SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): FEBRUARY 20, 1996
HECHINGER COMPANY
(Exact name of registrant as specified in its charter)
Delaware 0-7214 52-1001530
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
3500 Pennsy Drive
Landover, MD 20785
(Address of principal executive offices) (Zip Code)
(301) 341-1000
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS.
On February 20, 1996, Hechinger Stores Company ("Stores"), a
subsidiary of Hechinger Company, and Hechinger Stores East Coast
Company, a subsidiary of Stores, as Borrowers, entered into a $200
million Revolving Credit Agreement dated as of February 20, 1996 (the
"Credit Agreement") with the financial institutions from time to time
party thereto, as Lenders, and The CIT Group/Business Credit, Inc., as
Agent. The Credit Agreement is attached as Exhibit 99 hereto and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(C) Exhibits.
Exhibit No.
99 $200 million Revolving Credit Agreement dated as of
February 20, 1996 among Hechinger Stores Company and
Hechinger Stores East Coast Company, as Borrowers, the
financial institutions from time to time party thereto, as
Lenders, and The CIT Group/Business Credit, Inc., as Agent.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Hechinger Company
By: /s/ W. Clark McClelland
W. Clark McClelland
Executive Vice President and
Chief Financial Officer
Date: February 28, 1996
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
99 $200 million Revolving Credit Agreement
dated as of February 20, 1996 among Hechinger
Stores Company and Hechinger Stores East
Coast Company, as Borrowers, the financial
institutions from time to time party thereto,
as Lenders, and The CIT Group/Business
Credit, Inc., as Agent.
REVOLVING CREDIT AGREEMENT
dated as of February 20, 1996
among
HECHINGER STORES COMPANY,
and
HECHINGER STORES EAST COAST COMPANY
AS BORROWERS,
THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS LENDERS,
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT
$200,000,000
Table of Contents
Section Title Page
ARTICLE I DEFINITIONS; CONSTRUCTION . . . . . . . . . . . . 1
1.01. Certain Definitions . . . . . . . . . . . . . . 1
1.02. Construction . . . . . . . . . . . . . . . . . 19
1.03. Accounting Principles . . . . . . . . . . . . . 19
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . 19
2.01. Revolving Credit Loans . . . . . . . . . . . . 19
2.02. Notes . . . . . . . . . . . . . . . . . . . . . 20
2.03. Notice of Borrowing; Making of Loans . . . . