property, money, DDAs, or other tangible or
intangible property resulting from the sale, exchange, collection, or
other disposition of any of the foregoing, or any portion thereof or
interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, consent executed by any lessor or mortgagee of Real Property, or other
Person in possession of, having a Lien upon, or having rights or interests in
the Equipment or Inventory or any item of Collateral, in each case in form and
substance reasonably satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commercial Tort Claim" means all of Borrowers' right, title and
interest with respect to any "commercial tort claim", as such term is defined in
the Code.
"Commitment" means, at any time, with respect to a Lender, such
Lender's Standard Line Commitment and/ or Special Term Subline Commitment.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 and delivered by the chief accounting officer of Administrative
Borrower to Agent.
"Concentration Account" means account number 41690-61777 of Borrowers,
maintained at Xxxxx Fargo, or such other deposit accounts of Borrowers (located
in the United States) into which cash received in the other Blocked Accounts is
wire transferred as provided in Section 2.8(b).
"Concentration Account Agreement" means the Blocked Account Agreement
among Borrowers, the Concentration Account Bank and Agent, applicable to the
Concentration Account.
"Concentration Account Bank" means Xxxxx Fargo or a replacement bank
approved by Agent in Agent's Discretion.
"Control Agreement" means an agreement, in form and substance
satisfactory to Agent, executed and delivered by the applicable Borrower, Agent,
and the applicable securities intermediary or bank, which agreement is
sufficient to give Agent "control" over the subject Securities Account, DDA or
Investment Property as provided in the Code.
"Copyright Security Agreement" means a copyright security agreement
executed and delivered by each Borrower and Agent, the form and substance of
which is satisfactory to Agent.
"Cost" means the calculated cost of Inventory, as determined from
invoices received by Borrowers, Borrowers' purchase journal or stock ledger,
based upon Borrowers' accounting practices, known to Agent, which practices are
in effect on the date on which this Agreement was executed. "Cost" does not
include any inventory capitalization costs inclusive of advertising, but may
include other charges used in Borrowers' determination of cost of goods sold and
bringing goods to market, all within Agent's sole discretion and in accordance
with GAAP.
8
"Credit Card Agreements" means those certain agreements between Agent
and the Credit Card Processors of Borrowers pursuant to which such Credit Card
Processors agree to transfer on a daily basis all credit card receipts of
Borrowers, or other amounts payable by such Credit Card or Processor, into the
Concentration Account or any other Blocked Account. All Credit Card Agreements
shall be in form and substance satisfactory to Agent.
"Credit Card Processor(s)" means any Person which acts as a credit card
clearinghouse or processor of credit card payments accepted by Borrowers.
"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any "deposit account" maintained by any Borrower, as such
term is defined from time to time in the Code and including only checking or
other demand daily depository account.
"Debtors" means, collectively, Children's Development, Inc., a Delaware
corporation, Children's Products, Inc., a Delaware corporation, Children's
Distribution, L.L.C., a New Jersey limited liability company, Noodle Kidoodle,
Inc., a Delaware corporation, Zany Brainy Direct LLC, a Delaware limited
liability company, and Zany Brainy, Inc., a Pennsylvania corporation.
"deems itself insecure" means that the Person deems itself insecure in
accordance with the provisions of Section 1208 of the Bankruptcy Code.
"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" has the meaning set forth in Section 2.3(c)(ii).
"Defaulting Lenders Rate" means the Reference Rate for the first three
days from and after the date the relevant payment is due and thereafter at the
interest rate then applicable to Advances.
"Designated Account" means account number 4168372225 of Borrowers
maintained with Borrowers' Designated Account Bank, or such other deposit
account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by Borrowers to Agent.
"Designated Account Bank" means Xxxxx Fargo, whose office is located at
San Francisco, California, and whose ABA number is 000000000.
"Dilution" means, as of any date of determination, a percentage, based
upon the experience of the immediately prior 360 days, that is the result of
dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to credit card
receivables during such period by (b) the Borrowers' collections with respect to
credit card receivables during such period (excluding extraordinary items) plus
the Dollar amount of clause (a).
9
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the Advance Rate against Eligible Credit Card Accounts by
one percentage point for each percentage point by which Dilution is in excess of
7.5%, such amount to be determined by Agent upon the completion of the first
field examination conducted after the Closing.
"Disbursement Letter" means an instructional letter executed and
delivered by Administrative Borrower to Agent regarding the extensions of credit
to be made on the Closing Date, the form and substance of which shall be
satisfactory to Agent.
"Document" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to any "document", as such term is
defined from time to time in the Code, and any and all supporting obligations in
respect thereof.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Parent's and its
Subsidiaries consolidated net earnings (or loss), minus non-cash extraordinary
gains, plus non-cash extraordinary losses, plus interest expense, income taxes,
and depreciation and amortization for such period, as determined in accordance
with GAAP.
"Eligible Credit Card Accounts" means Accounts owed to Borrowers from
Credit Card Processors arising from purchases by the Borrowers' customers on
credit cards, to the extent deemed eligible in the Agent's Discretion, net of
all applicable Reserves.
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrowers' respective
businesses that are located at Borrowers' premises identified on Schedule E-1
and, in the Agent's Discretion, in transit Inventory in an amount not to exceed
$20,000,000 which was purchased using an Inventory Letter of Credit that, as of
any date of determination, had been drawn within the preceding 40 days, provided
that all related Letter of Credit Obligations (including any repayment
obligations under Section 2.4) have been repaid in full, in each instance that
strictly comply with each and all of the representations and warranties
respecting Inventory made by Borrowers to the Lender Group in the Loan
Documents, and that are and at all times continue to be acceptable to the Lender
Group in all respects; provided, however, that standards of eligibility may be
fixed and revised from time to time by the Agent in the Agent's Discretion. In
determining the value of Eligible Inventory, such Inventory shall be valued at
the lower of Cost or market on a basis consistent with Borrowers' current and
historical accounting practices less the aggregate amount of all Inventory
Reserves. An item of Inventory shall not be included in Eligible Inventory if:
(a)......it is not owned solely by a Borrower or a Borrower
does not have good, valid, and marketable title thereto;
(b)......it is not located at one of the locations set forth
on Schedule E-1;
(c)......it is not subject to a valid and perfected first
priority security interest in favor
of the Lender Group;
10
(d)......it consists of unsaleable goods returned or rejected
by Borrowers' customers or goods in transit except to the extent expressly
included above;
(e)......it is obsolete or slow moving, an item custom-made
for a third party, packaging and shipping materials, supplies used or consumed
in Borrowers' business, defective goods, "seconds," or Inventory acquired on
consignment; or
(f)......it is subject to a Lien in favor of any third Person
(unless Agent has an executed Bailee Acknowledgment from the applicable bailee
or warehouseman, if applicable, and other than a KBB Lien or a Permitted Lien
arising under clauses (b), (c), (f), (g) or (h) of the definition of "Permitted
Lien").
"Eligible Transferee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $5,000,000,000, or the asset based lending Affiliate of such bank, (b)
a commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development or a
political subdivision of any such country, and having total assets in excess of
$5,000,000,000, or the asset based lending Affiliate of such bank; provided that
such bank is acting through a branch or agency located in the United States, (c)
a finance company, insurance or other financial institution, or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having total assets in excess of
$500,000,000, (d) any Affiliate (other than individuals) of an existing Lender,
or (e) any other Person approved by Agent and Administrative Borrower.
"Entered" means entered on the docket with respect to the Bankruptcy
Case by the Clerk of the Bankruptcy Court.
"Equipment" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "equipment", as such term is defined
from time to time in the Code, fixtures and vehicles (including motor vehicles)
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"Equipment Financing Indebtedness" means Indebtedness secured by an
Equipment Financing Lien.
"Equipment Financing Lien" means a Lien granted by any Borrower on such
Borrower's Equipment or a portion thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C.ss.ss.1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrowers under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrowers under IRC Section 414(c), (c) solely for purposes of Section 302 of
11
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrowers are members under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrowers and whose employees are aggregated with the employees of
Borrowers under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan, (b) the withdrawal of a Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrowers, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrowers or its Subsidiaries or any of their ERISA
Affiliates.
"Estate" means, collectively, the estates of the Debtors created under
Section 541 of the Bankruptcy Code by virtue of the Bankruptcy Case.
"Event of Default" has the meaning set forth in Section 8.
"FAO Purchase Agreement": The Asset Purchase Agreement dated November
19, 2001 by and among Parent, Xxxxxxx, KBB Retail Assets, QFS and Vendex.
"Fee Letter" means that certain fee letter agreement dated as of the
date hereof between Borrowers and Agent, in form and substance satisfactory to
Agent in Agent's discretion.
"FEIN" means Federal Employer Identification Number.
"Final Bankruptcy Court Order" means a Final Order in form, scope and
substance acceptable to the Agent finally approving, and authorizing the Debtors
to enter into the ZB Purchase Agreement and complete the transactions
contemplated thereby, which order must include a finding that Parent is a good
faith purchaser under Section 363(m) of the Bankruptcy Code, as such order may
be amended, modified or supplemented from time to time with the express written
joinder and consent of the Agent and the Borrowers and the approval of the
Bankruptcy Court, which order has not been vacated or appealed with respect to
the questions of whether Parent is a good faith purchaser under Section 363(m)
of the Bankruptcy Code or whether the transactions contemplated by the ZB
Purchase Agreement may be completed, or reversed, stayed, modified or
supplemented.
"Final Bankruptcy Court Order Date" means the date which the Final
Bankruptcy Court Order shall have been duly Entered by the Bankruptcy Court and
shall be in full force and effect, and shall not have been reversed, stayed,
modified or amended, absent written consent of the Agent and the Borrowers.
12
"Final Order" means an order of the Bankruptcy Court (a) as to which
the time to appeal, petition for certiorari or move for reargument or rehearing
has expired and as to which no appeal, petition for certiorari or other
proceedings for reargument or rehearing shall then be pending, or (b) if an
appeal, writ of certiorari, reargument or rehearing thereof has been filed or
sought, such order of the Bankruptcy Court shall have been affirmed by the
highest court to which such order was appealed, or certiorari shall have been
denied or reargument or rehearing shall have been denied or resulted in no
modification of such order, and the time to take any further appeal, petition
for certiorari or move for reargument or rehearing shall have expired.
"Funding Date" means any date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "general intangibles" (as
such term is defined from time to time in the Code), and any and all supporting
obligations in respect thereof.
"Goods" means all of Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "goods", as such term is defined from time
to time in the Code, including, without limitation, any and all Inventory and
Equipment.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hilco Participant" means Hilco Capital LP.
"Hilco Participation Agreement" means the Participation Agreement of
even date herewith by and among Agent, WFRF and the Hilco Participant.
"Indebtedness" means: (a) all obligations of Borrowers for borrowed
money, (b) all obligations of Borrowers evidenced by bonds, debentures, notes,
13
or other similar instruments and all reimbursement or other obligations of
Borrowers in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrowers under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of any Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of any Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to such Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indebtedness" shall not include trade credit extended to the Borrowers in the
ordinary course of business or indemnification obligations assumed by Borrowers
under the terms of contracts entered into by Borrowers in the ordinary course of
business.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Instruments" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "instruments", including, without
limitation, any "promissory notes", as such terms are defined from time to time
in the Code, and any and all supporting obligations in respect thereof.
"Intangible Assets" means, with respect to any Person, that portion of
the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Interest Period" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or
3 months thereafter; provided, however, that (a) if any Interest Period would
end on a day that is not a Business Day, such Interest Period shall be extended
(subject to clauses (c)-(e) below) to the next succeeding Business Day, (b)
interest shall accrue at the applicable rate based upon the LIBOR Rate from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (c) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (d) with respect
to an Interest Period numerically corresponding day in the calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period), the Interest Period shall end on the last
Business Day of the calendar month that is 1, 2, or 3 months after the date on
which the Interest Period began, as applicable, and (e) Borrowers (or
Administrative Borrower on behalf thereof) may not elect an Interest Period
which will end after the Maturity Date.
"Inventory" means all Borrowers' now owned or hereafter acquired right,
title, and interest with respect to "inventory", as that term is defined from
time to time in the Code, including, without limitation, goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in a
Borrower's business.
14
"Inventory Letter of Credit" means a documentary Letter of Credit
issued to support the purchase by a Borrower of Inventory prior to transit to a
location set forth on Schedule E-1, that provides that all draws thereunder must
require presentation of customary documentation (including, if applicable,
commercial invoices, packing list, certificate of origin, xxxx of lading or
airway xxxx, customs clearance documents, quota statement, inspection
certificate, beneficiaries statement and xxxx of exchange, bills of lading, dock
warrants, dock receipts, warehouse receipts, or other documents of title) in
form and substance reasonably satisfactory to Agent and reflecting the passage
to such Borrower of title to first quality Inventory conforming to such
Borrower's contract with the seller thereof. Any such Letter of Credit shall
cease to be an "Inventory Letter of Credit" at such time, if any, as the goods
purchased thereunder become Eligible Inventory.
"Inventory Reserves" means such reserves as may be established from
time to time by Agent in Agent's Discretion with respect to the determination of
the saleability, at retail, of the Eligible Inventory or which reflect such
other factors as affect the current retail or market value of the Eligible
Inventory. Without limiting the generality of the foregoing, Inventory Reserves
may include (but are not limited to) reserves based on the following:
(a)......seasonality;
(b)......shrinkage;
(c)......imbalance;
(d)......change in Inventory character, composition or mix;
(e)......markdowns (both permanent and point of sale);
(f)......damaged or unsaleable returns;
(g)......retail markons or markups inconsistent with prior
period practice and performance, current business plans, or advertising calendar
and planned advertising events; and
(h)......estimated reclamation claims of unpaid sellers of
Inventory to Borrowers, if any;
provided, however, that Inventory Reserves shall not include reserves for items
already included in Borrowers' calculation of the value of Eligible Inventory
(such as markdowns to market of Inventory in the calculation of the value of
Inventory).
"Investment Property" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "investment property", as
such term is defined from time to time in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect, and the
regulations thereunder.
"Kayne Holders" means, collectively, (a) Xxxx Xxxxx and (b) Xxxxx
Xxxxxxxx Investment Management, Inc. and its Affiliates.
15
"KBB Lien" means the Lien granted by Parent or FAO Xxxxxxx to secure
the Vendex Indebtedness.
"KBB Retail Assets" means KBB Retail Assets Corp., a New York
corporation, formerly known as F.A.O. Xxxxxxx.
"Key Managers" means Xxxxxxx Xxxxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxx.
"Landlord Lien State" means any state or other jurisdiction under whose
statutory or common law the rights of a landlord in assets of that landlord's
tenant, for unpaid rent, are senior or equal in priority to a perfected security
interest in such assets.
"L/C" has the meaning set forth in Section 2.4(a).
"L/C Guaranty" has the meaning set forth in Section 2.4(a).
"Lease" means any lease or other agreement, no matter how styled or
structured, pursuant to which the Borrowers are entitled to the use or occupancy
of any space.
"Lease Reserve" means, as of any date of determination, an amount equal
to the liabilities of the Borrowers under all Capital Leases and operating
leases of Personal Property for the next succeeding three months from such date
of determination to the extent that monthly payments on such Capital Leases and
operating leases exceed the amounts used in the calculation of Net Retail
Liquidation Value, provided that such amount shall not be less than zero.
"Leasehold Interests" means Borrowers' leasehold estate or interest in
each of the properties at or upon which Borrowers conduct business or maintain
any of the Collateral, together with Borrowers' interest in any of the
improvements and fixtures located upon or appurtenant to each leasehold
interest, including without limitation, any rights of Borrowers to payments,
proceeds of value of any kind or nature realized upon the sale or transfer of
such estate or interest.
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 15.1 and in any
event shall include the Hilco Participant.
"Lender Group" means, individually and collectively, each of the
individual Lenders, Agent and the Hilco Participant.
"Lender Group Expenses" means all: costs or expenses (including taxes
and insurance premiums) required to be paid by Borrowers under any of the Loan
Documents that are paid or incurred by the Lender Group; fees or charges paid or
incurred by the Lender Group in connection with the Lender Group's transactions
with Borrowers, including fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC searches and including searches with the patent
and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
Personal Property Collateral or Real Property Collateral appraisals), real
16
estate surveys, real estate title policies and endorsements, Collateral and
field examinations and environmental audits; costs and expenses incurred by
Agent in the disbursement of funds to Borrowers (by wire transfer or otherwise);
charges paid or incurred by Agent resulting from the dishonor of checks; costs
and expenses paid or incurred by Agent to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Personal Property Collateral or the Real Property
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by the Lender Group in
examining Borrowers' Books; costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with Borrowers or any guarantor;
and the reasonable attorneys fees and expenses incurred by Agent and each Lender
in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or concerning the Loan Documents (including
attorneys fees and expenses incurred in connection with the Bankruptcy Case, or
any other Insolvency Proceeding concerning Borrowers or any guarantor of the
Obligations), irrespective of whether suit is brought.
"Letter(s) of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Letter of Credit Fee" has the meaning set forth in Section 2.7(b).
"Letter of Credit Rights" means all of Borrowers' now owned or
hereafter acquired right, title, and interest with respect to "letter-of-credit
rights", as such term is defined from time to time in the Code, and any and all
supporting obligations in respect thereof.
"LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan,
the rate per annum determined by Agent (rounded upwards, if necessary, to the
next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b)
100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means each portion of an Advance under the Standard
Line that bears interest at a rate determined by reference to the LIBOR Rate.
"LIBOR Rate Margin" means (a) for the period from the Closing Date
through June 30, 2002, 3.50% and (b) thereafter, the applicable percentage set
forth opposite Borrowers' Average Fiscal Quarter Availability in the following
table. The LIBOR Rate Margin shall be adjusted on the first Business Day of each
fiscal quarter in Borrowers' fiscal year and shall be determined by reference to
the average level of Availability (determined as of the end of each Business
Day) during the immediately preceding fiscal quarter or part thereof of the
Borrowers.
17
Average Fiscal Quarter Availability LIBOR Rate Margin
----------------------------------- -----------------
Greater than $35,000,000 2.25%
Greater than $15,000,000 but less than or equal to $35,000,000 2.50%
Greater than $10,000,000 but less than or equal to $15,000,000 3.00%
Greater than $5,000,000 but less than or equal to $10,000,000 3.50%
"Lien" means any interest in property securing an obligation owed to,
or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.11.
"Loan Documents" means this Agreement, , the Letters of Credit, the
Concentration Account Agreement, the Blocked Account Agreements, the ZB
Trademark Security Agreement, the Xxxxxxx Trademark Security Agreement, the
Mortgages, the Credit Card Agreements, the Participation Agreements, the Parent
Pledge Agreement, the Athanor Intercreditor Agreement, the Vendex Intercreditor
Agreement, the PNC Intercreditor Agreement, any Bank Product Agreement, any
certificates (including, without limitation, the Borrowing Base Certificate and
Compliance Certificate) delivered from time to time by a Borrower pursuant to
this Agreement or any other Loan Document, any note or notes executed by
Borrowers and payable to the Lender Group, and any other agreement entered into,
now or in the future, in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrowers taken as a whole, including a material
adverse change in the business, operations, results or operations, assets,
liabilities or condition since the date of the latest financial information
submitted to Agent hereunder or at any time as compared to the Business Plan
attached hereto as Exhibit B-1, (b) the material impairment of a Borrower's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group to enforce the Obligations or realize upon the
Collateral, (c) a material adverse effect on the value of the Collateral or the
amount that the Lender Group would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (d) a material impairment of the priority of the Lender
Group's Liens with respect to the Collateral.
"Maturity Date" has the meaning set forth in Section 3.4.
18
"Maximum Amount" means the sum of the Maximum Standard Line Amount and
the Special Term Subline Amount.
"Maximum Standard Line Amount" means $115,000,000.
"Mortgages" means one or more mortgages, leasehold mortgages, deeds of
trust, leasehold deeds of trust, or deeds to secure debt, executed by Borrowers
in favor of Agent for the benefit of the Lender Group, the form and substance of
which shall be satisfactory to Agent, that encumber the Real Property Collateral
and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrowers, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Negotiable Collateral" means all of Borrowers' now owned and hereafter
acquired right title and interest with respect to letters of credit,
Instruments, Documents, Goods covered by Documents, Chattel Paper and all
supporting obligations of the foregoing.
"Net Liquidation Percentage" means, at any date of determination, the
percentage of the Cost value of Borrowers' Eligible Inventory that is estimated
to be recoverable in an orderly liquidation of such Eligible Inventory, net of
liquidation expenses, such percentage to be as determined from time to time by
Agent in Agent's Discretion or by a qualified appraisal company selected by
Agent.
"Net Retail Liquidation Value" means, at any date of determination, the
result (expressed in Dollars) of the Net Liquidation Percentage times the Cost
value of Eligible Inventory as of such date.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations under any outstanding
Letters of Credit, Bank Product Obligations, premiums, liabilities (including
all amounts charged to Borrowers' Loan Account pursuant hereto), obligations,
fees, charges, costs, or Lender Group Expenses (including any fees or expenses
that, but for the provisions of the Bankruptcy Code, would have accrued), lease
payments, guaranties, covenants, and duties owing by Borrowers to the Lender
Group of any kind and description (whether pursuant to or evidenced by the Loan
Documents or pursuant to any other agreement between the Lender Group and
Borrowers, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrowers to others (excluding trade claims or other liabilities owed to a
particular member of the Lender Group unrelated to this Agreement) that the
Lender Group may have obtained by assignment or otherwise, and further including
all interest not paid when due and all Lender Group Expenses that Borrowers are
required to pay or reimburse by the Loan Documents, by law, or otherwise.
For the purposes of Sections 2.3(c)(iii), 2.3(d), 2.7(a) and 15.1, the
definition of Required Lenders, and determining whether an Overadvance has
occurred under Section 2.6, the term "Obligations" shall not include Bank
Product Obligations.
19
"Ontario Lien" means the lien on the racking and conveyor system at
Parent's Ontario, California distribution center granted by Parent to the
landlord of such distribution center to secure Parent's lease of such
distribution center.
"Operations Plan" means Borrowers' written plan to consolidate their
purchasing systems information (including inventory tracking) systems, and
warehouse and distribution center operations by August 1, 2002, which plan shall
be reasonably satisfactory to Agent.
"Originating Lender" has the meaning set forth in Section 15.1(e).
"Overadvance" has the meaning set forth in Section 2.6.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Parent Pledge Agreement" means a stock pledge agreement executed and
delivered by Parent in favor of Agent, for the benefit of the Lender Group, in
form and substance acceptable to Agent, pursuant to which Parent shall pledge
100% of the capital stock of each of its Subsidiaries.
"Participant" has the meaning set forth in Section 15.1(e).
"Participation Agreements" means those Participation and Intercreditor
Agreements of even date herewith by and among Agent, WFRF and the respective
Participants named therein, including the Hilco Participation Agreement.
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Agent, from Existing Lender respecting the amount necessary to
repay in full all of the obligations of Borrowers owing to Existing Lender and
obtain a termination or release of all of the Liens existing in favor of
Existing Lender in and to the properties or assets of Borrowers.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Perfection Certificate" means the certification of officers forms
submitted by Agent to Administrative Borrower with respect to each Borrower,
together with Borrowers' completed responses to the inquiries set forth therein,
the form and substance of such responses to be satisfactory to Agent.
"Permitted Indebtedness" means Indebtedness set forth on Schedule 7.1.
"Permitted Liens" means the following Liens (to the extent, with
respect to Borrowers or any of its assets or properties, if created, incurred or
assumed by the Borrowers before the filing Date same are valid, perfected, and
non-avoidable in accordance with applicable law): (a) Liens held by the Lender
Group, (b) Liens for unpaid taxes that either (i) are not yet due and payable or
(ii) are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1,
(d) the interests of lessors under operating leases and purchase money security
interests and Liens of lessors under Capital Leases or Permitted Financing
20
Indebtedness to the extent that the acquisition or lease of the underlying asset
is permitted under Section 7.22 or existing as of the date of this Agreement and
so long as the Lien only attaches to the asset purchased or acquired and only
secures the purchase price of the asset, (e) Liens arising by operation of law
in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of Borrowers and not
in connection with the borrowing of money, and which Liens either (i) are for
sums not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance or other social security
legislation, (g) Liens or deposits to secure performance of bids, tenders,
utility contracts or leases (to the extent not prohibited under this Agreement),
incurred in the ordinary course of business of Borrowers and not in connection
with the borrowing of money, (h) Liens arising by reason of security for surety
or appeal bonds or statutory or regulatory obligations in the ordinary course of
business of Borrowers, (i) Liens with respect to the Real Property Collateral
that are exceptions to the commitments for title insurance issued in connection
with the Mortgages, as accepted by Agent, (j) with respect to any Real Property
that is not subject to a Mortgage, easements, rights of way, zoning and similar
covenants and restrictions, Liens contemplated by Section 4.2(b)(ii), and
similar encumbrances that customarily exist on properties of Persons engaged in
similar activities and similarly situated and that in any event do not
materially interfere with or impair the use or operation of the Collateral by
Borrowers or the value of the Lender Group's Lien thereon or therein, or
materially interfere with the ordinary conduct of the business of Borrowers, (k)
Equipment Financing Liens, (l) the Ontario Indebtedness and (m) Liens of
depositary institutions.
"Permitted Protest" means the right of Borrowers to protest any Lien
(other than any such Lien that secures the Obligations), tax (other than payroll
taxes or taxes that are the subject of a United States federal tax lien or any
state or local tax lien), or rental payment, provided that (a) a reserve with
respect to such obligation is established on the books of Borrowers in an amount
that is reasonably satisfactory to Agent, (b) any such protest is instituted and
diligently prosecuted by Borrowers in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of the Lender Group in
and to the Collateral.
"Permitted Subordinated Indebtedness" means unsecured Indebtedness
contractually subordinated to the Obligations; provided that the terms of such
Indebtedness and the subordination thereof shall be satisfactory to Agent in
Agent's Discretion. For purposes of clarity, the Vendex Indebtedness is secured
Indebtedness and is not Permitted Subordinated Indebtedness.
"Permitted Transaction" has the meaning set forth on Schedule 7.3.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
21
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrowers or with respect to which it may incur
liability.
"PNC" means PNC Leasing, LLC.
---
"PNC Indebtedness" means any Indebtedness incurred under the PNC Loan
Documents.
"PNC Intercreditor Agreement" means the Amended and Restated Lien
Priority Agreement by and between Agent and PNC.
"PNC Loan Documents" means the Letter Agreement - Special Term Subline
between the Borrowers and PNC dated September 5, 2001 and all related
agreements, instruments and documents.
"Post-Closing Payments" means, collectively, the Cure Costs, the
Post-Closing Payments, and the Additional Post-Closing Payments (as each such
term is defined in the ZB Purchase Agreement) and any other post-closing
monetary obligations of the Borrowers to the Debtors' Estates or any other
Person under the ZB Purchase Agreement.
"Pro-Rata Share" means, with respect to a Lender, a fraction (expressed
as a percentage), the numerator of which is the amount of such Lender's
Commitment and the denominator of which is the aggregate amount of the
Commitments.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Indebtedness related to Capital Leases) incurred at
the time of the acquisition of any fixed personal property assets for the
purpose of financing all or any part of the acquisition cost thereof, to the
extent such transaction is permitted under Section 7.22.
"QFS" means Quality Fulfillment Services, Inc., a Virginia corporation.
"Real Property" means any fee, leasehold or other estate or interest in
real property now or hereafter owned or leased by a Borrower and the
improvements thereto.
"Real Property Collateral" means all of Borrowers' right, title, and
interest (whether as owner, lessee, or otherwise) in the parcel or parcels of
real property and the related improvements thereto, and each of the leased
locations, whether or not identified on Schedule R-1, and any Real Property
hereafter acquired by Borrowers.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Xxxxx Fargo Bank, National Association, or any successor
thereto, as its "prime rate," irrespective of whether such announced rate is the
best rate available from such financial institution.
"Reference Rate Loan" means each portion of an Advance under the
Standard Line that bears interest at a rate determined by reference to the
Reference Rate.
"Reference Rate Margin" means (a) for the period from the Closing Date
through June 30, 2002, 1.50% and (b) thereafter, the applicable percentage set
forth opposite Borrowers' Average Fiscal Quarter Availability in the following
table. The Reference Rate Margin shall be adjusted on the first Business Day of
each fiscal quarter in Borrowers' fiscal year and shall be determined by
reference to the average level of Availability (determined as of the end of each
Business Day) during the immediately preceding fiscal quarter or part thereof of
the Borrowers.
22
Average Fiscal Quarter Availability Reference Rate Margin
----------------------------------- ---------------------
Greater than $35,000,000 0.25%
Greater than $15,000,000 but less than or equal to $35,000,000 0.50%
Greater than $10,000,000 but less than or equal to $15,000,000 1.00%
Greater than $5,000,000 but less than or equal to $10,000,000 1.50%
"Reportable Event" means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Required Lenders" means (i) so long as three or fewer Lenders are
party to this Agreement, two of the three Lenders and (ii) so long as more than
three Lenders are party to this Agreement, Lenders whose Pro Rata Shares in the
aggregate constitute 50.1% or more of the Commitments, provided that such 50.1%
must be comprised of two or more Lenders and may not be comprised of only one
Lender.
"Reserve Percentage" means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Reserves" means all (if any) Availability Reserves, Inventory
Reserves, Bank Products Reserves and any other reserves which may be established
by Agent in the Agent's Discretion under this Agreement.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of, or other equity interest in, any Borrower now or hereafter outstanding,
except a dividend payable solely in shares of stock or interests of the same
class, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock of, or other equity interest in any Borrower now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of, or other equity interest in any Borrower now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption purchase, retirement, defeasance (including
economic or legal defeasance), sinking fund or similar payment with respect to,
any subordinated indebtedness.
23
"Retiree Health Plan" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Sale-Leaseback Indebtedness" means Indebtedness (other than the
Obligations, but including Indebtedness related to Capital Leases) incurred in
connection with any sale-leaseback transaction involving personal property of
the Borrowers to the extent such transaction is permitted under Section 7.22.
"Securities Account" means a "securities account" as such term is
defined from time to time in the Code.
"Settlement" has the meaning set forth in Section 2.3(e)(i).
"Settlement Date" has the meaning set forth in Section 2.3(e)(i).
"Solvency Certificate" means a certificate substantially in the form of
Exhibit S-1 and delivered by the chief financial officer of each Borrower to
Agent.
"Special Term Subline" has the meaning set forth in Section 2.2.
"Special Term Subline Amount" means $12,000,000.
"Special Term Subline Commitment" means, with respect to each Lender,
its Special Term Subline Commitment, and, with respect to all Lenders, their
Special Term Subline Commitments, in each case as such Dollar amounts are set
forth beside such Lender's name under the heading "Special Term Subline
Commitment" on Schedule C-1 or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 15.1.
"Standard Line" means the line of credit provided under Section 2.1(a).
All Agent Advances, Swing Loans, Overadvances and purchases of risk
participations in Letters of Credit shall be deemed made under the Standard
Line.
"Standard Line Commitment" means, with respect to each Lender, its
Standard Line Commitment, and, with respect to all Lenders, their Standard Line
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the heading "Standard Line Commitment" on Schedule C-1 or on
the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of Section
15.1, as such Standard Line Commitment may be adjusted from time to time in
accordance with the provisions of Section 15.1.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
24
"Swing Lender" means WFRF or any other Lender that, at the request of
Borrowers and with the consent of Agent agrees, in such Lender's sole
discretion, to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(i).
"Trademark Security Agreement" means a trademark security agreement
executed and delivered by a Borrower in form and substance satisfactory to
Agent.
"TRS Loan Agreement" has the meaning set forth in the Introduction to
this Agreement.
"Vendex" means Royal Vendex KBB, a Netherlands corporation.
"Vendex Indebtedness" means Indebtedness owing by Parent and/or FAO
Xxxxxxx to KBB Retail Assets and QFS (or any successor thereto) under the Vendex
Notes or any extension, renewal, replacement substitution or refinancing thereof
consented to by Agent under the Vendex Intercreditor Agreement.
"Vendex Intercreditor Agreement": An intercreditor and subordination
agreement executed and delivered by KBB Retail Assets, QFS Parent, Xxxxxxx and
Agent, the form and substance of which is satisfactory to Agent.
"Vendex Notes": Collectively, the Subordinated Notes (as defined in the
Vendex Intercreditor Agreement) in the aggregate principal amount of $17,230,537
issued by FAO Xxxxxxx to Vendex and its Subsidiaries.
"Voidable Transfer" has the meaning set forth in Section 18.6.
"Xxxxx Fargo" means Xxxxx Fargo Bank, National Association, a national
banking association.
"WFRF" means Xxxxx Fargo Retail Finance, LLC.
"ZB Loan Agreement" has the meaning set forth in the Introduction of
this Agreement.
"ZB Purchase Agreement" means the Asset Purchase Agreement by and among
the ZB, Parent and the Debtors dated as of August 31, 2001.
1.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3. Bankruptcy Code. Any terms used in this Agreement which are defined in the
Bankruptcy Code shall be construed and defined as set forth from time to time in
the Bankruptcy Code, unless otherwise defined herein.
25
1.4. Code. Any terms used in this Agreement that are defined in the Code shall
be construed and defined as set forth from time to time in the Code unless
otherwise defined herein.
1.5. Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by the
requisite members of the Lender Group. Section, subsection, clause, schedule,
and exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.6. Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1. Revolving Advances; Swing Loans.
(a) Subject to the terms and conditions of this Agreement and during the term of
this Agreement, each Lender with a Standard Line Commitment agrees (severally
and not jointly) to make advances (collectively, including the Swing Loans and
the Agent Advances, the "Advances") to Borrowers in an aggregate amount at any
one time outstanding not to exceed such Lender's Pro Rata Share of an amount
equal to the least of (i) the Maximum Standard Line Amount less the outstanding
balance of all undrawn or unreimbursed Letters of Credit, or (ii) the Borrowing
Base less the outstanding balance of all undrawn or unreimbursed Letters of
Credit and, without duplication, the aggregate amount of Availability Reserves.
For purposes of this Agreement, "Borrowing Base", as of any date of
determination, shall mean the result of:
(x) the lesser of
(i) $115,000,000; or
(ii) an amount equal to the sum of (A) (I) during the calendar months of
May through August 2002, 87.5% of the Net Retail Liquidation Value and (II) at
all other times, 85% of the Net Retail Liquidation Value plus (B) the lesser of
(I) 75% of Eligible Credit Card Accounts or (II) $7,500,000, less the amount of
the Dilution Reserve plus (C) 85% of the Net Liquidation Percentage times the
undrawn amount of undrawn Inventory Letters of Credit; or
(iii) an amount equal to the sum of (A) (I) during the period commencing on
December 16 of any calendar year and ending on September 30 of the following
26
calendar year, 67.5% of the Cost value of Eligible Inventory, (II) during the
calendar month of October of any calendar year, 72%, of the Cost value of
Eligible Inventory, (III) during the calendar month of November of any calendar
year, 78% of the Cost value of Eligible Inventory, and (IV) during the period
commencing on December 1 of any calendar year and ending on December 15 of such
year, 75% of the Cost value of Eligible Inventory plus (B) the lesser of (I) 75%
of Eligible Credit Card Accounts or (II) $7,500,000, less the amount of the
Dilution Reserve plus (C) 85% of the Net Liquidation Percentage times the
undrawn amount of undrawn Inventory Letters of Credit;
minus
(y) the aggregate amount of Reserves, without duplication, if any,
established by Agent under Sections 2.1(b), 6.14 and 10;
Notwithstanding anything to the contrary contained in this Agreement, so long as
the Special Term Subline has not been terminated, the sum of the aggregate
outstanding Advances plus the Special Term Subline plus all Inventory Letters of
Credit plus outstanding stand-by Letters of Credit in excess of $1,000,000 shall
not exceed (A) 100% of the Net Retail Liquidation Value plus the lesser of 75%
of Eligible Credit Card Accounts or $7,500,000 at any time during the period
commencing on the Closing Date and ending on October 31, 2002, (B) 95% of the
Net Retail Liquidation Value plus the lesser of 75% of Eligible Credit Card
Accounts or $7,500,000 at any time during the period commencing on November 1,
2002 and ending on December 31, 2002, and (C) after December 31, 2002, 90% of
the Net Retail Liquidation Value based on a five day trailing average, provided
that at no time shall such amount exceed 95% of the Net Retail Liquidation
Value.
(b) Anything to the contrary in Section 2.1(a) above notwithstanding, Agent may
create Reserves, without duplication, against the Borrowing Base or reduce its
advance rates based upon Eligible Inventory without declaring an Event of
Default (i) for any amount subject to a Permitted Protest, (ii) for amounts
owing to landlords or similar Persons who could assert a statutory lien in
respect of any of the Collateral, (iii) as determined by Agent based on
noncompliance with the covenants set forth in Section 7.21, or (iv) as
determined by Agent in the Agent's Discretion.
(c) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement.
27
(d) The Advances made by each Lender on or after the Closing Date shall be made
in amounts calculated by Agent such that, as soon as possible after the Closing
Date and after giving effect to such Advances, each Lender's aggregate
outstanding Advances calculated as a percentage of all of the then outstanding
Advances shall be equal to such Lender's Pro Rata Share after which time the
Lender Group will fund Advances as otherwise provided herein.
2.2. Special Term Subline. Subject to the terms and conditions of this
Agreement, on the Closing Date each Lender with a Special Term Subline
Commitment agrees (severally, not jointly or jointly and severally) to make
Special Term Sublines (collectively, the "Special Term Subline") to Borrowers in
an amount equal to such Lender's Pro Rata Share of the Special Term Subline
Amount. The outstanding unpaid principal balance and all accrued and unpaid
interest under the Special Term Subline shall be due and payable on the date of
termination of this Agreement, whether by its terms, by prepayment, or by
acceleration. Except as provided in Section 3.7, The Special Term Subline may
not be prepaid without the prior written consent of the Required Lenders. All
amounts outstanding under the Special Term Subline shall constitute Obligations.
2.3. Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing under the Standard Line shall be
made upon Borrowers' irrevocable request therefor delivered to Agent (which
notice must be received by Agent no later than 2:00 p.m. (Eastern time) on the
Funding Date if such advance is for $5,000,000 or less or no later than 2:00
p.m. (Eastern time) on the Business Day immediately preceding the requested
Funding Date if such advance is for more than $5,000,000) specifying (i) the
amount of the Borrowing; and (ii) the requested Funding Date, which shall be a
Business Day.
(b) Agent's Election. Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a) in excess of $5,000,000, the Agent may elect, in its
discretion, (i) to have the terms of Section 2.3(c) apply to such requested
Borrowing, or (ii) to request Swing Lender to make a Swing Loan pursuant to the
terms of Section 2.3(i) in the amount of the requested Borrowing; provided,
however, that if Swing Lender declines in its sole discretion to make a Swing
Loan pursuant to Section 2.3(i), Agent shall elect to have the terms of Section
2.3(c) apply to such requested Borrowing. Any requested Borrowing of $5,000,000
or less under the Standard Line shall be made as a Swing Loan pursuant to the
terms of Section 2.3(i).
(c) Making of Advances.
(i) In the event that the Agent shall elect to have the terms of this
Section 2.3(c) apply to a requested Borrowing under the Standard Line in excess
of $5,000,000 as described in Section 2.3(a), then promptly after receipt of a
request for a Borrowing pursuant to Section 2.3(a), the Agent shall notify the
Lenders, not later than 3:00 p.m. (Eastern time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telephone and promptly
followed by telecopy, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of
the requested Borrowing available to the Agent in same day funds, to such
account of the Agent as the Agent may designate, not later than 1:00 p.m.
(Eastern time) on the Funding Date applicable thereto. After the Agent's receipt
of the proceeds of such Advances, upon satisfaction of the applicable conditions
precedent set forth in Section 3, the Agent shall make the proceeds of such
Advances available to Administrative Borrower on the applicable Funding Date by
transferring same day funds equal to the proceeds of such Advances received by
the Agent to the Designated Deposit Account; provided, however, that, subject to
28
the provisions of Section 2.3(h), the Agent shall not request any Lender to
make, and no Lender shall have the obligation to make, any Advance if the Agent
shall have received written notice from any Lender, or otherwise has actual
knowledge, that (A) one or more of the applicable conditions precedent set forth
in Sections 3.1 or 3.2 will not be satisfied on the requested Funding Date for
the applicable Borrowing, or (B) the requested Borrowing would exceed the
Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to the Closing
Date or, with respect to any Borrowing after the Closing Date, at least one
Business Day prior to the date of such Borrowing, that such Lender will not make
available as and when required hereunder to Agent for the account of Borrowers
the amount of that Lender's Pro Rata Share of the Borrowing, Agent may assume
that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds and Agent
in such circumstances has made available to Borrowers such amount, that Lender
shall on the Business Day following such Funding Date make such amount available
to Agent, together with interest at the Defaulting Lenders Rate for each day
during such period. A notice from Agent submitted to any Lender with respect to
amounts owing under this subsection shall be conclusive, absent manifest error.
If such amount is paid to Agent such payment to Agent shall constitute such
Lender's Advance on the date of Borrowing for all purposes of this Agreement. If
such amount is not paid to Agent on the Business Day following the Funding Date,
Agent will notify Administrative Borrower of such failure to fund and, upon
demand by Agent, Borrowers shall pay such amount to Agent for Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Advances composing such Borrowing. The failure of any Lender to make any
Advance on any Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be made
by such other Lender on any Funding Date. Any Lender that fails to make any
Advance that it is required to make hereunder on any Funding Date and that has
not cured such failure by making such Advance on the next Business Day, shall
constitute a "Defaulting Lender" for purposes of this Agreement until such
Advance is made. Notwithstanding any other provision of this Agreement,
Borrowers shall be permitted to exercise all legal remedies against such a
Defaulting Lender, and if such default results in a Material Adverse Change,
such change shall not be deemed a Default.
(iii) Agent shall not be obligated to transfer to a Defaulting Lender any
payments made by Borrowers to Agent for the Defaulting Lender's benefit; nor
shall a Defaulting Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to Borrowers the amount of
all such payments received or retained by it for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to matters with respect
to the Loan Documents and determining Pro Rata Shares, such Defaulting Lender
shall be deemed not to be a "Lender" and such Defaulting Lender's Commitment
29
shall be deemed to be zero. This section shall remain effective with respect to
such Defaulting Lender until (A) the Obligations under this Agreement shall have
been declared or shall have become immediately due and payable or (B) the
requisite non-Defaulting Lenders, Agent, and Borrowers shall have waived such
Defaulting Lender's default in writing. The operation of this section shall not
be construed to increase or otherwise affect the Commitment of any
non-Defaulting Lender, or relieve or excuse the performance by Borrowers of
their duties and obligations hereunder.
(d) Agent Advances.
(i) Agent hereby is authorized by Borrowers and the Lenders, from time to
time in Agent's sole discretion, (1) after the occurrence of a Default or an
Event of Default (but without constituting a waiver of such Default or Event of
Default), or (2) at any time that any of the other applicable conditions
precedent set forth in Section 3 have not been satisfied, to make Advances under
the Standard Line to Borrowers on behalf of the Lenders which Agent, in its
reasonable business judgment, deems necessary or desirable (A) to preserve or
protect the Collateral, or any portion thereof, (B) to enhance the likelihood
of, or maximize the amount of, repayment of the Obligations, or (C) to pay any
other amount chargeable to Borrowers pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses described in
Section 10 (any of the Advances described in this Section 2.3(d) being
hereinafter referred to as "Agent Advances"); provided, that Agent shall not
make any Agent Advances to Borrowers without the consent of the Required Lenders
if the amount thereof would exceed $5,000,000 in the aggregate at any one time.
(ii) Agent Advances shall be repayable on demand and secured by the
Collateral, shall constitute Advances under the Standard Line and Obligations
hereunder, and shall bear interest at the rate applicable from time to time to
the Obligations pursuant to Section 2.7.
(e) Settlement. It is agreed that each Lender's funded portion of the Advances
is intended by the Lenders to be equal at all times to such Lender's Pro Rata
Share of the outstanding Advances. Such agreement notwithstanding, the Agent and
the Lenders agree (which agreement shall not be for the benefit of or
enforceable by Borrowers) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among them as to the
Advances, the Swing Loans, and the Agent Advances shall take place on a periodic
basis in accordance with the following provisions:
(i) The Agent shall request settlement ("Settlement") with the Lenders on a
weekly basis, or on a more frequent basis if so determined by the Agent, (1) for
itself, with respect to each Agent Advance and for Swing Lender with respect to
each Swing Loan, and (2) with respect to Collections received, as to each by
notifying the Lenders by telephone and promptly followed by telecopy, or other
similar form of transmission, of such requested Settlement, no later than 1:00
30
p.m. (Eastern time) on the Business Date immediately preceding the date of such
requested Settlement (the "Settlement Date"). Such notice of a Settlement Date
shall include a summary statement of the amount of outstanding Advances, Swing
Loans, and Agent Advances for the period since the prior Settlement Date, the
amount of repayments received in such period, and the amounts allocated to each
Lender of the principal, interest, fees, and other charges for such period.
Subject to the terms and conditions contained herein (including Section 2.2
(e)):(y) if a Lender's balance of the Advances, Swing Loans, and Agent Advances
exceeds such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent
Advances as of a Settlement Date, then Agent shall by no later than 1:00 p.m.
(Eastern time) on the Settlement Date transfer in same day funds to the account
of such Lender as Lender may designate, an amount such that each such Lender
shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata
Share of the Advances, Swing Loans, and Agent Advances; and (z) if a Lender's
balance of the Advances, Swing Loans, and Agent Advances is less than such
Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, such Lender shall no later than 1:00 p.m. (Eastern time) on the
Settlement Date transfer in same day funds to such account of the Agent as the
Agent may designate, an amount such that each such Lender shall, upon transfer
of such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances, Swing Loans, and Agent Advances. Such amounts made available to the
Agent under clause (z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Swing Loan or Agent Advance and, together
with the portion of such Swing Loan or Agent Advance representing WFRF's Pro
Rata Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to the Agent by any Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, the Agent shall
be entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of the Advances, Swing
Loans, and Agent Advances is less than, equal to, or greater than such Lender's
Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received by Agent with respect to
principal, interest, fees payable by Borrowers and allocable to the Lenders
hereunder, and proceeds of Collateral. To the extent that a net amount is owed
to any such Lender after such application, such net amount shall be distributed
by Agent to that Lender as part of such Settlement; provided, however, that the
closing fee payable by Borrowers under Section 2.12(a) shall be distributed to
the Lenders within three Business Days following the Closing Date without regard
to the netting of amounts owing to or owed by any Lender as part of a
Settlement.
(iii) Between Settlement Dates, the Agent, to the extent no Agent Advances
are outstanding, may pay over to WFRF any payments received by the Agent, which
in accordance with the terms of the Agreement would be applied to the reduction
of the Advances, for application to WFRF's Pro Rata Share of the Advances. If,
as of any Settlement Date, Collections received since the then immediately
preceding Settlement Date have been applied to WFRF's Pro Rata Share of the
Advances other than Agent Advances, as provided for in the previous sentence,
WFRF shall pay to the Agent for the accounts of the Lenders, and Agent shall pay
to the Lenders, to be applied to the outstanding Advances of such Lenders, an
amount such that each Lender shall, upon receipt of such amount, have, as of
such Settlement Date, its Pro Rata Share of the Advances. During the period
between Settlement Dates, the Agent with respect to Agent Advances, and each
31
Lender with respect to the Advances other than Agent Advances, shall be entitled
to interest at the applicable rate or rates payable under this Agreement on the
daily amount of funds employed by the Agent or the Lenders, as applicable.
(f) Notation. The Agent shall record on its books the principal amount of the
Advances owing to each Lender, including the Agent Advances owing to the Agent,
and the interests therein of each Lender, from time to time. In addition, each
Lender is authorized, at such Lender's option, to note the date and amount of
each payment or prepayment of principal of such Lender's Advances in its books
and records, including computer records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein.
(g) Lenders' Failure to Perform. All Advances (other than Swing Loans and Agent
Advances) shall be made by the Lenders simultaneously and in accordance with
their Pro Rata Shares. It is understood that (i) no Lender shall be responsible
for any failure by any other Lender to perform its obligation to make any
Advances hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Advances hereunder, and (ii) no failure by any Lender to
perform its obligation to make any Advances hereunder shall excuse any other
Lender from its obligation to make any Advances hereunder.
(h) Overadvances. Agent may make voluntary Overadvances without the written
consent of the Required Lenders for amounts charged to the applicable Loan
Account for interest, fees or Lender Group Expenses pursuant to Section
2.3(d)(i)(2)(C). If the conditions for borrowing under Section 3.2(d) cannot be
fulfilled, the Agent may, but is not obligated to, knowingly and intentionally
continue to make Advances (including Swing Loans) to Borrowers in its discretion
in accordance with Section 2.3(d)(i)(2)(C). The Advances and Swing Loans, as
applicable, that are made pursuant to this Section 2.3(h) shall be subject to
the same terms and conditions as any other Agent Advance or Swing Loan, as
applicable, except that the rate of interest applicable thereto shall be the
rates set forth in Section 2.7(c)(i) without regard to the presence or absence
of a Default or Event of Default.
In the event Agent obtains actual knowledge that the aggregate amount
of Advances (including any Swing Loans or Agent Advances) and undrawn or
unreimbursed Letters of Credit outstanding as of any date of determination
exceeds the amount permitted by the preceding paragraph, regardless of the
amount of or reason for such excess, Agent shall notify Lenders as soon as
practicable (and prior to making any (or any further) intentional Overadvances
(except for and excluding amounts charged to the applicable Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior
notice would result in imminent harm to the Collateral or its value), and
Lenders thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrowers intended to reduce, within
a reasonable time, the outstanding principal amount of the Advances to Borrowers
to an amount permitted by the preceding paragraph. In the event any Lender
disagrees over the terms of reduction and/or repayment of any Overadvance, the
terms of reduction and/or repayment thereof shall be implemented according to
the determination of the Required Lenders.
32
Each Lender shall be obligated to settle with Agent as provided in
Section 2.3(e) for the amount of such Lender's Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.3(h), and any Overadvances
resulting from the charging to the applicable Loan Account of interest, fees, or
Lender Group Expenses.
Nothing contained herein shall limit or impair the Borrowers'
obligations under Section 2.6.
(i) Making of Swing Loans.
(i) In the event Agent shall elect, with the consent of Swing Lender, as a
Lender, to have the terms of this Section 2.3(i) apply to a requested Borrowing
under the Standard Line as described in Section 2.3(b), Swing Lender as a Lender
shall make such Advance in the amount of such Borrowing (any such Advance made
solely by Swing Lender as a Lender pursuant to this Section 2.3(i), a "Swing
Loan" and such Advances, collectively, "Swing Loans") available to Borrowers on
the Funding Date applicable thereto by transferring immediately available funds
to the Designated Account, provided that in no event shall the aggregate
outstanding principal amount of the Swing Loans exceed $5,000,000. Each Swing
Loan is an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances under the Standard Line , except that no
such Swing Loan shall be eligible for the LIBOR Option and all payments on any
Swing Loan shall be payable to Swing Lender as a Lender solely for its own
account (and for the account of the holder of any participation interest with
respect to such Swing Loan). Subject to the provisions of this Section 2.3(i),
Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a
Lender shall not make, any Swing Loan if Agent has actual knowledge that (i) one
or more of the applicable conditions precedent set forth in Section 3 will not
be satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (ii) the requested Borrowing would exceed the
Availability on such Funding Date. Swing Lender as a Lender shall not otherwise
be required to determine whether the applicable conditions precedent set forth
in Section 3 have been satisfied on the Funding Date applicable thereto prior to
making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's Liens, shall
constitute Advances and Obligations hereunder, and shall bear interest at the
rate applicable from time to time to Advances that are Reference Rate Loans.
2.4. Letters of Credit.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration Date. Subject to
the terms and conditions of this Agreement, Agent agrees to issue letters of
credit for the account of Borrowers (each, an "L/C") or to issue guarantees of
payment (each such guaranty, an "L/C Guaranty") with respect to letters of
credit issued by an issuing bank for the account of Borrowers. Agent shall have
no obligation to issue a Letter of Credit if any of the following would result
after giving effect to the requested Letter of Credit:
33
(i) the aggregate amount of all undrawn and unreimbursed Letters of Credit
would exceed the lower of: (x) the Borrowing Base less the amount of outstanding
Advances, or (y) twenty-five million Dollars ($25,000,000); or
(ii) the aggregate amount of all undrawn or unreimbursed Letters of Credit
would exceed the Maximum Standard Line Amount less the amount of outstanding
Advances; or
(iii) the amount of the requested Letter of Credit would exceed the then
extant Availability.
Borrowers expressly understand and agree that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrowers and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than 60 days prior to the date on which this
Agreement is scheduled to terminate under Section 3.4 (without regard to any
potential renewal term) and all such Letters of Credit shall be in form and
substance acceptable to Agent in the Agent's Discretion. If the Lender Group is
obligated to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such amount to Agent and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance under the Standard Line and, thereafter, shall bear interest at the rate
then applicable to Advances under Section 2.7.
(b) Indemnification. Borrowers hereby agree to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, including
payments made by the Lender Group, expenses, and reasonable attorneys fees
incurred by the Lender Group arising out of or in connection with any Letter of
Credit. Borrowers agree to be bound by the issuing bank's regulations and
interpretations of any letters of credit guarantied by the Lender Group and
opened to or for Borrowers' account or by Agent's interpretations of any Letter
of Credit issued by Agent to or for Borrowers' account, even though this
interpretation may be different from Borrowers' own, and Borrowers understand
and agree that the Lender Group shall not be liable for any error, negligence,
or mistake, whether of omission or commission, in following Borrowers'
instructions or those contained in the Letter of Credit or any modifications,
amendments, or supplements thereto. Borrowers understand that the L/C Guarantees
may require the Lender Group to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrowers against such issuing bank.
Borrowers hereby agree to indemnify, save, defend, and hold the Lender Group
harmless with respect to any loss, cost, expense (including reasonable attorneys
fees), or liability incurred by the Lender Group under any L/C Guaranty as a
result of the Lender Group's indemnification of any such issuing bank.
(c) Supporting Materials. Borrowers hereby authorize and direct any bank that
issues a letter of credit guaranteed by an L/C Guaranty to deliver to Agent all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. Borrowers may or may not
be the "applicant" or "account party" with respect to such letter of credit.
34
(d) Costs of Letters of Credit. Any and all charges, commissions, fees, and
costs incurred by Agent relating to the letters of credit guaranteed by an L/C
Guaranty shall be considered Lender Group Expenses for purposes of this
Agreement and immediately shall be reimbursable by Borrowers to Agent.
(e) Indemnification. Immediately upon the termination of this Agreement,
Borrowers agree to either (i) provide cash collateral to be held by Agent in an
amount equal to 102% of the Lender Group's obligations under outstanding Letters
of Credit, or (ii) cause to be delivered to Agent releases of all of the Lender
Group's obligations under outstanding Letters of Credit. At Agent's Discretion,
any proceeds of Collateral received by Agent after the occurrence and during the
continuation of an Event of Default may be held as the cash collateral required
by this Section 2.3(e).
(f) Increased Costs. If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or the Lender Group with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letters of Credit issued hereunder, or
(ii) there shall be imposed on the issuing bank or the Lender Group any
other condition regarding any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrowers, and Borrowers shall pay on demand such amounts as
the issuing bank or Agent may specify to be necessary to compensate the issuing
bank or Agent for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in Section 2.7(a) or Section (c)(i), as
applicable. The determination by the issuing bank or Agent, as the case may be,
of any amount due pursuant to this Section 2.4(f), as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.
(g) Participations.
(i) Purchase of Participations. Immediately upon issuance of any Letter of
Credit in accordance with this Section 2.4, each Lender under the Standard Line
35
shall be deemed to have irrevocably and unconditionally purchased and received
without recourse or warranty, an undivided interest and participation in the
credit support or enhancement provided through the Agent to such issuer in
connection with the issuance of such Letter of Credit, equal to such Lender's
Pro Rata Share of the face amount of such Letter of Credit (including, without
limitation, all obligations of Borrowers with respect thereto, and any security
therefor or guaranty pertaining thereto).
(ii) Documentation. Upon the request of any Lender, the Agent shall furnish
to such Lender copies of any Letter of Credit, reimbursement agreements executed
in connection therewith, application for any Letter of Credit and credit support
or enhancement provided through the Agent in connection with the issuance of any
Letter of Credit, and such other documentation as may reasonably by requested by
such Lender.
(iii) Obligations Irrevocable. The obligations of each Lender under the
Standard Line to make payments to the Agent with respect to any Letter of Credit
or with respect to any credit support or enhancement provided through the Agent
with respect to a Letter of Credit, and the obligations of Borrowers to make
payments to the Agent, for the account of the Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever, including, without
limitation, any of the following circumstances: (A) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;
(B) the existence of any claim, setoff, defense, or other right
which Borrowers may have at any time against a beneficiary
named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be
acting), any Lender, the Agent, the issuer of such Letter of
Credit, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transactions between Borrowers or any other Person and the
beneficiary named in any Letter of Credit);
(C) any draft, certificate, or any other document presented under
the Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(D) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents; or
(E) the occurrence of any Default or Event of Default.
2.5. Payments.
(a) Payments by Borrowers.
(i) All payments to be made by Borrowers shall be made without set-off,
recoupment, deduction, or counterclaim, except as otherwise required by law.
Except as otherwise expressly provided herein, all payments by Borrowers shall
be made to Agent for the account of the Lenders or Agent, as the case may be, at
36
Agent's address set forth in Section 12, and shall be made in immediately
available funds, no later than 11:30 a.m. (Eastern time) on the date specified
herein. Any payment received by Agent later than 11:30 a.m. (Eastern time), at
the option of Agent, shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.
(ii) Whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
(iii) Unless Agent receives notice from Administrative Borrower prior to
the date on which any payment is due to the Lenders that Borrowers will not make
such payment in full as and when required, Agent may assume that Borrowers have
made such payment in full to Agent on such date in immediately available funds
and Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent Borrowers have not made such payment in
full to Agent, each Lender shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the Reference Rate
for each day from the date such amount is distributed to such Lender until the
date repaid.
(b) Apportionment and Application of Payments. Except as otherwise provided with
respect to Defaulting Lenders, aggregate principal and interest payments shall
be apportioned ratably among the Lenders (according to the unpaid principal
balance of the Advances to which such payments relate held by each Lender) and
payments of the fees (other than fees designated for Agent's separate account)
shall, as applicable, be apportioned ratably among the Lenders. All payments
shall be remitted to Agent and all such payments not relating to principal or
interest on specific Advances, or not constituting payment of specific fees and
all proceeds of Collateral received by Agent, shall be applied as follows: (i)
prior to the termination of the Special Term Subline, pursuant to the terms of
the Participation Agreements and (ii) after the termination of the Special Term
Subline, first, to pay any fees or expense reimbursements then due to Agent from
Borrowers; second, to pay any fees or expense reimbursements then due to the
Lenders from Borrowers; third, to pay interest due in respect of all Advances,
including Swing Loans and Agent Advances, and the Special Term Subline; fourth,
to pay or prepay principal of Swing Loans and Agent Advances; fifth, ratably to
pay principal of the Advances (other than Swing Loans and Agent Advances) and
unreimbursed obligations in respect of Letters of Credit; sixth, to pay the
principal on the Special Term Subline; and seventh, ratably to pay any other
Obligations due to Agent or any Lender by Borrowers. Agent shall promptly
distribute to each Lender, pursuant to the applicable wire transfer instructions
received from each Lender in writing, such funds as it may be entitled to
receive, subject to a Settlement delay as provided for in Section 2.3(e). The
foregoing application shall be subject to the terms of the Participation and
Intercreditor Agreement.
2.6. Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrowers to the Lender Group pursuant to Sections 2.1, 2.2, 2.3 and 2.4
is greater than either the Dollar or percentage limitations set forth in
37
Sections 2.1, 2.2, 2.3 or 2.4 (an "Overadvance"), Borrowers immediately shall
pay to Agent, in cash, the amount of such excess to be used by Agent to reduce
the Obligations pursuant to the terms of Section 2.5(b).
2.7. Interest and Letter of Credit Fees: Rates, Payments, and Calculations.
(a) Interest Rates. Except as provided in Section 2.7(c), (i) all Obligations
(except for undrawn Letters of Credit and Advances under the Special Term
Subline) shall bear interest on the Daily Balance thereof as follows (i) if the
relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate
equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per
annum rate equal to the Reference Rate plus the Reference Rate Margin. Except as
provided in Section 2.7(c), the Special Term Subline shall bear interest on the
daily balance thereof at a rate per annum equal to the Reference Rate plus 7%
per annum but in no event less than 12% per annum.
(b) Letter of Credit Fee. Borrowers shall pay Agent, for the ratable benefit of
the Lender Group under the Standard Line, a monthly fee (the "Letter of Credit
Fee") (in addition to the charges, commissions, fees, and costs set forth in
Section 2.4) equal to the sum of (i) ten basis points (0.10%) per month
multiplied by the average amount of all documentary Letters of Credit
outstanding during such month and (ii) the then applicable LIBOR Rate Margin
multiplied by the average amount of all standby Letters of Credit outstanding
during such month.
(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default, (i) all Obligations (except for undrawn Letters of Credit and the
Special Term Subline) shall bear interest on the Daily Balance at a per annum
rate equal to 2 percentage points above the Reference Rate plus the highest
Reference Rate Margin provided for hereunder, and (ii) the Letter of Credit Fee
shall be increased to 2 percentages points per annum over the then applicable
Letter of Credit Fee provided in Section 2.7(b), and (iii) the Special Term
Subline shall bear interest on the daily balance at a per annum rate equal to 2%
per annum in excess of the Special Term Subline interest rate set forth in
Section 2.7(a).
(d) Payments. Interest and Letter of Credit Fees payable hereunder (except
interest in respect of LIBOR Rate Loans, which shall be payable in accordance
with Section 2.13(a)) shall be due and payable, in arrears, on the first day of
each month during the term hereof. Borrowers hereby authorize Agent, at its
option, without prior notice to Borrowers, to charge such interest and Letter of
Credit fees, all Lender Group Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in Section 2.3(d) (as and when accrued
or incurred), the fees and charges provided for in Section 2.12 (as and when
accrued or incurred), and all installments or other payments due under any Loan
Document to the applicable Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(e) Computation. The Reference Rate as of the date of this Agreement is 4.25%
per annum. In the event the Reference Rate is changed from time to time
hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Reference Rate. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a 360 day year for the actual number of days
elapsed.
38
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
2.8. Collection of Accounts.
(a) Borrowers shall, immediately after the Closing Date, instruct all Credit
Card Processors and all depositories maintaining a DDA to remit all Collections
directly to the Concentration Account via electronic funds transfer (including,
but not limited to ACH transfers) on each Business Day. Borrowers shall cause
all cash received by Borrowers at any retail store location to be deposited on a
daily basis into any Blocked Account or, at Agent's option, any other bank
account, thereupon to be deposited to or sent by electronic funds transfer
(including, but not limited to, ACH transfers) on each Business Day to the
Concentration Account. In addition, Borrowers agrees that all other Collections
and other amounts received directly by Borrowers from any Account Debtor or any
other source immediately upon receipt shall be deposited into any Blocked
Account. With respect to such bank accounts that are Blocked Accounts,
Borrowers, Agent and the Blocked Account Banks shall enter into Blocked Account
Agreements, which, among other things, with respect to all Blocked Accounts
(other than the Concentration Account) will provide for all cash deposited into
a Blocked Account to be sent by electronic funds transfer (including, but not
limited to, ACH transfers) each Business Day to the Concentration Account. With
respect to each account (other than Blocked Accounts) into which Collections are
deposited, Borrowers shall irrevocably authorize and direct in writing, in form
and substance satisfactory to Agent, each such bank to send via wire transfer
(including, but not limited to, ACH transfers) each Business Day all funds
deposited into each such account to the Concentration Account and each such bank
shall agree to do so. No Blocked Account Agreement or other arrangement
contemplated in this Section 2.8(a) shall be modified by Borrowers without the
prior written consent of Agent. Upon the terms and subject to the conditions set
forth in the Blocked Account Agreement applicable to the Concentration Account,
all amounts received in the Concentration Account shall be wired each Business
Day into an account (the "Agent's Account") maintained by Agent at a depositary
selected by Agent.
(b) Borrowers shall not, and shall not permit any of its Subsidiaries to, open
or maintain any deposit account or investment account with any bank or other
financial institution other than the Designated Account, the Blocked Accounts
and the other accounts listed on Schedule 5.17. All deposit accounts and
investment accounts of Borrowers and its Subsidiaries are listed on Schedule
5.17.
2.9. Crediting Payments; Application of Collections. The receipt of any
Collections by Agent (whether from transfers to Agent by the Concentration
39
Account Bank pursuant to the Concentration Account Agreement, or by any other
Blocked Account Bank, pursuant to any Blocked Account Agreements, or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Sections 2.1 and 2.2, but shall not be considered a payment on account
unless such Collection item is a wire transfer of immediately available federal
funds and is made to the Agent's Account or unless and until such Collection
item is honored when presented for payment. From and after the Closing Date,
Agent shall be entitled to charge Borrowers for one Business Day of "clearance"
or "float" at the rate set forth in Section 2.7(a)(i) or Section 2.7(c)(i), as
applicable, on all Collections that are received by Agent (regardless of whether
provisionally applied to reduce the Obligations under Section 2.1 and/or Section
2.2). This across-the-board one Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of the Lender Group's financing of Borrowers, and shall apply
irrespective of the characterization of whether receipts are owned by Borrowers
or Agent, and whether or not there are any outstanding Advances, the effect of
such clearance or float charge being the equivalent of charging one Business Day
of interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrowers shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Agent only if it is received into the Agent's Account on a Business
Day on or before 11:30 a.m. Eastern time. If any Collection item is received
into the Agent's Account on a non-Business Day or after 11:30 a.m. Eastern time
on a Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day.
2.10. Designated Account. Agent and the Lender Group is authorized to make the
Advances and issue the Letters of Credit under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.7(d).
Administrative Borrower shall maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by the Lender Group hereunder. Unless
otherwise agreed by Agent and Borrowers, any Advance requested by Borrowers and
made by the Lender Group hereunder shall be made to the Designated Account.
2.11. Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrowers (the "Loan Account")
on which Borrowers will be charged with the Special Term Subline Amount and all
Advances made by the Lender Group to Borrowers or for Borrowers' account,
including, accrued interest, Lender Group Expenses, and any other payment
Obligations of Borrowers. In accordance with Section 2.9, the Loan Account will
be credited with all payments received by Agent from Borrowers or for Borrowers'
account, including all amounts received in the Agent's Account from any Blocked
Account Bank. Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest and fees, and including
an itemization of all charges and expenses constituting the Lender Group
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.
40
2.12. Fees. Borrowers shall pay to Agent for the ratable benefit of the
Lender Group (except where otherwise indicated) the following fees:
(a) Unused Line Fee. On the first day of each month during the term of this
Agreement, Borrowers shall pay to Agent for the ratable benefit of those Lenders
with a Standard Line Commitment an unused line fee in an amount equal to 0.375%
per annum times the result of (a) the Maximum Standard Line Amount, less (b) the
sum of (i) the average Daily Balance of Advances that were outstanding during
the immediately preceding month, plus (ii) the average Daily Balance of the
Letter of Credit Usage during the immediately preceding month,
(b) Fee Letter Fees. Borrowers shall pay to Agent all fees set forth in
the Fee Letter as and when due under the terms thereof; and
(c) Financial Examination, Documentation, and Appraisal Fees. Borrowers shall
pay to Agent for each of the respective sole accounts of Agent and, to the
extent a Lender accompanies Agent under Section 4.8, such Lender: (i) a fee of
$850 per day per examiner, plus out-of-pocket expenses for each financial
analysis and examination (i.e., audits) of Borrowers performed by personnel
employed by Agent and any such Lender; (ii) an appraisal fee of $1500 per day
per appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by personnel employed by Agent and any such Lender; (iii) the actual
charges paid or incurred by Agent if it elects to employ the services of one or
more third Persons to perform such financial analyses and examinations (i.e.,
audits) of Borrowers or to appraise the Collateral; and (iv) the actual charges
paid or incurred by Agent if it elects to employ the services of one or more
third Persons to appraise the Collateral.
2.13. LIBOR Option.
(a) Interest and Interest Payment Dates. In lieu of having interest charged at
the rate based upon the Reference Rate, Borrowers shall have the option (the
"LIBOR Option") to have interest on all or a portion of the Advances (other than
the Swing Loans for which there is no LIBOR Option) be charged at the LIBOR
Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto, (ii) the occurrence of an
Event of Default in consequence of which the Required Lenders or Agent on behalf
thereof elect to accelerate the maturity of the Obligations, or (iii)
termination of this Agreement pursuant to the terms hereof. On the last day of
each applicable Interest Period, unless Administrative Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable to
such LIBOR Rate Loan automatically shall convert to the rate of interest then
applicable to Reference Rate Loans of the same type hereunder. At any time that
a Default or Event of Default has occurred and is continuing, Borrowers no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate and Agent shall have the right to convert the interest rate on all
outstanding LIBOR Rate Loans to the rate then applicable to Reference Rate Loans
hereunder.
(b) LIBOR Election.
41
(i) Administrative Borrower may, at any time and from time to time, so long
as no Event of Default has occurred and is continuing, elect to exercise the
LIBOR Option by notifying Agent prior to 2:00 p.m. (Eastern time) at least 3
Business Days prior to the commencement of the proposed Interest Period (the
"LIBOR Deadline"). Notice of Administrative Borrower's election of the LIBOR
Option for a permitted portion of the Advances and an Interest Period pursuant
to this Section 2.13 shall be made by delivery to Agent of a LIBOR Notice
received by Agent before the LIBOR Deadline, or by telephonic notice received by
Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR
Notice received by Agent prior to 5:00 p.m. (Boston time) on the same day.
Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy
thereof to each of the Lenders.
(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In
connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and
hold Agent and the Lenders harmless against any loss, cost, or expense incurred
by Agent or any Lender as a result of (a) the payment of any principal of any
LIBOR Rate 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 LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR
Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto
(such losses, costs, and expenses, collectively, "Funding Losses"). Funding
Losses shall, with respect to Agent or any Lender, be deemed to equal the amount
determined by Agent or such Lender to be the excess, if any, of (i) the amount
of interest that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, 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 therefor), minus (ii) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Agent or such Lender
would be offered were it to be offered, at the commencement of such period,
Dollar deposits of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to Borrowers setting forth
any amount or amounts that Agent or such Lender is entitled to receive pursuant
to this Section 2.13 shall be conclusive absent manifest error.
(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in effect at
any given time. Borrowers only may exercise the LIBOR Option for LIBOR Rate
Loans of at least $1,000,000 and integral multiples of $500,000 in excess
thereof.
(c) Prepayments. Borrowers may prepay LIBOR Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are prepaid on any date that is
not the last day of the Interest Period applicable thereto, including as a
result of any automatic prepayment through the required application by Agent of
proceeds of Collections in accordance with Section 2.5(b) upon conversion by
Agent, in accordance with Section 2.13 or for any other reason, including early
termination of the term of this Agreement or acceleration of the Obligations
pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold
Agent and the Lenders and their Participants harmless against any and all
Funding Losses in accordance with clause (b)(ii) above.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs
due to changes in applicable law occurring subsequent to the commencement of the
then applicable Interest Period, including changes in tax laws (except changes
of general applicability in corporate income tax laws) and changes in the
reserve requirements imposed by the Board of Governors of the Federal Reserve
System (or any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing interest at the
LIBOR Rate. In any such event, the affected Lender shall give Administrative
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Administrative Borrower may, by notice to
such affected Lender (y) require such Lender to furnish to Administrative
Borrower a statement setting forth the basis for adjusting such LIBOR Rate and
the method for determining the amount of such adjustment, or (z) repay the LIBOR
42
Rate Loans with respect to which such adjustment is made (together with any
amounts due under clause (b)(ii) above).
(ii) In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the interpretation
of application thereof, shall at any time after the date hereof, in the
reasonable opinion of any Lender, make it unlawful or impractical for such
Lender to fund or maintain LIBOR Advances or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such
Lender shall give notice of such changed circumstances to Agent and
Administrative Borrower and Agent promptly shall transmit the notice to each
other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are
outstanding, the date specified in such Lender's notice shall be deemed to be
the last day of the Interest Period of such LIBOR Rate Loans, and interest upon
the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate
then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to
elect the LIBOR Option until such Lender determines that it would no longer be
unlawful or impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section 2.13 shall apply as if each Lender or its
Participants had match funded any Obligation as to which interest is accruing at
the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.
2.14. Capital Requirements. If, after the date hereof, any Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
43
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request, or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return on capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
2.15. Joint and Several Liability of Borrowers.
(a) Each Borrower is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by the Agent and the Lenders under this Agreement, for the mutual
benefit, directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Section 2.15), it being the intention of the parties hereto
that all the Obligations shall be the joint and several obligations of each
Person composing Borrowers without preferences or distinction among them.
(c) If and to the extent that any of Borrowers shall fail to make any payment
with respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Persons composing Borrowers will make such payment with respect to, or
perform, such Obligations.
(d) The Obligations of each Person composing Borrowers under the provisions of
this Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Person composing Borrowers enforceable against each such
Borrower to the full extent of its properties and assets, irrespective (in the
case of the liability of such Borrower for the Obligations owing by the other
Borrowers) of the validity, regularity or enforceability of this Agreement or
any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each Person
composing Borrowers hereby waives notice of acceptance of its joint and several
44
liability, notice of any Advances, Special Term Sublines or Letters of Credit
issued under or pursuant to this Agreement, notice of the occurrence of any
Default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Agent or Lenders
under or in respect of any of the Obligations, any requirement of diligence or
to mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Person
composing Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Person
composing Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by Agent or Lenders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Person composing Borrowers. Without
limiting the generality of the foregoing, each Borrower assents to any other
action or delay in acting or failure to act on the part of any Agent or Lender
with respect to the failure by any Person composing Borrowers to comply with any
of its respective Obligations, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 2.15 afford grounds for terminating, discharging or
relieving any Person composing Borrowers, in whole or in part, from any of its
Obligations under this Section 2.15, it being the intention of each Person
composing Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Person composing Borrowers under this
Section 2.15 shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Person composing Borrowers
under this Section 2.15 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or any Agent or
Lender. The joint and several liability of the Persons composing Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing Borrowers or
any Agent or Lender.
(f) Each Person composing Borrowers represents and warrants to Agent and Lenders
that such Borrower is currently informed of the financial condition of Borrowers
and of all other circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Obligations. Each Person composing
Borrowers further represents and warrants to Agent and Lenders that such
Borrower has read and understands the terms and conditions of the Loan
Documents. Each Person composing Borrowers hereby covenants that such Borrower
will continue to keep informed of Borrowers' financial condition, the financial
condition of other guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment or nonperformance of the Obligations.
(g) Each of the Persons composing Borrowers waives all rights and defenses
arising out of an election of remedies by the Agent or any Lender, even though
that election of remedies, such as a nonjudicial foreclosure with respect to
45
security for a guaranteed obligation, has destroyed the Agent's or such Lender's
rights of subrogation and reimbursement against such Borrower by the operation
of Section 580(d) of the California Code of Civil Procedure or otherwise.
(h) Each of the Persons composing Borrowers waives all rights and defenses that
such Borrower may have because the Obligations are secured by Real Property.
This means, among other things:
(i) Agent and Lenders may collect from such Borrower without first
foreclosing on any Real or Personal Property Collateral pledged by Borrowers;
and
(ii) If Agent or any Lender forecloses on any Real Property Collateral
pledged by Borrowers:
(A) The amount of the Obligations may be reduced only by the price
for which that collateral is sold at the foreclosure sale,
even if the collateral is worth more than the sale price.
(B) Agent and Lenders may collect from such Borrower even if Agent
or Lenders, by foreclosing on the Real Property Collateral,
has destroyed any right such Borrower may have to collect from
the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.
(i) The provisions of this Section 2.15 are made for the benefit of the Agent,
the Lenders and their respective successors and assigns, and may be enforced by
it or them from time to time against any or all of the Persons composing
Borrowers as often as occasion therefor may arise and without requirement on the
part of any such Agent, Lender, successor or assign first to marshal any of its
or their claims or to exercise any of its or their rights against any of the
other Persons composing Borrowers or to exhaust any remedies available to it or
them against any of the other Persons composing Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations hereunder
or to elect any other remedy. The provisions of this Section 2.15 shall remain
in effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the Obligations, is rescinded or must otherwise be restored or
returned by any Agent or Lender upon the insolvency, bankruptcy or
reorganization of any of the Persons composing Borrowers, or otherwise, the
provisions of this Section 2.15 will forthwith be reinstated in effect, as
though such payment had not been made.
(j) Each of the Persons composing Borrowers hereby agrees that it will not
enforce any of its rights of contribution or subrogation against the other
Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
the Agent or the Lenders with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have been
46
paid in full in cash. Any claim which any Borrower may have against any other
Borrower with respect to any payments to any Agent or Lender hereunder or under
any other Loan Documents are hereby expressly made subordinate and junior in
right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.
(k) Each of the Persons composing Borrowers hereby agrees that, after the
occurrence and during the continuance of any Default or Event of Default, the
payment of any amounts due with respect to the indebtedness owing by any
Borrower to any other Borrower is hereby subordinated to the prior payment in
full in cash of the Obligations. Each Borrower hereby agrees that after the
occurrence and during the continuance of any Default or Event of Default, such
Borrower will not demand, xxx for or otherwise attempt to collect any
indebtedness of any other Borrower owing to such Borrower until the Obligations
shall have been paid in full in cash. If, notwithstanding the foregoing
sentence, such Borrower shall collect, enforce or receive any amounts in respect
of such indebtedness, such amounts shall be collected, enforced and received by
such Borrower as trustee for the Lender Group, and such Borrower shall deliver
any such amounts to Agent for application to the Obligations in accordance with
Section 2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1. Conditions Precedent to the Initial Advance and Issuance of the Initial
Letter of Credit. The obligation of the Lender Group to make the initial Advance
and to issue the initial Letters of Credit is subject to the fulfillment, to the
satisfaction of the Lender Group and its counsel, of each of the following
conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before April 30, 2002;
(b) Agent shall have filed all financing statements required by Agent, duly
executed by the applicable Borrowers, and Agent shall have received searches
reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following documents, duly executed,
and each such document shall be in full force and effect:
(i) the Parent Pledge Agreement,
(ii) the ZB Trademark Security Agreement,
(iii) the Xxxxxxx Trademark Security Agreement,
(iv) the Vendex Intercreditor Agreement,
(v) the Athanor Intercreditor Agreement,
(vi) the PNC Intercreditor Agreement,
47
(vii) any Participation Agreement,
(viii) the Fee Letter,
(ix) the Cash Management Agreements, and
(x) the Credit Card Agreements.
(d) Agent shall have received a certificate from the Secretary of each Borrower
attesting to the resolutions of such Borrower's Board of Directors, authorizing
its execution, delivery, and performance of this Agreement and the other Loan
Documents to which such Borrowers is a party and authorizing specific officers
or directors of Borrowers to execute the same;
(e) Agent shall have received copies of each Borrower's Governing Documents, as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary of such Borrower;
(f) Agent shall have received a certificate of status with respect to each
Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Borrower, which certificate shall indicate that such Borrower is in good
standing in such jurisdiction;
(g) Agent shall have received certificates of status with respect to each
Borrower, each dated within 15 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
(h) Agent shall have received evidence that each Borrower has ordered
certificates of status with respect to such Borrower, such certificates to be
issued by the appropriate officers of the jurisdiction of organization of such
Borrower and the jurisdictions where such Borrower maintains its principal
places of business, which certificates shall indicate that such Borrower is in
tax good standing in such jurisdictions;
(i) Agent shall have received a Solvency Certificate from each Borrower,
certified by the chief financial officer of such Borrower;
(j) Agent shall have received a certificate of insurance, together with the
endorsements thereto, as are required by Section 6.9, the form and substance of
which shall be satisfactory to Agent and its counsel;
(k) Agent shall have received an opinion or opinions of Borrowers' counsel
in form and substance satisfactory to Agent in its sole discretion;
(l) Borrowers shall have Availability of not less than $5,000,000, after taking
into account the initial Advance and the issuance of any Letters of Credit on
the Closing Date;
48
(m) No order shall have been entered or requested by any Person (i) for
appointment of a trustee or examiner of any of the Debtors, or (ii) to convert
the Bankruptcy Case to Chapter 7 or to dismiss the Bankruptcy Case;
(n) All obligations (including principal, accrued interest and fees) owing under
the TRS Loan Agreement to WFRF and under the ZB Loan Agreement to the lenders
thereunder shall have been paid in full with the proceeds of the initial
Advances hereunder;
(o) Agent shall have completed its business, legal, and collateral due
diligence, including (i) a collateral audit and review of Borrowers' books and
records and verification of Borrowers' representations and warranties to the
Lender Group, the results of which shall be satisfactory to Agent, (ii) a field
survey performed by examiners on behalf of the Lender Group and (ii) an
inspection of each of the locations where Inventory is located, the results of
which shall be satisfactory to Agent;
(p) Agent shall have received the Business Plan, in form and substance
acceptable to Agent;
(q) Borrowers shall have reimbursed the Lender Group for all of the reasonable
costs incurred by the Lender Group in connection with the transactions
contemplated by this Agreement, including, but not limited to, all fees due and
payable as of the Closing Date and expenses for audits, collateral appraisals,
legal assistance, and lien searches and filings;
(r) Agent shall have received the Operations Plan, in form and substance
satisfactory to Agent;
(s) Agent shall have had the opportunity to review, and shall be satisfied with,
in Agent's Discretion, the capitalization, ownership and management of Parent
and each of the other Borrowers, including without limitation, the terms and
conditions of the employment of the Key Managers; and
(t) All other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Agent and its counsel.
3.2. Conditions Precedent to all Advances and all Letters of Credit. The
following shall be conditions precedent to all Advances and all Letters of
Credit hereunder:
(a) Borrowers shall have delivered to Agent draft audited financial
statements for their immediately preceding fiscal year;
(b) the representations and warranties contained in this Agreement and the other
Loan Documents, as amended from time to time, shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(c) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof;
49
(d) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any governmental authority against Borrowers,
the Lender Group or any of their Affiliates;
(e) the amount of any requested Advance or Letter of Credit shall not exceed
Availability at such time and, after giving effect to any such Advance or Letter
of Credit, the Borrowers shall have Availability greater than or equal to the
applicable minimum Availability requirement set forth on Schedule 7.21;
(f) the Final Bankruptcy Court Order, in form and substance satisfactory to the
Agent, shall be in full force and effect and shall not have been reversed,
stayed, modified or amended, except for such modifications and amendments
mutually agreed to by Borrowers and Agent and there shall have been no material
objections to either Order by any interested party which remain subject to
appeal; and
(g) no action shall have been taken by the Debtors, the Committee or any other
party in interest in the Debtors' Bankruptcy Case: (i) challenging any provision
of this Agreement or the priority, validity or perfection of the Agent's Liens;
or (ii) seeking the revocation, amendment or rescission of the Final Bankruptcy
Court Order.
3.3. Conditions Subsequent. As a condition subsequent to the initial
funding hereunder, Borrowers shall perform or cause to be performed the
following (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) Within thirty days of the Closing Date, Borrowers shall have delivered to
Agent cash management agreements with Xxxxx Fargo in form and substance
satisfactory to Agent duly executed by all parties thereto; and
(b) On or before November 15, 2002, Borrowers shall have substantially completed
the actions set forth in the Operations Plan with such modification thereto as
Borrowers deem reasonably necessary.
3.4. Term. This Agreement shall become effective upon the execution and delivery
hereof by Borrowers and the Lender Group and shall continue in full force and
effect for a term ending on October 6, 2004 (the "Maturity Date"). The foregoing
notwithstanding, Agent (on behalf of the Lender Group) shall have the right to
terminate the Lender Group's obligations under this Agreement immediately and
without notice upon the occurrence and during the continuation of an Event of
Default.
3.5. Effect of Termination. On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrowers with
respect to any outstanding Letters of Credit as provided in Section 3.6 below)
immediately shall become due and payable without notice or demand. No
termination of this Agreement, however, shall relieve or discharge Borrowers of
Borrowers' duties, Obligations, or covenants hereunder, and the Lender Group's
50
continuing security interests in the Collateral shall remain in effect until all
Obligations have been fully and finally discharged and the Lender Group's
obligation to provide additional credit hereunder is terminated.
3.6. Early Termination by Borrowers. Borrowers have the option, at any time upon
90 days prior written notice by Administrative Borrower to Agent, to terminate
this Agreement by paying to Agent, for the benefit of the Lender Group, in cash,
the Obligations (including (a) either (i) providing cash collateral to be held
by Agent for the benefit of those Lenders with a Revolver Commitment in an
amount equal to 102% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender, and (b)
providing cash collateral to be held by Agent for the benefit of Xxxxx Fargo or
its Affiliates with respect to the then extant Bank Products Obligations), in
full, together with the Applicable Prepayment Premium (to be allocated based
upon letter agreements between Agent and individual Lenders); provided, that
after the first anniversary of the Closing Date, Borrowers shall not be required
to pay the Applicable Prepayment Premium if (A) Agent reduces the advance rate
against the Net Retail Liquidation Value in Section 2.1(a)(x)(ii)(A) to 76.5% or
lower, (B) Agent adds Reserves not included as line items in the Borrowing Base
Certificate delivered to Agent on the Closing Date in an amount greater than
$500,000 or (c) the Lender Group does not cure within 7 days any shortfall
caused by a Defaulting Lender's failure to make an Advance that it is required
to make hereunder. If Administrative Borrower has sent a notice of termination
pursuant to the provisions of this Section, then the Commitments shall terminate
and Borrowers shall be obligated to repay the Obligations (including (a) either
(i) providing cash collateral to be held by Agent for the benefit of those
Lenders with a Revolver Commitment in an amount equal to 102% of the then extant
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral to be held by
Agent for the benefit of Xxxxx Fargo or its Affiliates with respect to the then
extant Bank Products Obligations), in full, together with the Applicable
Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice. In the event of the termination of this Agreement and
repayment of the Obligations at any time prior to the Maturity Date, for any
other reason, including (a) termination upon the election of the Required
Lenders to terminate after the occurrence of an Event of Default, (b)
foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (d) restructure, reorganization or compromise of the Obligations
by the confirmation of a plan of reorganization, or any other plan of
compromise, restructure, or arrangement in any Insolvency Proceeding, then
Borrowers shall pay the Applicable Prepayment Premium to Agent (to be allocated
based upon letter agreements between Agent and individual Lenders), measured as
of the date of such termination.
3.7. Termination of Special Term Subline. Subject to the terms of this Section
3.7, Borrowers have the option, at any time upon 30 days' prior written notice
to Agent and the Hilco Participant, subject in all instances to the approval of
the Required Lenders, to terminate the Special Term Subline by paying to Agent,
in cash, the Obligations outstanding under the Special Term Subline, in full.
Such option may only be exercised if, on or before the date of such termination,
(a) Parent has received net cash proceeds of at least $20,000,000 in
consideration of the sale of its capital stock (in which event Borrowers may not
exercise such option before November 30, 2002), or (b) Borrowers have received
net cash proceeds of at least $12,000,000 in consideration of indebtedness that
is subordinated in payment and priority to the Obligations hereunder on terms
satisfactory to the Required Lenders, has been consented to in writing by the
51
Required Lenders. Such option may not be exercised if at the time of
termination, or after giving effect thereto, a Default or Event of Event has
occurred and is continuing, or (iii) Availability under the Standard Line would
be less than $17,000,000 after giving effect thereto.
4. CREATION OF SECURITY INTEREST.
4.1. Grant of Security Interest. Each Borrower hereby grants to Agent, for the
benefit of the Lender Group and any other holder of Obligations, a continuing
security interest in all of such Borrower's right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrowers of each of their covenants and duties
under the Loan Documents. The Agent's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of Agent or Borrowers. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except as provided in
Section 7.4, Borrowers shall have no authority, express or implied, to dispose
of any item or portion of the Collateral.
4.2. Leasehold Interests.
(a) Each Borrower hereby grants to Agent, for the benefit of the Lender Group, a
security interest in, collateral assignment of, and mortgage upon all of such
Borrower's Leasehold Interests to secure all Obligations. Each Borrower agrees
to execute and deliver to Agent, upon the reasonable request of Agent, one or
more leasehold mortgages which are acceptable to Agent in Agent's Discretion and
its counsel with respect to such Borrower's Leasehold Interests, duly executed
and acknowledged on behalf of such Borrower and in proper form for recording in
the appropriate land records with the appropriate county or municipal filing
officer ("Leasehold Mortgages"), together with any UCC-1 Financing Statements
covering any ancillary security interest granted under any of the Leasehold
Mortgages, and has provided herewith full legal descriptions, including the
identity of each fee owner, of each Leasehold Interest. Borrowers shall use
commercially reasonable efforts to obtain any necessary consents to the delivery
and recordation of such Leasehold Mortgages (which efforts shall not include
monetary expenditures in excess of nominal amounts).
(b) Each Borrower represents and covenants to the Agent and the Lender Group and
shall, as of the date hereof and until Borrowers have indefeasibly paid and
satisfied in full any and all of the Obligations, fully comply with each of the
following terms and conditions:
(i) Except to the extent provided in any lease thereof or there exists a
valid, unavoidable statutory or state law lien in favor of any Landlord, each
Leasehold Interest is and shall at all times be free and clear of all liens,
claims and encumbrances of any nature or description other than Permitted Liens
and no other creditor of the Borrowers (secured or unsecured) other than holders
of Permitted Liens shall be entitled to encumber the Leasehold Interests without
the written consent of Agent;
(ii) The security interest and mortgage upon any Leasehold Interest granted
to Agent is and shall be subordinate, where applicable, only to the Permitted
52
Liens and to liens or mortgages granted by the owner of the fee and any other
Encumbrance which is accorded priority ahead of the liens of the Agent under the
Loan Documents; and
(iii) Except: (x) for those Leasehold Interests which, with Agent's
consent, a Borrower has voluntarily conveyed or assigned, (y) where Agent
otherwise consents and/or (z) for amounts the validity of which is being
contested in good faith by Borrowers and for which reserves may be established
at any time by Agent as provided herein in respect of the amounts due or amounts
which may become due from Borrowers to such owners or lessors, Borrowers are and
shall remain current in the payment of all rent and additional rent, including,
without limitation, taxes, insurance, and other charges or amounts due each of
owner and/or lessor as provided for in each Leasehold Interest, as well as in
compliance with all other terms of each Leasehold Interest.
(c) Borrowers shall pay all fees and expenses associated with any recordation of
the Leasehold Mortgages, including, without limitation, reasonable attorney's
fees and legal expenses incurred by Agent's in connection with the retention of
local real estate counsel, if reasonably necessary.
(d) Upon Agent's request, Borrowers shall provide Agent with an analysis by an
independent appraiser reasonably acceptable to Agent, such report to be in form
and substance acceptable to Agent, of the fair market value of all of the
Leasehold Interests within thirty (30) days of the Closing Date, the scope of
such analysis to be mutually agreed upon by Borrowers and Agent. Borrowers
acknowledge and agree that Agent, based on the results of such report, may
require that Borrowers execute and deliver Leasehold Mortgages on certain of the
Leasehold Interests, as contemplated by Section 4.2.
4.3. Negotiable Collateral. If from time to time any Collateral, including any
proceeds, is evidenced by or consists of Negotiable Collateral, and if
perfection or priority of Agent's security interest in such Negotiable
Collateral is dependent on or enhanced by possession, the applicable Borrower,
immediately upon the request of Agent, shall endorse and deliver physical
possession of such Negotiable Collateral to Agent.
4.4. Control of Collateral. If from time to time any Collateral, including any
proceeds or supporting obligations, consists of property or rights of a Borrower
in which the perfection or priority of Agent's security interest is dependent
upon or enhanced by Agent's gaining control of such Collateral, such Borrower
shall immediately notify Agent and, at Agent's request, deliver the appropriate
Control Agreements or take such actions as may be necessary to give Agent
control over such Collateral as provided in the Code. No arrangement
contemplated hereby or by any Control Agreement in respect of any DDA or any
Securities Account or other Investment Property shall be modified by Borrowers
without the prior written consent of Agent.
4.5. Collection of Accounts, General Intangibles, and Negotiable Collateral. At
any time after an Event of Default, Agent or Agent's designee may (a) notify
customers, Account Debtors or other Persons obligated on the Collateral that the
Accounts, General Intangibles, or Negotiable Collateral have been assigned to
Agent for the benefit of the Lender Group or that Agent for the benefit of the
53
Lender Group has a security interest therein, and (b) collect the Accounts,
General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for the Lender Group, as the Lender Group's trustee, any
Collections that it receives and immediately will deliver said Collections to
Agent in their original form as received by such Borrower.
4.6. Delivery of Additional Documentation Required. At any time upon the request
of Agent, Borrowers shall execute and deliver to Agent all financing statements,
continuation financing statements, fixture filings, Mortgages, security
agreements, pledges, assignments, control agreements, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in form satisfactory to Agent, to perfect and continue
perfected the Agent's Liens in the Collateral, and in order to fully consummate
all of the transactions contemplated hereby and under the other the Loan
Documents. Without limiting the foregoing, Borrowers shall give Agent prompt
written notice of any Commercial Tort Claim of any Borrower not specifically
identified herein and any Letter of Credit Right of any Borrower. The applicable
Borrower shall grant to Agent a security interest in any such Commercial Tort
Claim or Letter of Credit Right and the proceeds thereof upon Agent's written
request. So long as no Event of Default has occurred and is continuing, Agent
agrees not to assert rights to direct the settlement of any litigation giving
rise to any such Commercial Tort Claim and, upon prior written notice, to
provide such documentation as the Borrowers may reasonably request to satisfy
the counterparty or counterparties to any such settlement of the applicable
Borrower's authority to settle such litigation. On such periodic basis as Agent
shall require, the Borrowers shall (a) provide Agent with a report of all new
patentable, copyrightable, or trademarkable materials acquired or generated by
Borrowers during the prior period, (b) cause all patents, copyrights, and
trademarks acquired or generated by Borrowers that are not already the subject
of a registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrowers' ownership thereof
promptly upon Agent's reasonable written request, taking into account the value
of such intellectual property and the cost of such filing, and (c) cause to be
prepared, executed, and delivered to Agent supplemental schedules to the
applicable Loan Documents to identify such patents, copyrights, and trademarks
as being subject to the security interests created thereunder
4.7. Power of Attorney. Borrowers hereby irrevocably make, constitute, and
appoint Agent (and any of Agent's officers, employees, or agents designated by
Agent) as Borrowers' true and lawful attorney, with power to (a) if Borrowers
refuse to, or fail timely to execute and deliver any of the documents described
in Section 4.6, sign the name of Borrowers on any of the documents described in
Section 4.6, (b) at any time that an Event of Default has occurred and is
continuing or the Lender Group deems itself insecure, sign Borrowers' name on
any invoice or xxxx of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse Borrowers' name on any Collection item that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing or the Lender Group deems itself insecure, notify the post office
authorities to change the address for delivery of Borrowers' mail to an address
designated by Agent, to receive and open all mail addressed to Borrowers, and to
retain all mail relating to the Collateral and forward all other mail to
54
Borrowers, (f) at any time that an Event of Default has occurred and is
continuing or the Lender Group deems itself insecure, make, settle, and adjust
all claims under Borrowers' policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (g) at any time
that an Event of Default has occurred and is continuing or Agent deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors or other Persons obligated on the Collateral, for amounts
and upon terms that Agent determines to be reasonable, and Agent may cause to be
executed and delivered any documents and releases that Agent determines to be
necessary. The appointment of Agent as Borrowers' attorney, and each and every
one of Agent's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group's obligation to extend credit hereunder is terminated.
4.8. Right to Inspect; Inventories, Appraisals, Audits. Agent (through any of
its officers, employees, or agents), and together with any Lender that so elects
shall have the right, from time to time hereafter to inspect the Books and to
check, test, and appraise the Collateral in order to verify Borrowers' financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral. Without limiting the generality of the foregoing:
(a) Borrowers agree to conduct complete or full physical inventories at the end
of each of the second and fourth quarters of Borrowers' fiscal year. Agent, at
the expense of Borrowers, may participate in and/or observe each physical count
and/or inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of Borrowers. Borrowers shall provide to Agent within 15
days of the Closing Date a schedule of the store locations where such
inventories shall be conducted. Without limiting any provision of this
Agreement, Agent may establish or expand the Availability Reserves and Inventory
Reserves based on the results of such physical inventories in Agent's
Discretion.
(b) From time to time, but not more often than quarterly if no Event of Default
has occurred and is continuing, Agent may obtain or conduct (in all events, at
Borrowers' expense) appraisals conducted by such appraisers as are satisfactory
to Agent. In addition to the foregoing, the Agent may from time to time obtain
desktop appraisals.
(c) Agent contemplates conducting quarterly commercial finance audits (in each
event, at the Borrowers' expense) of the Books, provided that such audits may
occur more frequently if an Event of Default has occurred and is continuing.
(d) Agent from time to time (in all events, at Borrowers' expense) may undertake
"mystery shopping" (so-called) visits to all or any of Borrowers' business
premises. Agent shall provide Borrowers with a copy of any nonconfidential
results of such mystery shopping upon Borrowers' written request.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, Each
Borrower makes the following representations and warranties to the Lender Group,
which shall be true, correct, and complete in all respects as of the date
hereof, and shall be true, correct, and complete in all respects as of the
55
Closing Date, and, as revised pursuant to Section 5.22, at and as of the date of
the making of each Advance and the issuance of each Letter of Credit thereafter,
as though made on and as of the date of such Advance or, Letter of Credit
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1. No Encumbrances. Each Borrower has good and indefeasible title to all
of its property composing the Collateral, free and clear of Liens except for
Permitted Liens.
5.2. Reserved.
5.3. Eligible Inventory. All Eligible Inventory is of good and merchantable
quality, free from known defects.
5.4. Equipment. All of the Equipment is used or held for use in Borrowers'
business and is fit for such purposes.
5.5. Location of Inventory and Equipment. Except as indicated on Schedule 6.11,
the Inventory and Equipment are not stored with a bailee, warehouseman, or
similar party. Except for Inventory that is in-transit, the Inventory and
Equipment and are located only at the locations identified on Schedule 6.11 or
otherwise permitted by Section 6.11.
5.6. Inventory Records. Each Borrower keeps materially correct and accurate
records itemizing and describingthe kind, type, quality, and quantity of the
Inventory, and such Borrower's Cost therefor.
5.7. Legal Status. Each Borrower represents and warrants that
(a) Schedule 5.7 correctly sets forth (i) such Borrower's exact legal name, (ii)
such Borrower's type and jurisdiction of organization, (iii) such Borrower's
organizational identification number or accurately states that such Borrower has
none, and (iv) such Borrower's place of business or, if more than one, its chief
executive office, as well as such Borrower's mailing address, if different.
(b) All information set forth on the applicable Perfection Certificate
pertaining to such Borrower is accurate and complete (except for immaterial
inaccuracies that do not affect Agent's ability to obtain or maintain a
perfected security interest in any portion of the Collateral) as of the date
hereof.
5.8. Due Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in good standing under the
laws of the jurisdiction of its incorporation and qualified and licensed to do
business in, and in good standing in, any state where the failure to be so
licensed or qualified reasonably could be expected to cause a Material Adverse
Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list of each
Borrower's direct and indirect Subsidiaries showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
56
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the applicable Borrower. All of the outstanding capital stock
of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or any securities,
instruments, warrants, options, purchase rights, conversion or exchange rights,
calls, commitments or claims of any character convertible into or exercisable
for capital stock) of any direct or indirect Subsidiary of any Borrower is
subject to the issuance of any security, instrument, warrant, option, purchase
right, conversion or exchange right, call, commitment or claim of any right,
title, or interest therein or thereto.
5.9. Due Authorization; No Conflict.
(a) As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of such
Borrower.
(b) As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to such Borrower, the Governing Documents of such Borrower, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Borrower, (ii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual
obligation or material lease of such Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of such Borrower, other than Permitted Liens, or (iv) require any
approval of stockholders or other equity holders or any approval or consent of
any Person under any material contractual obligation of any such Borrower.
(c) Other than the filing of appropriate financing statements, fixture filings,
and mortgages, the execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which such Borrower is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any federal, state, foreign, or other Governmental
Authority or other Person.
(d) As to each Borrower, this Agreement and the Loan Documents to which such
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Borrower will be the legally valid and
binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
(e) The Agent's Liens granted by each Borrower in and to its properties and
assets pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
57
5.10. Litigation.
(a) There are no actions or proceedings pending by or against any Borrower
before any court or administrative agency and Borrowers do not have knowledge or
belief of any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrowers, except for: (a) matters disclosed on Schedule 5.10(a); (b) matters
covered by applicable insurance of the Borrowers; and (c) matters arising after
the date hereof that, if decided adversely to the applicable Borrower, would not
cause a Material Adverse Change.
(b) Schedule 5.10(b) lists all of Borrowers' Commercial Tort Claims,
existing as of the date hereof.
5.11. No Material Adverse Change. Except as set forth on Schedule 5.11, all
financial statements relating to Borrowers that have been delivered by Borrowers
to the Lender Group in connection with this Agreement have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and,
except in the case of draft financial statements (which shall be conspicuously
marked as drafts), fairly present Borrowers' (or such guarantor's, as
applicable) financial condition as of the date thereof and Borrowers' results of
operations for the period then ended. There has not been a Material Adverse
Change with respect to Borrowers or Parent (or any other guarantor, as
applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.
5.12. Fraudulent Transfer.
(a) each Borrower is Solvent.
(b) No transfer of property is being made by any Borrower and no obligation is
being incurred by any Borrower in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of Borrowers.
5.13. Employee Benefits. None of Borrowers, any of its Subsidiaries, or any of
its ERISA Affiliates maintains or contributes to any Benefit Plan, other than
those listed on Schedule 5.13. Borrowers, each of its Subsidiaries and each
ERISA Affiliate have satisfied the minimum funding standards of ERISA and the
IRC with respect to each Benefit Plan to which they are obligated to contribute.
No ERISA Event has occurred nor has any other event occurred that may result in
an ERISA Event that reasonably could be expected to result in a Material Adverse
Change. None of Borrowers or its Subsidiaries or any ERISA Affiliate is required
to provide security to any Plan under Section 401(a)(29) of the IRC.
5.14. Environmental Condition. None of Borrowers' properties or assets have ever
been used by Borrowers or, to the best of Borrowers' knowledge, by previous
owners or operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials. None of Borrowers' properties or
assets have ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, or a
58
candidate for closure pursuant to any environmental protection statute. No Lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Borrowers. Borrowers
have not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrowers resulting in the releasing
or disposing of Hazardous Materials into the environment.
5.15. Licenses. Each distributorship, franchise, and similar agreement and
each material license issued to, or to which Borrowers are a party is in full
force and effect. No party to any such license or agreement is in default or
violation thereof. Borrowers have not received any notice or threat of
cancellation of any such license or agreement.
5.16. Leases. Schedule 5.16, is a schedule of all presently effective Leases and
Capital Leases. Each of such Leases and Capital Leases is in full force and
effect. The Borrowers hereby authorize Agent at any time and from time to time
to contact any of Borrowers' respective landlords in order to confirm Borrower's
continued compliance with the terms and conditions of the Lease(s) between a
Borrower and that landlord and to discuss such issues, concerning such
Borrower's occupancy under such Lease(s), as Agent may determine in Agent's
Discretion.
5.17. DDAs.
(a) Schedule 5.17 sets forth all present DDAs, and includes, with respect to
each depository (i) the name and address of that depositary; (ii) the account
number(s) of the account(s) maintained with such depositary; (iii) a contact
person at such depositary; and (iv) the telephone number of the contact person.
(b) Borrowers will not establish any DDA hereafter unless Borrowers,
contemporaneous with such establishment, delivers to Agent a control agreement
(in form satisfactory to Agent) executed on behalf of the depositary in favor of
Agent with which such DDA is being established.
5.18. Credit Card Receipts. Schedule 5.18 sets forth all arrangements to which
each Borrower is a party with respect to the payment to such Borrower of the
proceeds of all credit card charges for sales by such Borrower. Borrowers shall
not attempt to change any direction or designation set forth in the Credit Card
Agreements regarding payment of charges without the prior written consent of
Agent.
5.19. Brokerage Fees. Borrowers have not utilized the services of any broker or
finder in connection with Borrowers obtaining financing from the Lender Group
under this Agreement or in connection with the transactions contemplated by the
Purchase Agreement and, to Borrowers' knowledge, no brokerage commission or
finders fee that may arise in connection with the Borrowers obtaining financing
from the Lender Group under this Agreement or the Agreement shall be payable by
the Borrowers.
5.20. Payment of Taxes. Except where the failure to do so would not have a
Material Adverse Effect and except with respect to the tax liens set forth on
Schedule T-1, (a) all tax returns required to be filed by Borrowers have been
timely filed and (b) all taxes upon Borrowers or their properties, assets,
income and franchises (including real property taxes and payroll taxes) but not
subject of a Permitted Protest have been paid prior to delinquency.
59
5.21. Bankruptcy Court Disclosures. All written and oral statements made by or
on behalf of ZB to the Bankruptcy Court related to the Purchase Agreement were
true and complete in all material respects and the Final Bankruptcy Court Order
was not obtained by fraud or misrepresentation. ZB acted in good faith at all
times in connection with the Purchase Agreement and did not collude with any
Person in seeking to purchase the Debtors' assets.
5.22. Updates. Borrowers shall deliver to Agent from time to time supplements to
or replacements of the Schedules to this Agreement to the extent that any
information thereon is not true and correct in all material respects and any
such supplement or replacement shall supersede the Schedules in effect on the
dates or any prior supplements or replacements thereof; provided that such
supplements and replacements shall be effective only upon receipt and approval
by Agent (such approval not to be unreasonably withheld) and shall not
retroactively apply to prior representations and warranties made by the
Borrowers.
5.23. Post-Closing Payments. Borrowers have made all of the Post-Closing
Payments and have no further liabilities to any Person with respect to the
transactions contemplated by the ZB Purchase Agreement.
5.24. Complete Disclosure. All factual information (taken as a whole) furnished
by or on behalf of Borrowers in writing to Agent or any Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents
or any transaction contemplated herein or therein is true and accurate in all
material respects. On the Closing Date, the Business Plan represents, and as of
the date on which any other Business Plan is delivered to Agent, such additional
Business Plans represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.
6. AFFIRMATIVE COVENANTS.
Borrowers covenant and agree that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrowers shall and shall cause each of their respective Subsidiaries to do all
of the following (except to extent compliance is specifically waived by the
Agent in writing):
6.1. Accounting System. Maintain a standard and modern system of accounting that
enables Borrowers to produce financial statements in accordance with GAAP, and
maintain records pertaining to the Collateral that contain information as from
time to time may be requested by Agent. Borrowers also shall keep a modern
inventory reporting system that shows accurate current stock, cost and sales
records of Inventory, that accurately and sufficiently itemizes and describes
the kinds, types and quantities of Inventory and the cost and selling prices
thereof, and that shows all additions, sales, claims, returns, and allowances
with respect to the Inventory.
6.2. Collateral and Financial Reporting. Provide Agent, or such other party
as Agent shall designate with the following documents at the following times in
form satisfactory to Agent:
60
(a) Borrowing Base Certificate. Administrative Borrower shall provide to Agent,
on each Business Day, a certificate in the form of Exhibit 6.2, as such form may
be revised from time to time by Agent (the "Borrowing Base Certificate"). The
Borrowing Base Certificate may be sent to Agent by facsimile transmission,
provided that, upon request by Agent, the original thereof is forwarded to Agent
on the date of such transmission. No adjustments to the Borrowing Base
Certificate may be made without supporting documentation and such other
documentation as may be requested by Agent from time to time.
(b) Weekly Reports. Weekly, not later than Wednesday for the immediately
preceding fiscal week:
(i) sales audit report or cash reconciliation (Borrowers' format in use on
the Closing Date is acceptable);
(ii) collateral activity summary (the so-called "roll forward inventory
report") in a form substantially similar to Exhibit W-1;
(iii) "flash sales report" by geographical market (Borrowers' format in use
on the Closing Date is acceptable);
(iv) purchases/receipts by department; and
(v) stock ledger by department.
(c) Monthly Reports. Monthly, Administrative Borrower shall provide to
Agent original counterparts of (each in such form as Agent from time to time may
specify):
(i) Within 15 days of the end of each month for the immediately preceding
month;
(A) purchase and accounts payable aging analysis report;
(B) stock ledger by department;
(C) inventory certificate;
(D) accounts payable aging by invoice date;
(E) rent, tax and insurance compliance certificate;
(F) accounts payable summary;
(G) last date received report (inventory aging);
(H) open to buy;
(I) on order reporting; and
(J) updated self insurance accrual report.
61
(ii) Within 30 days of the end of each month for the immediately preceding
month:
(A) store profit and loss statements;
(B) inventory reconciliation of the stock ledger to general ledger;
(C) financial statements including balance sheet, income statement
(consolidated and by store), cash flow report and comparison
of same store sales;
(D) gross margin reconciliation of the stock ledger to the general ledger;
and
(E) statement of store activity.
(iii) For purposes of Section 6.2(c)(i)(A), above, the first "preceding
month" in respect of which the items required by that Section shall be provided
shall be March 2002 and for purposes of Section 6.2(c)(i)(B) above, the first
"preceding month" in respect of which the items required by that Section shall
be provided shall be March 2002.
(d) Reserved.
(e) Annual Reports. In addition to the monthly reports required under this
Section 6.2 annually, within 90 days following the end of Parent's and its
Subsidiaries' fiscal year, Administrative Borrower shall deliver to Agent an
original signed counterpart of Parent's and its Subsidiaries' annual financial
statement, on a consolidated basis, which statement shall have been audited by,
and bear the unqualified opinion of Borrowers' independent certified public
accountants reasonably acceptable to Agent (i.e. said statement shall be
"certified" by such accountants) certifying that such statements have been
prepared in accordance with GAAP and without any explanatory paragraphs or other
qualifying paragraphs, together with a copy of such accountant's letter to
management; provided, that for the current fiscal year such certification shall
not be required before the date required by the Securities and Exchange
Commission. Such annual statement shall include, at a minimum (with comparative
information for the then prior fiscal year) a balance sheet, profit and loss
statement, income statement, statement of changes in shareholders' equity, and
cash flows. Administrative Borrower shall provide an interim draft of such
financial statements within 60 days after year-end, inclusive of subsequent
periods, which draft shall not be required to contain footnotes, until the
year-end statements are finalized. Together with the above, Administrative
Borrower also shall deliver to Agent Borrowers' Form 10-Q Quarterly Reports,
Form 10-K Annual Reports, and Form 8-K Current Reports, and any other filings
made by Parent with the Securities and Exchange Commission as soon as the same
are filed, any press releases of Borrowers, and any other information that is
provided by a Borrower to its shareholders, and any other report reasonably
requested by Agent relating to the financial condition of Parent and its
Subsidiaries. Prior to the Closing Date, Borrowers shall have issued written
instructions to their independent certified public accountants authorizing them
to communicate with Agent and to release to Agent whatever financial information
concerning Borrowers that Agent may request. Borrowers hereby irrevocably
authorize and direct all auditors, accountants, or other third parties to
62
deliver to Agent, at Borrowers' expense, copies of Parent's and its
Subsidiaries' financial statements, papers related thereto, and other accounting
records of any nature in their possession and to disclose to Agent any
information they may have regarding Parent's and its Subsidiaries' business
affairs and financial condition.
(f) Officers' Certificates. Parent shall cause its chief accounting officer to
provide a Compliance Certificate with each of those monthly, quarterly and
annual statements and/or reports to be furnished pursuant to this Agreement,
including, without limitation, the monthly reports furnished pursuant to Section
6.2(c), which Compliance Certificate shall:
(i) indicate that the subject statement was prepared in accordance with
GAAP consistently applied, and presents fairly the financial condition of Parent
and its Subsidiaries at the close of, and the results of Parent's and its
Subsidiaries' operations and cash flows for, the period(s) covered, subject,
however (with the exception of the certificate which accompanies such annual
statement) to usual year-end adjustments;
(ii) indicate either that (i) no default or event of default has occurred
and that no default or event of default has occurred and is continuing under any
of the PNC Loan Documents, the Vendex Notes or any agreement evidencing
Equipment Financing Indebtedness, Purchase Money Indebtedness or Sale-Leaseback
Indebtedness or (ii) if such an event has occurred, its nature (in reasonable
detail) and the steps (if any) being taken or contemplated by Borrowers to be
taken on account thereof;
(iii) include calculations concerning Borrowers' compliance (or failure to
comply) at the date of the subject statement with the covenants included in
Sections 7.20 through 7.22;
(iv) indicate that all payments required to be paid under Section 6.17 have
been timely paid; and
(v) indicate that premiums for insurance required under Section 6.9 have or
have not been paid.
(g) Additional Financial Information.
(i) In addition to all other information required to be provided pursuant
to this Section 6.2, Borrowers promptly shall provide to Agent such other and
additional information concerning Parent and any of its subsidiaries, the
Collateral (and other collateral securing repayment of the Obligations), the
operation of Parent's and its Subsidiaries' business, and Borrowers' and its
Subsidiaries' financial condition, including original counterparts of financial
reports and statements, as Agent may from time to time reasonably request from
Borrowers.
(ii) Borrowers may provide Agent, from time to time hereafter, with updated
Business Plans, any such updated Business Plan to be satisfactory to Agent in
Agent's Discretion. Any such updated Business Plan shall be deemed accepted by
Agent upon the earlier to occur of the date such updated Business Plan is
attached hereto as Exhibit B-1 or 21 days after Borrowers submit a written
63
request to Agent and its counsel that such updated Business Plan be accepted by
Agent. In all events, Borrowers, not later than 60 days prior to the end of each
of Parent's fiscal years, shall deliver to Agent an updated and extended
Business Plan which shall go out at least through the end of the then next
fiscal year, the final version of such Business Plan to be delivered at least 15
days of the end of Parent's fiscal year. In each event, such updated and
extended Business Plans shall be provided in the same form as that provided to
and approved by Parents Board of Directors and reasonably satisfactory to Agent.
(h) Electronic Reporting. At Agent's option, all information and reports
required to be submitted to Agent by Borrowers shall be transmitted
electronically pursuant to an electronic transmitting reporting system and shall
be in a record layout format designated by Agent from time to time.
(i) Lender Information. Agent shall, promptly upon receipt thereof, provide the
following documents and information to each of the Lenders: (1) the Borrowing
Base Certificate described in Section 6.2(a); (2) the monthly reporting
information described in Section 6.2(c)(ii)(C) (financial statements) and
6.2(c)(ii)(F) (officer's compliance certificate); (3) the Annual Reports
described in Section 6.2(e), and (4) the Officer's Certificate described in
Section 6.2(f).
6.3. Tax Returns. Deliver to Agent copies of Borrowers' future federal
income tax returns, and any amendments thereto, within 30 days of the filing
thereof with the Internal Revenue Service.
6.4. Reserved.
6.5. Returns. Cause returns and allowances, if any, as between Borrowers
and their Account Debtors to be on the same basis and in accordance with the
usual customary practices of Borrowers, as they exist at the time of the
execution and delivery of this Agreement.
6.6. Title to Equipment. Upon Agent's request, Borrowers, as promptly as
reasonably possible but in any event within three Business Days, shall deliver
to Agent, properly endorsed, any and all evidences of ownership of, certificates
of title, or applications for title to any items of Equipment.
6.7. Maintenance of Equipment. Maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved.
6.8. Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their property to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Agent, on demand, appropriate certificates attesting to
the payment thereof or deposit with respect thereto. Borrowers will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
64
disability, and local, state, and federal income taxes, and will, upon request,
furnish Agent with proof satisfactory to Agent indicating that the applicable
Borrower has made such payments or deposits.
6.9. Insurance.
(a) At Borrowers' expense, keep the Personal Property Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrowers also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrowers' ownership and use of the Personal Property Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
(b) At Borrowers' expense, obtain and maintain (i) insurance of the type
necessary to insure the Improvements and Chattels (as such terms are defined in
the Mortgages), for the full replacement cost thereof, against any loss by fire,
lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage,
elevator collision, and other risks from time to time included under "extended
coverage" policies, in such amounts as Agent may require, but in any event in
amounts sufficient to prevent any Borrower from becoming a co-insurer under such
policies, (ii) combined single limit bodily injury and property damages
insurance against liability, or damages on, about, or relating to each parcel of
Real Property Collateral, in an amount of not less than $1,000,000; (iii)
business rental insurance covering annual receipts for a 12 month period for
each parcel of Real Property Collateral; and (iv) insurance for such other risks
as Agent may require. Replacement costs, in Agent's Discretion, may be
redetermined by an insurance appraiser, satisfactory to Agent, not more
frequently than once every 12 months at Borrowers' cost.
(c) All such policies of insurance shall be in such form, with such companies,
and in such amounts as may be reasonably satisfactory to Agent. All insurance
required herein shall be written by companies which are authorized to do
insurance business in the States of California or Pennsylvania, as applicable.
All hazard insurance and such other insurance as Agent shall specify, shall
contain a Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Agent, showing Agent (for the ratable benefit of the Lenders) as
sole loss payee thereof, and shall contain a waiver of warranties. Every policy
of insurance referred to in this Section 6.9 shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days prior written
notice to Agent (for the ratable benefit of the Lenders) and that any loss
payable thereunder shall be payable notwithstanding any act or negligence of
Borrowers or the Lender Group which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by the Lender Group pursuant to the Mortgages upon the
happening of an Event of Default, or (iii) any change in title or ownership of
the Real Property Collateral. Borrowers shall deliver to Agent certified copies
of such policies of insurance and evidence of the payment of all premiums
therefor.
(d) Original policies or certificates thereof satisfactory to Agent evidencing
such insurance shall be delivered to Agent at least 60 days prior to the
65
expiration of the existing or preceding policies. Borrowers shall give Agent
prompt notice of any loss covered by such insurance, and Agent shall have the
right to adjust any loss. Agent shall have the exclusive right to adjust all
losses payable under any such insurance policies without any liability to
Borrowers whatsoever in respect of such adjustments. Any monies received as
payment for any loss under any insurance policy including the insurance policies
mentioned above, shall be paid over to Agent (for the ratable benefit of
Lenders) to be applied at the option of Agent either to the prepayment of the
Obligations without premium, in such order or manner as Agent may elect, or
shall be disbursed to Borrowers under stage payment terms satisfactory to Agent
for application to the cost of repairs, replacements, or restorations. All
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, Agent shall have the right to apply all prepaid premiums to
the payment of the Obligations in such order or form as Agent shall determine.
(e) Borrowers shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.9, unless Agent is included thereon as named insured with the loss
payable to Agent (for the ratable benefit of Lenders) under a standard 438BFU
(NS) Mortgagee endorsement, or its local equivalent. Borrowers immediately shall
notify Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Agent.
6.10. No Setoffs or Counterclaims. Make payments hereunder and under the other
Loan Documents by or on behalf of Borrowers without setoff or counterclaim and
free and clear of, and without deduction or withholding for or on account of,
any federal, state, or local taxes.
6.11. Location of Inventory and Equipment. Keep the Inventory and Equipment only
at the locations identified on Schedule 6.11; provided, however, that Borrowers
may amend Schedule 6.11 so long as such amendment occurs by written notice to
Agent not less than 30 days prior to the date on which the Inventory or
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, Borrowers provides any financing statements or fixture filings
necessary to perfect and continue perfecting the Lien of Agent for the benefit
of the Lender Group, security interests in such assets and also provides to
Agent a Collateral Access Agreement.
6.12. Compliance with Laws. Comply with the requirements of all applicable laws,
rules, regulations, and orders of any governmental authority, including the Fair
Labor Standards Act and the Americans With Disabilities Act, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, would not have and could not reasonably be expected to cause a
Material Adverse Change.
6.13. Employee Benefits.
(a) Deliver to Agent: (i) promptly, and in any event within 10 Business Days
after Borrowers or any of their Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
66
Material Adverse Change, a written statement of the chief financial officer of
Borrowers describing such ERISA Event and any action that is being taking with
respect thereto by any Borrower, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC and
Borrowers or such Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor,
(ii) promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Borrowers, any of their
Subsidiaries or, to the knowledge of Borrowers, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within 3 Business Days
after receipt by Borrowers, any of their Subsidiaries or, to the knowledge of
Borrowers, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Agent, upon Agent's request, each of the following:
(i) a copy of each Plan (or, where any such plan is not in writing, complete
description thereof) (and if applicable, related trust agreements or other
funding instruments) and all amendments thereto, all written interpretations
thereof and written descriptions thereof that have been distributed to employees
or former employees of Borrowers or their Subsidiaries; (ii) the most recent
determination letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three most recent plan years, annual reports on Form 5500 Series
required to be filed with any governmental agency for each Benefit Plan; (iv)
all actuarial reports prepared for the last three plan years for each Benefit
Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions required to be made by Borrowers or any ERISA
Affiliate to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
Borrowers or any ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrowers or their Subsidiaries under any
Retiree Health Plan.
6.14. Leases. Pay when due all rents and other amounts payable under any Leases
to which any Borrower is a party or by which any Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
To the extent that a Borrower fails timely to make payment of such rents and
other amounts payable when due under its Leases, Agent shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.15. Mailing Lists, Advertising. Add Agent as an addressee on all mailing
lists maintained by or for Borrowers. At the request of Agent, Borrowers shall
provide Agent with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio advertising).
6.16. Payroll and Operating Accounts. Maintain separate "zero-balance"
payroll and operating accounts at a depository institution acceptable to Agent.
6.17. Rent and Lease Obligations. Pay all rent and additional rent and all other
obligations under all Capital Leases and operating leases, provided, however,
67
that to the extent any operating lease is in dispute, the Agent may, in the
Agent's Discretion, pay amounts due on such lease or leases.
6.18. Vendex Indebtedness. On or before October 6, 2004, Borrowers shall have
received net cash proceeds in consideration of the sale of capital stock of
Parent or the issuance of Permitted Subordinated Indebtedness in an amount equal
to or greater than the amount of the Vendex Indebtedness to be payable on the
maturity date thereof and shall use such proceeds to satisfy the obligations of
Parent and Xxxxxxx with respect to the Vendex Indebtedness. Notwithstanding the
foregoing, nothing herein shall be interpreted to prevent Borrowers from
terminating the Special Term Subline prior to the satisfaction of the Vendex
Indebtedness.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower will not and will not permit any of its Subsidiaries
to do any of the following without the prior written consent of the Agent:
7.1. Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except as set forth in the Business Plan or:
(a) Indebtedness evidenced by this Agreement and the other Loan Documents,
together with Indebtedness to issuers of letters of credit that are the subject
of L/C Guarantees;
(b) Indebtedness set forth in the latest financial statements of Borrowers
submitted to Agent on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) refinancings, renewals, or extensions of Indebtedness permitted under
Section 7.1 other than subsection (a) hereof (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrowers, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended or add one or more Borrowers as liable with respect thereto
if such additional Borrower or Borrowers were not liable with respect to the
original Indebtedness, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness;
(e) the PNC Indebtedness;
(f) Sale-Leaseback Indebtedness, Purchase Money Indebtedness and Equipment
Financing Indebtedness in an aggregate amount outstanding not to exceed
68
$20,000,000, provided that in no instance may such Indebtedness be secured by a
lien on or security interest in any Real Property owned in fee by Borrowers.
(g) Vendex Indebtedness;
(h) Permitted Subordinated Indebtedness;
(i) Permitted Indebtedness; and
(j) Post-Closing Payments that arise and become payable after the Closing Date
pursuant to an order Entered by the Bankruptcy Court.
7.2. Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any Lien on or with respect to any of its property or assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced under Section
7.1(d) and so long as the replacement Liens only encumber those assets or
property that secured the original Indebtedness).
7.3. Restrictions on Fundamental Changes. Except for Permitted Transactions
and subject to the applicable conditions set forth on Schedule 7.3,
(a) Enter into any merger, consolidation, reorganization, or recapitalization,
or reclassify its Stock or otherwise change any Borrower's type of organization,
jurisdiction of organization or other legal or corporate structure, except that
subject to Agent's prior written approval, Borrowers may cause the merger of a
Borrower's Subsidiary into such Borrower.
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in
one transaction or a series of transactions, all or substantially all of its
assets.
7.4. Disposal of Assets. Except as set forth on Schedule 7.4, sell, lease,
assign, transfer, or otherwise dispose of any Borrower's properties or assets
(including, without limitation, by a "store-closing" or "going-out-of-business"
sale) other than (i) sales of Inventory to buyers in the ordinary course of
Borrowers' business as currently conducted and (ii) sales of other assets
outside the ordinary course of business to the extent contemplated by the
Business Plan (including store closings), provided that such sales are for cash
for fair market value and the methods of effectuating such sales are acceptable
to Agent in the Agent's Discretion; provided, further, that Borrowers may close
up to 5 stores in excess of the number of store closings set forth in the
Business Plan.
7.5. Change of Name or Address. Change any Borrower's name or organizational
identification number or relocate any Borrower's chief executive office to a new
location; provided, however, that a Borrower may change its name or chief
executive office location upon at least 30 days prior written notice by
Administrative Borrower to Agent of such change and so long as, at the time of
such written notification, such Borrower provides (i) any financing statements,
69
fixture filings or other agreements or documents necessary to perfect and
continue perfected Agent's Liens and (ii) in the case of such a relocation, if
the new chief executive office location is leased by such Borrower, a Collateral
Access Agreement with respect thereto.
7.6. Guarantee. Except with respect to guarantees secured by Permitted Liens or
constituting Permitted Indebtedness, guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by endorsement
of instruments or items of payment for deposit to the account of Borrowers or
which are transmitted or turned over to Agent.
7.7. Nature of Business; Suspension.
(a) Make any change in the principal nature of Borrowers' business.
(b) suspend or go out of a substantial portion of its business.
7.8. Prepayments and Amendments.
(a) Prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, except as set forth in Section 7.8(c) or in connection with
(i) a refinancing permitted by Section 7.1(d) and set forth in the Business Plan
or (ii) the redemption or conversion of the Athanor Note as set forth in the
Business Plan.
(b) Directly or indirectly, amend, modify, alter, increase, or change any of the
material terms or conditions of any agreement, instrument, document, indenture,
or other writing evidencing or concerning Indebtedness permitted under Section
7.1 (other than subsection (a) thereof) unless such amendment, modification,
alteration or change (i) does not impair the prospects of repayment of the
Obligations by Borrowers, (ii) does not increase the amount of such Indebtedness
or add one or more Borrowers as liable with respect thereto if such additional
Borrower or Borrowers were not liable with respect thereto, (iii) does not
result in a shortening of the average weighted maturity of such Indebtedness,
and (iv) if such Indebtedness was subordinated in right of payment to the
Obligations, does not have subordination terms and conditions less favorable to
the Lender Group than those applicable previously applicable to such
Indebtedness; and
(c) Make any prepayment under the Vendex Notes or the Athanor Note except as
provided therein, subject to Section 7.11 and the terms of the Vendex
Intercreditor Agreement or the Athanor Intercreditor Agreement, as applicable.
7.9. Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10. Consignments. Without the prior written consent of the Agent or except as
set forth in the Business Plan, consign any Inventory or sell any Inventory on
xxxx and hold, sale or return, sale on approval, or other conditional terms of
sale (except for Borrowers' customary return policy applicable to the return of
70
inventory purchased by Borrowers' retail customers in the ordinary course of
Borrowers' business), or have possession of any property with a Cost value in
excess of $100,000 on consignment to Borrowers.
7.11. Restricted Payments and Distributions.
(a) Except as set forth in the Business Plan and subject to Section 7.11 (b) and
Section 7.8(c), make any Restricted Junior Payment other than a payment with
respect to the Vendex Indebtedness or the Athanor Note; or
(b) Any payment of principal and/ or interest in respect of the Vendex
Indebtedness if any Default or Event of Default has occurred or is continuing or
would be caused by such payment.
7.12. Accounting Methods. Modify or change Borrowers' method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrowers' accounting records without
said accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or Borrowers' financial condition. Each Borrower waives
the right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agree that Agent
may contact directly any such accounting firm or service bureau in order to
obtain such information, provided that no member of the Lender Group shall
disclose, directly or indirectly, such information to Borrowers' competitors.
7.13. Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14. Transactions with Affiliates. Except for Permitted Transactions and
subject to the applicable conditions set forth on Schedule 7.3, directly or
indirectly enter into or permit to exist any material transaction with any
non-Borrower Affiliate of Borrowers except for transactions that are in
furtherance of Borrowers' business, upon fair and reasonable terms, that are
fully disclosed to Agent, and that are no less favorable to Borrowers than would
be obtained in an arm's length transaction with a non-Affiliate. 7.15. Store
Openings. Open, or commit to open, more than 3 "discount" or "outlet" stores, or
fail to provide Agent prior written notice that a Borrower intends to open, or
commit to open, any such store.
7.16. Compensation. Increase the annual fee or per-meeting fees paid to
directors during any year or increase by more than 15% in any year the total
cash compensation, during any year, paid to or accrued by officers and senior
management employees except as provided in a severance and retention plan
approved by the board of directors of Borrowers or approved by Agent or as
assumed by Borrowers pursuant to the ZB Purchase Agreement or as set forth in
the Business Plan.
71
7.17. Use of Proceeds. Use the proceeds of the Advances for any purpose other
than (a) on the Closing Date, (i) to repay in full the outstanding principal,
accrued interest, and accrued fees and expenses owing under the TRS Loan
Agreement and the ZB Loan Agreement, (ii) to pay sums due and owing in cash
under the Purchase Agreement, and (iii) to pay transactional costs and expenses
incurred in connection with this Agreement, and (b) thereafter, consistent with
the terms and conditions hereof and the Business Plan, for its lawful and
permitted corporate purposes.
7.18. Inventory and Equipment with Bailees. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party unless Agent has granted its prior written consent and Borrowers
have delivered to Agent a Bailee Acknowledgment with respect to the applicable
Inventory and/or Equipment.
7.19. No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrowers to engage, in any prohibited
transaction which is reasonably likely to result in a civil penalty or excise
tax described in Sections 406 of ERISA or 4975 of the IRC for which a statutory
or class exemption is not available or a private exemption has not been
previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated funding
deficiency (as defined in Sections 302 of ERISA and 412 of the IRC), whether or
not waived;
(c) fail, or permit any Subsidiary of Borrowers to fail, to pay timely required
contributions or annual installments due with respect to any waived funding
deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrowers to terminate, any Benefit
Plan where such event would result in any liability of Borrowers, any of its
Subsidiaries or any ERISA Affiliate under Title IV of ERISA that reasonably
could be expected to exceed $250,000;
(e) fail, or permit any Subsidiary of Borrowers to fail, to make any required
contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrowers to fail, to pay any required
installment or any other payment required under Section 412 of the IRC on or
before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrowers to amend, a Plan resulting in
an increase in current liability for the plan year such that either of
Borrowers, any Subsidiary of Borrowers or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrowers to withdraw, from any
Multiemployer Plan where such withdrawal is reasonably likely to result in any
liability of any such entity under Title IV of ERISA;
72
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrowers, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20. Minimum EBITDA. Fail to maintain EBITDA of at least 70% of the projected
EBITDA set forth in the Business Plan, tested as of the last day of each
calendar month during the term of this Agreement, commencing December 2002 and
(i) for the calendar months of December 2002 and January 2003 on a year-to-date
basis and (ii) for each calendar month thereafter, on a trailing 12 month basis.
7.21. Retail Performance and Other Covenants.
(a) Fail to observe or comply with each of the covenants set forth on
Schedule 7.21(a); and
(b) If the Special Term Subline has not been terminated pursuant to Section 3.7
before January 1, 2003, after such date, fail to observe or comply with each of
the covenants set forth on Schedule 7.21(b).
7.22. Capital Expenditures. Make capital expenditures in any fiscal year in
excess of the amount set forth in the Business Plan.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1. If Borrowers fail to pay when due and payable or when declared due
and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2. (a) If Borrowers fail or neglect to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in Sections 6.3
(Tax Returns), 6.6 (Title to Equipment), 6.11 (Location of Inventory and
Equipment), 6.12 (Compliance with Laws), or 6.13 (Employee Benefits), of this
Agreement and such failure continues for a period of 5 Business Days after the
earlier of: (i) notice thereof to Borrowers by Agent, or (ii) the date Borrowers
were required to give notice to Agent pursuant to Section 6.2(f)(ii);
(b) If Borrowers fail or neglect to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.1 (Accounting System), 6.7 (Maintenance of Equipment) or 6.15
(Mailing Lists, Advertising) of this Agreement and such failure continues for a
period of 15 Business Days; after the earlier of: (i) notice thereof to
Borrowers by Agent, or (ii) the date Borrowers was required to give notice to
Agent pursuant to Section 6.2(f)(ii);
73
(c) If Borrowers fail or neglect to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
in any material Bank Product Agreement; or
(d) If Borrowers fail or neglect to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
in this Agreement, or in any of the other Loan Documents other than a Bank
Product Agreement (giving effect to any grace periods, cure periods, or required
notices, if any, expressly provided for in such Loan Documents); in each case,
other than any such term, provision, condition, covenant, or agreement that is
the subject of another provision of this Section 8, in which event such other
provision of this Section 8 shall govern.
8.3. If there is a Material Adverse Change;
8.4. If any material portion of Borrowers' properties or assets
taken as a whole is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any third
Person;
8.5. If Borrowers are enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of their
collective business affairs;
8.6. If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrowers' properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether xxxxxx or otherwise, upon a material portion of Borrowers' properties or
assets taken as a whole and the same is not paid on the payment date thereof;
8.7. If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrowers' properties or assets;
8.8. If there is a default in any material agreement for borrowed money
to which any Borrower is a party with one or more third Persons and such default
(a) occurs at the final maturity of the obligations thereunder, or (b) results
in a right by such third Person(s), irrespective of whether exercised, to
accelerate the maturity of such Borrower's obligations thereunder;
8.9. If any Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.10. If any material misstatement or material misrepresentation (as of
the time such statement or representation is made) exists now or hereafter in
any warranty, representation, statement, or report made to the Lender Group by
Borrowers or any officer, employee, agent, or director of any Borrower in any
Loan Document or in any financial information, report, projection or other item
delivered pursuant to a Loan Document, or if any such warranty or representation
is withdrawn;
74
8.11. If the obligation of Parent or any other third Person under any
Loan Document is limited or terminated by operation of law or by the guarantor
or other third Person thereunder, or any such guarantor or other third Person
becomes the subject of an Insolvency Proceeding;
8.12. If, in any fiscal year, the Borrowers close, or liquidate the
Inventory (or enter into a contract obligating Borrowers to close, or liquidate
the Inventory) at, a greater number of store locations than as provided in
Section 7.4, any store location, in any case without the prior written consent
of the Agent;
8.13. If an Insolvency Proceeding is commenced by any Borrower or
any of its Subsidiaries;
8.14. If an Insolvency Proceeding is commenced against any Borrower or
any of its Subsidiaries and any of the following events occur: (a) the
applicable Borrower or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Agent (including any successor agent) and each other member of the Lender Group
shall be relieved of their obligation to extend credit hereunder, (d) an interim
trustee is appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, any Borrower or any of its Subsidiaries, or (e) an order for relief
shall have been entered therein;
8.15. If there exists any default or event of default under the Vendex
Notes, PNC Loan Documents, the Athanor Note, or any Equipment Financing,
Sale-Leaseback or Purchase Money Indebtedness.
8.16. If any Key Manager ceases to perform the duties of office held by
such Key Manager as of the date of this Agreement and no successor acceptable to
Agent, in Agent's Discretion, commences performance of such duties with 60 days
of such date; or
8.17. If the Final Bankruptcy Court Order is in any way amended,
modified, revoked, rescinded, annulled, overruled, stayed or terminated without
Agent's prior written consent.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1. Rights and Remedies. Upon the occurrence, and during the continuation, of
an Event of Default, Agent may exercise any of the rights and remedies of a
secured party under the Code and any other rights and remedies provided for in
this Agreement or any other Loan Document or otherwise available to it at law or
in equity, such rights and remedies to include, without limitation, the
following, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;
75
(b) Cease advancing money or extending credit to or for the benefit of Borrowers
under this Agreement, under any of the Loan Documents, or under any other
agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of the Lender Group, but without affecting the
Lender Group's rights and security interests in the Personal Property Collateral
or the Real Property Collateral and without affecting the Obligations;
(d) Notify Account Debtors and other Persons obligated on the Collateral to make
payment or otherwise render performance to or for Agent, and, to the extent
permitted under the Code, enforce the obligations of Account Debtors and other
Persons obligated on the Collateral and exercise the rights of Borrowers with
respect to such obligations and any property that may secure such obligations
and settle or adjust disputes and claims directly with such parties for amounts
and upon terms which Agent considers advisable. In such cases, Agent will credit
Borrowers' Loan Account with only the net amounts received by Agent in payment
of such disputed Accounts after deducting all Lender Group Expenses incurred or
expended in connection therewith;
(e) Take any proceeds of the Collateral;
(f) Make any filings with the applicable recording offices required to
enforce any Borrower's rights as a
mortgagee of Real Property;
(g) Cause Borrowers to hold all returned Inventory in trust for the Lender
Group, segregate all returned Inventory from all other property of Borrowers or
in Borrowers' possession and conspicuously label said returned Inventory as the
property of the Lender Group;
(h) Without notice to or demand upon any Borrower, make such payments and do
such acts as Agent considers necessary or reasonable to protect its security
interests in the Collateral. Each Borrower agrees to assemble the Personal
Property Collateral if Agent so requires, and to make the Personal Property
Collateral available to Agent as Agent may designate. Each Borrower authorizes
Agent to enter the premises where the Personal Property Collateral is located,
to take and maintain possession of the Personal Property Collateral, or any part
of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
Lien that in Agent's determination appears to conflict with the Liens of Agent
(for the benefit of the Lender Group) in the Collateral and to pay all expenses
incurred in connection therewith. With respect to any of Borrowers' owned or
leased premises, and in addition to the Lien of Agent for the benefit of the
Lender Group therein, Borrowers hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of the Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
(i) Without notice to any Borrower (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrowers held by the
76
Lender Group (including any amounts received in the Concentration Account or any
other Blocked Account), or (ii) indebtedness at any time owing to or for the
credit or the account of Borrowers held by the Lender Group;
(j) Instruct each Blocked Account Bank and any other depositary with whom a DDA
subject to a Control Agreement is maintained, to pay any and all balances and
deposits in the Concentration Account, applicable Blocked Account or other DDA
to the Agent's Account;
(k) Instruct any securities intermediary to liquidate the applicable Securities
Account or any related Investment Property maintained or held thereby and remit
the proceeds thereof to the Agent's Account;
(l) Hold, as cash collateral, any and all balances and deposits of Borrowers
held by the Lender Group, and any amounts received in the Concentration Account
or the other Blocked Accounts, to secure the full and final repayment of all of
the Obligations;
(m) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Personal
Property Collateral. Agent is hereby granted a license or other right to use,
without charge, Borrowers' labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Personal
Property Collateral, in completing production of, advertising for sale, and
selling any Personal Property Collateral and Borrowers' rights under all
licenses and all franchise agreements shall inure to the Lender Group's benefit;
(n) Sell the Personal Property Collateral at either a public or private sale
(including going out of business sales), or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrowers' premises) as Agent determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be present
at any such sale. Agent may conduct one or more going out of business sales, in
Agent's own right or by one or more agents and contractors. Such sale(s) may be
conducted upon any premises owned, leased, or occupied by Borrowers. Agent and
any such agent or contractor, in conjunction with any such sale, may augment the
Inventory with other goods (all of which other goods shall remain the sole
property of Agent or such agent or contractor). Any amounts realized from the
sale of such goods which constitute augmentations to the Inventory (net of an
allocable share of the costs and expenses incurred in their disposition) shall
be the sole property of Agent or such agent or contractor and neither Borrowers
nor any Person claiming under or in right of Borrowers shall have any interest
therein.
(o) Agent shall give notice of the disposition of the Personal Property
Collateral as follows:
(i) Agent shall give Borrowers and each holder of a security interest in
the Personal Property Collateral who has filed with Agent a written request for
notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;
77
(ii) The notice shall be personally delivered or mailed, postage prepaid,
to Borrowers as provided in Section 12, at least 10 days before the date fixed
for the sale, or at least 10 days before the date on or after which the private
sale or other disposition is to be made; no notice needs to be given prior to
the disposition of any portion of the Personal Property Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrowers
claiming an interest in the Personal Property Collateral shall be sent to such
addresses as they have furnished to Agent or as stated on UCC financing
statements then on file in the applicable recording office;
(iii) If the sale is to be a public sale, Agent also shall give notice of
the time and place by publishing a notice one time at least 10 days before the
date of the sale in a newspaper of general circulation in the county in which
the sale is to be held;
(p) Agent may credit bid and purchase at any public sale; and
(q) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrowers.
9.2. Remedies Cumulative. The Lender Group's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative and
may be exercised simultaneously. The Lender Group shall have all other rights
and remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrowers could result in a Material Adverse
Change, in Agent's Discretion and without prior notice to Borrowers, Agent may
do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrowers' Loan Account as Agent deems
necessary to protect the Lender Group from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type described in Section
6.9, and take any action with respect to such policies as Agent deems prudent.
Any such amounts paid by Agent shall constitute Lender Group Expenses. Any such
payments made by Agent shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
78
11. WAIVERS; INDEMNIFICATION.
11.1. Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which each such Borrower may in any way be liable.
11.2. The Lender Group's Liability for Collateral. Except in the event of its
gross negligence or willful misconduct, the Lender Group shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk
of loss, damage, or destruction of the Collateral shall be borne by Borrowers.
11.3. Indemnification. Each Borrower shall pay, indemnify, defend, and hold each
Agent-Related Person, each Lender, the Hilco Participant and each of their
respective officers, directors, employees, counsel, agents, and
attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrowers shall have no
obligation to any Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
11.4. Damages. Each Borrower waives any claim it may now or in the future
have against the Lender Group or any of them for consequential, special, or
punitive damages.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrowers or to
Agent, as the case may be, at its address set forth below:
79
If to Borrowers: F.A.O., Inc.
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Legal
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: FULBRIGHT & XXXXXXXX L.L.P.
000 Xxxxx Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxx, Esq.
Tel: (000) 000-00000
Fax: (000) 000-0000
If to Agent or the
Lender Group in
care of Agent: XXXXX FARGO RETAIL FINANCE, LLC
Xxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: XXXXXX, HALL & XXXXXXX
00 Xxxxx Xxxxxx, Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, P.C., Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Agent in connection with Part 6 of Article 9 of the Code, shall
be deemed received on the earlier of the date of actual receipt or 3 days after
the deposit thereof in the mail. Each Borrower acknowledges and agrees that
notices sent by Agent in connection with Part 6 of Article 9 of the Code shall
be deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or other similar method set forth
above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
80
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
OR, AT THE SOLE OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN WHICH THE
LENDER GROUP SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH BORROWER AND EACH
MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 13. EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER AND EACH MEMBER OF THE
LENDER GROUP REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Agent may be destroyed or otherwise disposed of by Agent four months after
they are delivered to or received by Agent, unless Borrowers request, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrowers' expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1. Assignments and Participations.
(a) Any Lender may, with the written consent of Agent, assign and delegate to
one or more Eligible Transferees (each an "Assignee") all, or any ratable part,
of the Obligations, the Commitments, and the other rights and obligations of
such Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrowers and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, shall have been given to Administrative Borrower and Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
81
to Administrative Borrower and Agent a fully executed Assignment and Acceptance
("Assignment and Acceptance") in the form of Exhibit A-1 which Assignment and
Acceptance shall contain an acknowledgment of the terms of the Participation and
Intercreditor Agreement; and (iii) the assignor Lender or Assignee has paid to
Agent for Agent's sole and separate account a processing fee in the amount of
$5,000. Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor Lender that it has
received a fully executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation between
Borrowers and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other Loan Document furnished pursuant hereto;
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or any
guarantor or the performance or observance by Borrowers or any guarantor of any
of its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender, or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
82
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments of the Assignor and
Assignee arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitment of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of Agent, which consent
shall not be unreasonably withheld, sell to one or more Persons (a
"Participant") participating interests in the Obligations, the Commitment, and
the other rights and interests of that Lender (the "Originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) Borrowers and Agent shall continue to deal solely and
directly with the Originating Lender in connection with the Originating Lender's
rights and obligations under this Agreement and the other Loan Documents, (iv)
no Originating Lender shall transfer or grant any participating interest under
which the Participant has the sole and exclusive right to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such participant is
participating; (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating; (C) release all or a
material portion of the Collateral (except to the extent expressly provided
herein or in any of the Loan Documents) supporting the Obligations hereunder in
which such Participant is participating; (D) postpone the payment of, or reduce
the amount of, the interest or fees hereunder in which such Participant is
participating; or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums in respect of the Obligations hereunder in
which such Participant is participating; and (v) all amounts payable by
Borrowers hereunder shall be determined as if such Originating Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement; provided, however, that no Participant may exercise any such
right of setoff without the notice to and consent of Agent. The rights of any
Participant shall only be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any direct rights as
to the other Lenders, Agent, Borrowers, the Collections, the Collateral, or
otherwise in respect of the Advances or the Letters of Credit. No Participant
shall have the right to participate directly in the making of decisions by the
Lenders among themselves. The provisions of this Section 15.1(e) are solely for
the benefit of the Lender Group, and Borrowers shall have no rights as a third
party beneficiary of any of such provisions.
(f) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose to a third party all
documents and information which it now or hereafter may have relating to
Borrowers or Borrowers' business; provided, that such third party agrees in
writing to hold such information confidential and not disclose it except as may
be required by law.
83
(g) Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law. 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, 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
15.2. Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void. No consent to assignment by the Lenders shall release
Borrowers from its Obligations. A Lender may assign this Agreement and its
rights and duties hereunder pursuant to Section 15.1 and, except as expressly
required pursuant to Section 15.1, no consent or approval by Borrowers are
required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1. Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders or as permitted in this Agreement) and Administrative
Borrower on behalf of all Borrowers. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Lenders and Borrowers (on behalf of all
Borrowers) and acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due to
the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on, any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Advances which is required for the Lenders or any of
them to take any action hereunder;
(e) increase the advance rate with respect to Advances (except for the
restoration of an advance rate after the prior reduction thereof), or change
Section 2.1(b);
84
(f) amend this Section or any provision of the Agreement providing for consent
or other action by all Lenders;
(g) release Collateral, or subordinate the Lien of Agent in any of the
Collateral, other than as permitted by Section 17.11;
(h) change the definition of "Required Lenders";
(i) release any Borrower from any Obligation for the payment of money; or
(j) amend any of the provisions of Article 17;
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by Agent, affect the rights or duties of Agent under this
Agreement or any other Loan Document; and, provided further, that the limitation
contained in clause (e) above shall not be deemed to limit the ability of Agent
to make Advances or Swing Loans, as applicable, in accordance with the
provisions of Sections 2.3(h), (l), or (m). The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers.
16.2. No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement, any other Loan
Document, or any present or future supplement hereto or thereto, or in any other
agreement between or among Borrowers and Agent and/or any Lender, or delay by
Agent or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrowers of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1. Appointment and Authorization of Agent. Each Lender hereby designates and
appoints WFRF as its Agent under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Agent agrees to act as such on the
express conditions contained in this Article 17. The provisions of this Article
17 are solely for the benefit of Agent and the Lenders, and Borrowers shall not
have any rights as a third party beneficiary of any of the provisions contained
herein; provided, however, that the provisions of Sections 17.10, 17.11, and
17.16(d) also shall be for the benefit of Borrowers. Any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document
85
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which Agent
is expressly entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents, including making the determinations contemplated by
Section 2.1(b). Without limiting the generality of the foregoing, or of any
other provision of the Loan Documents that provides rights or powers to Agent,
Lenders agree that Agent shall have the right to exercise the following powers
as long as this Agreement remains in effect: (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Advances, the Collateral, the Collections, and related matters; (b) execute
and/or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim for Lenders,
notices and other written agreements with respect to the Loan Documents; (c)
make Advances for itself or on behalf of Lenders as provided in the Loan
Documents; (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents; (e) open and maintain such bank accounts and
lock boxes as Agent deems necessary and appropriate in accordance with the Loan
Documents for the foregoing purposes with respect to the Collateral and the
Collections; (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrowers, the Advances, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents; and (g) incur and pay such Lender Group Expenses as Agent
may deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.
17.2. Delegation of Duties. Except as otherwise provided in this Section, Agent
may execute any of its duties under this Agreement or any other Loan Document by
or through agents, employees, or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this Section and without gross negligence or willful misconduct.
The foregoing notwithstanding, Agent shall not make any material delegation of
duties to subagents or non-employee delegees without the prior written consent
of Required Lenders (it being understood that routine delegation of such
administrative matters as filing financing statements, or conducting appraisals
or audits, is not viewed as a material delegation that requires prior Required
Lender approval).
17.3. Liability of Agent-Related Persons. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or, (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Borrowers, or any
Subsidiary or Affiliate of Borrowers, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement, or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of Borrowers or any other party to any Loan Document to perform its obligations
86
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books, or records of
Borrowers, or any of Borrowers' Subsidiaries or Affiliates.
17.4. Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrowers or counsel to any Lender), independent accountants, and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders or all
Lenders, as applicable, and until such instructions are received, Agent shall
act, or refrain from acting, as it deems advisable so long as it is not grossly
negligent or guilty of willful misconduct. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders or all
Lenders, as applicable, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
17.5. Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of Agent or the Lenders,
except with respect to actual knowledge of the existence of an Overadvance, and
except with respect to Defaults and Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender or
Borrowers referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a "notice of default." Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has, or is deemed to have, actual knowledge. If any
Lender obtains actual knowledge of any Event of Default, such Lender promptly
shall notify the other Lenders and Agent of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if any.
Subject to Section 17.4, Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders;
provided, however, that:
(a) At all times, Agent may propose and, with the consent of Required Lenders
(which shall not be unreasonably withheld and which shall be deemed to have been
given by a Lender unless such Lender has notified Agent to the contrary in
writing within three days of notification of such proposed actions by Agent)
exercise, any remedies on behalf of the Lender Group; and
(b) At all times, once Required Lenders or all Lenders, as the case may be, have
approved the exercise of a particular remedy or pursuit of a course of action,
Agent may, but shall not be obligated to, make all administrative decisions in
connection therewith or take all other actions reasonably incidental thereto
87
(for example, if the Required Lenders approve the foreclosure of certain
Collateral, Agent shall not be required to seek consent for the administrative
aspects of conducting such sale or handling of such Collateral).
17.6. Credit Decision. Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by Agent
hereinafter taken, including any review of the affairs of Borrowers and their
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition, and creditworthiness of
Borrowers and any other Person (other than the Lender Group) party to a Loan
Document, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrowers. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals, and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition, and
creditworthiness of Borrowers, and any other Person (other than the Lender
Group) party to a Loan Document. Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by Agent,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition, or creditworthiness of Borrowers, and
any other Person party to a Loan Document that may come into the possession of
any of the Agent-Related Persons.
17.7. Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent deems reasonably necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including without limiting the generality of the
foregoing, but subject to any requirements of the Loan Documents that it obtain
any applicable consents or engage in any required consultation, court costs,
reasonable attorneys fees and expenses, costs of collection by outside
collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrowers are
obligated to reimburse Agent or Lenders for such expenses pursuant to the Loan
Agreement or otherwise. Agent is authorized and directed to deduct and retain
sufficient amounts from Collections to reimburse Agent for such out-of-pocket
costs and expenses prior to the distribution of any amounts to Lenders. In the
event Agent is not reimbursed for such costs and expenses from Collections, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrowers and without limiting the obligation of Borrowers to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence, bad faith, or willful
88
misconduct. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including attorney fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section 17.7 shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
17.8. Agent in Individual Capacity. WFRF and its Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity
interests, in and generally engage in any kind of banking, trust, financial
advisory, underwriting, or other business with Borrowers and their Subsidiaries
and Affiliates and any other Person party to any Loan Documents as though WFRF
were not Agent hereunder without notice to or consent of the Lenders. The
Lenders acknowledge that, pursuant to such activities, WFRF and its Affiliates
may receive information regarding Borrowers or their Affiliates and any other
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall be under no obligation to provide such information to them. With
respect to the Swing Loans and Agent Advances, WFRF shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not Agent, and the terms "Lender" and "Lenders" include WFRF in
its individual capacity.
17.9. Successor Agent. Agent may resign as Agent following notice of such
resignation ("Notice") to the Lenders and Borrowers, and effective upon the
appointment of and acceptance of such appointment by, a successor Agent. If
Agent resigns under this Agreement, the Required Lenders shall appoint any
Lender or Eligible Transferee as successor Agent for the Lenders. If no
successor Agent is appointed within 30 days of such retiring Agent's Notice,
Agent may appoint a successor Agent, after consulting with the Lenders and
Borrowers. In any such event, upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the rights,
powers and duties of the retiring Agent and the term "Agent" shall mean such
successor Agent and the retiring Agent's appointment, powers, and duties as
Agent shall be terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 17 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
17.10. Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust" within the
meaning of the IRC and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees
with and in favor of Agent and Borrowers, to deliver to Agent and Borrowers:
(i) if such Lender claims an exemption from, or a reduction of, withholding
tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8
89
before the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively connected
with a United States trade or business of such Lender, two properly completed
and executed copies of IRS Form 4224 before the payment of any interest is due
in the first taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the IRC or other
laws of the United States as a condition to exemption from, or reduction of,
United States withholding tax.
Such Lender agrees to promptly notify Agent and Borrowers of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrowers, such Lender agrees to notify Agent and Borrowers of
the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrowers to such Lender. To the extent of such percentage
amount, Agent and Borrowers will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States withholding tax by
filing IRS Form 4224 with Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrowers to such Lender,
such Lender agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable withholding tax,
Agent may withhold from any interest payment to such Lender an amount equivalent
to the applicable withholding tax after taking into account such reduction. If
the forms or other documentation required by subsection (a) of this Section are
not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent or Borrowers did not properly withhold
tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent and Borrowers of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify Agent and Borrowers fully for
all amounts paid, directly or indirectly, by Agent or Borrowers as tax or
otherwise, including penalties and interest, and including any taxes imposed by
90
any jurisdiction on the amounts payable to Agent or Borrowers under this
Section, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation of Agent.
17.11. Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Obligations; and upon such termination
and payment Agent shall deliver to Borrowers, at Borrowers' sole cost and
expense, all UCC termination statements and any other documents necessary to
terminate the Loan Documents and release the Liens with respect to the
Collateral; (ii) constituting property being sold or disposed of if a release is
required or desirable in connection therewith and if Borrowers certifies to
Agent that the sale or disposition is permitted under Section 7.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry); (iii) constituting property in which
Borrowers owned no interest at the time the Lien was granted or at any time
thereafter; or (iv) constituting property leased to Borrowers under a lease that
has expired or been terminated, property used to secure Equipment Financing
Indebtedness or property secured by the Ontario Lien in a transaction permitted
under this Agreement. Except as provided above, Agent will not release any Lien
on any Collateral without the prior written authorization of the Required
Lenders. Upon request by Agent or Administrative Borrower at any time, the
Lenders will confirm in writing Agent's authority to release any such Liens on
particular types or items of Collateral pursuant to this Section 17.11;
provided, however, that (i) Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Agent's opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Lien without recourse, representation, or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens (other than those expressly being released),
upon (or obligations of Borrowers in respect of) all interests retained by
Borrowers, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders to assure
that the Collateral exists or is owned by Borrowers, is cared for, protected, or
insured or has been encumbered, or that the Liens of the Agent (for the benefit
of the Lender Group) have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure, or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
91
17.12. Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations any amounts owing by such
Lender to Borrowers or any accounts of Borrowers now or hereafter maintained
with such Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Agent, take or cause to be taken any action,
including the commencement of any legal or equitable proceedings, to foreclose
any Lien on, or otherwise enforce any security interest in, any of the
Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times any Lender shall receive
(i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or
any payments with respect to the Obligations of Borrowers to such Lender arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from Agent pursuant to the
terms of this Agreement, or (ii) payments from Agent in excess of such Lender's
Pro Rata Share of all such distributions by Agent, such Lender shall promptly
(1) turn the same over to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in same day funds, as applicable,
for the account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
17.13. Agency for Perfection. Agent and each Lender hereby appoint each other as
agent for the purpose of perfecting the Liens of the Lender Group in assets
which, in accordance with Article 9 of the Code can be perfected only by
92
possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14. Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders shall be made by bank wire transfer or internal transfer of immediately
available funds pursuant to the instructions set forth on Schedule C-1, or
pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Agent. Concurrently with each such payment,
Agent shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15. Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit
(subject to Sections 2.3(b) and 4.1) of the Lender Group. Each member of the
Lender Group agrees that any action taken by Agent, Required Lenders, or all
Lenders, as applicable, in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent,
Required Lenders, or all Lenders, as applicable, of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
17.16. Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information. By signing this Agreement, each Lender;
(a) is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy of each field audit or examination report (each a
"Report" and collectively, "Reports") prepared by Agent, and Agent shall so
furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent (i) does not make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any audit or
examination will inspect only specific information regarding Borrowers and will
rely significantly upon Borrowers' books and records, as well as on
representations of Borrowers' personnel;
(d) agrees to keep all Reports and other material information obtained by it
pursuant to the requirements of this Agreement in accordance with its reasonable
customary procedures for handling confidential information; it being understood
and agreed by Borrowers that in any event such Lender may make disclosures (i)
reasonably required by any bona fide potential or actual Assignee, transferee,
or Participant in connection with any contemplated or actual assignment or
transfer by such Lender of an interest herein or any participation interest in
such Lender's rights hereunder so long as such third party agrees in writing to
keep such information confidential and not disclose it except as required by
93
law, (ii) of information that has become public by disclosures made by Persons
other than such Lender, its Affiliates, assignees, transferees, or participants,
or (iii) as required or requested by any court, governmental or administrative
agency, pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and all Agent Related
Persons and any such other Lender preparing a Report harmless from any action
the indemnifying Lender may take or conclusion the indemnifying Lender may reach
or draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to Borrowers,
or the indemnifying Lender's participation in, or the indemnifying Lender's
purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and
indemnify, defend, and hold Agent and all Agent Related Persons and any such
other Lender preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including, attorney
costs) incurred by Agent and all Agent Related Persons and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent, and, upon receipt of such request,
Agent shall provide a copy of same to such Lender promptly upon receipt thereof;
(y) to the extent that Agent is entitled, under any provision of the Loan
Documents, to request additional reports or information from Borrowers, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender's notice to Agent, whereupon Agent promptly shall
request of Borrowers the additional reports or information specified by such
Lender, and, upon receipt thereof, Agent promptly shall provide a copy of same
to such Lender; and (z) any time that Agent renders to Administrative Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
17.17. Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any Advances shall
constitute the several (and not joint) obligations of the respective Lenders on
a ratable basis, according to their respective Commitments, to make an amount of
such Advances not to exceed, in principal amount, at any one time outstanding,
the amount of their respective Commitments. Nothing contained herein shall
confer upon any Lender any interest in, or subject any Lender to any liability
for, or in respect of, the business, assets, profits, losses, or liabilities of
any other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Participant of any other Lender. Except as provided in Section
17.7, no member of the Lender Group shall have any liability for the acts of any
other member of the Lender Group. No Lender shall be responsible to Borrowers or
any other Person for any failure by any other Lender to fulfill its obligations
to make Advances, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1. Effectiveness. This Agreement shall be binding and deemed effective when
executed by Borrowers and the Lender Group.
18.2. Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
94
18.3. Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender Group or Borrowers,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4. Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
18.5. Counterparts; Telefacsimile Execution. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
18.6. Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Borrower or any guarantor of the Obligations or the
transfer by any or all of such parties to the Lender Group of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
18.7. Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
18.8. Right to Publish Notice. Any Lender may, at such Lender's discretion and
expense, publicize by so-called "tombstone" advertising or otherwise the Lender
Group's financing transaction with Borrowers and may utilize any logo or other
distinctive symbol associated with the Borrowers in connection with any such
advertising, promotion, or marketing undertaken by the Lender Group.
18.9. Parent as Agent for Borrowers. Each Borrower hereby irrevocably appoints
Parent as the borrowing agent and attorney-in-fact for all Borrowers (the
95
"Administrative Borrower") which appointment shall remain in full force and
effect unless and until Agent shall have received prior written notice signed by
each Borrower that such appointment has been revoked and that another Borrower
has been appointed Administrative Borrower. Each Borrower hereby irrevocably
appoints and authorizes the Administrative Borrower (i) to provide Agent with
all notices with respect to Advances and Letters of Credit obtained for the
benefit of any Borrower and all other notices and instructions under this
Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce the Lender Group to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender Group
and hold each member of the Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) the Lender Group's relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 17.9 with respect to any liability that has been finally determined
by a court of competent jurisdiction to have resulted solely from the gross
negligence or willful misconduct of such Agent-Related Person or Lender-Related
Person, as the case may be.
[Signature pages follow.]
96
IN WITNESS WHEREOF, the parties hereto have caused this Loan and
Security Agreement to be executed as of the date first above written.
BORROWERS:
F.A.O., INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
Executive Vice President
ZB COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
Executive Vice President
FAO XXXXXXX, INC.,
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
Executive Vice President
LENDERS:
XXXXX FARGO RETAIL FINANCE, LLC,
as Agent and a Lender
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx,
Vice President
97
LENDERS (continued):
LASALLE BUSINESS CREDIT, INC.
By: /s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx,
First Vice President
ORIX FINANCIAL SERVICES, INC.
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx,
Vice President
98
SCHEDULE P-1
Permitted Liens
1. Liens in favor of credit card processors.
2. Liens to secure the Vendex Indebtedness.
3. Liens of customs and revenue authorities.
4. Liens existing on acquired property (other than Inventory); provided
such Lien is not incurred in anticipation of such acquisition.
5. Liens to secure the PNC Agreement.
SCHEDULE 7.1
Indebtedness
1. Trade obligations and accruals in the ordinary course of business.
2. Unsecured indebtedness.
3. Indebtedness arising under agreements providing for indemnification,
adjustment of purchase price or similar obligations, or obligations to perform
bids, trade contracts, leases, statutory obligations or surety and appeal bonds,
performance bonds and other similar obligations incurred in the ordinary course
of business.
99
SCHEDULE 7.3
PERMITTED TRANSACTIONS
The transactions set forth below are "Permitted Transactions". The
Administrative Borrower shall provide Agent with at least fifteen days prior
written notice of each such Permitted Transaction and shall provide Agent and
its counsel copies of all the documentation related to such Permitted
Transaction, such documentation to be in form and substance reasonably
satisfactory to Agent. Before consummating any Permitted Transaction, Borrowers
shall deliver to Agent all documents requested by Agent to perfect and continue
perfected Agent's Liens on the Collateral. If any Borrower creates a Subsidiary,
such Borrower shall pledge the capital stock of such Subsidiary to Agent and
such Subsidiary shall become a Borrower hereunder.
1. Parent may create and merge into a wholly-owned Delaware subsidiary to
be named FAO, Inc. (the "Successor Parent").
2. The Successor Parent may create a wholly-owned Delaware subsidiary to be
named The Right Start, Inc. ("TRS"). The Successor Parent may sell, assign or
otherwise convey the assets related to The Right Start brand business to TRS
upon TRS's becoming a Borrower hereunder.
3. The winding up of Xxxxxxx-RS, LLC after its assets have been transferred
to Borrowers or Borrowers' directly or indirectly wholly-owned Subsidiary.
4. Creation of a Subsidiary that holds all of the group's internet assets.
5. Creation of a Subsidiary that provides executive employee services to
the group.
6. Transfers of assets among Borrowers and their directly or indirectly
wholly-owned Subsidiaries to facilitate any Permitted Transaction, any
transaction that is approved as part of the Business Plan and any immaterial
transfer.
100
SCHEDULE 7.4
Disposal of Assets
1. The Phillipsburg, New Jersey warehouse.
2. Any sale that is permitted as part of a Sale and Leaseback for which a
Lien is permitted under the definition of Permitted Liens.
3. Disposal of Equipment and Fixtures that are obsolete, worn out or
damaged or Inventory that is not current.
4. Transfers of assets among Borrowers or to a Subsidiary that is wholly-
owned directly or indirectly by Parent (provided Agent knows and
receives such filings as it reasonably deems necessary to protect its
security interests in the Collateral).
5. A sale of assets producing less than 1% of the revenue of the Borrowers
on a consolidated basis.
6. Disposals of cash to make purchases in the ordinary course of business.
7. Short-term leases of Inventory not exceeding a retail value of $100,000
in the aggregate upon the deposit of a credit card against the full
retail value if such Inventory is not returned in pristine saleable
condition.
101
SCHEDULE 7.21(a)
RETAIL PERFORMANCE AND OTHER COVENANTS
A. Minimum Availability. At all times during the term of this Agreement,
Borrowers shall have Availability under the Standard Line of not less than (i)
$5,000,000 for the period from the Closing Date through and including November
30, 2002 and (ii) thereafter (x) during the calendar months of July through
November of any calendar year, $5,000,000, and (y) during the calendar months of
January through June and December of any calendar year, $7,500,000.
B. Minimum/Maximum Inventory. At all times during the term of this
Agreement, tested as of the end of each calendar month, the Cost value of
Borrower's Inventory shall not differ by more than 15% from the applicable
amount for such date set forth in the Business Plan.
SCHEDULE 7.21(b)
POST 2002 SPECIAL TERM SUBLINE COVENANTS
A. Maximum Effective Advance Rate. The maximum Effective Advance Rate for
each calendar month of each calendar year shall be as set forth below. The
maximum Effective Advance Rate shall be tested at the end of each calendar
month, except that in the month of December for each year of this Agreement, the
maximum Effective Advance Rate shall be tested December 24. For purposes of this
Schedule 7.21(b), "Effective Advance Rate" means, at any date of determination,
the result, expressed as a percentage, of: (i) the sum of the outstanding
balance of the Loan Account plus all outstanding stand-by Letters of Credit in
an aggregate amount in excess of $1,000,000, divided by (ii) the value of
Eligible Inventory.
Maximum Effective
Calendar Month(s) Advance Rate
January 50%
February 50%
March 50%
April 65%
May 65%
June 65%
July 65%
August 70%
September 70%
October 70%
November 70%
December 35%
B. Ratio of Purchases to Cost of Goods Sold. As of the last Business Day of
each calendar month (beginning on the last Business Day of November 2001), the
Borrower shall not permit the ratio of purchases to costs of goods sold for the
trailing three calendar months ended on the last date of each such month to be
less than the ratio set forth below for the applicable month.
Ratio of Purchases
Calendar Month(s) to Cost of Goods Sold
January through May 0.30:1.00
June 0.70:1.00
July 1.00:1.00
August 1.25:1.00
September 1.25:1.00
October 1.35:1.00
November 1.00:1.00
December 0.50:1.00
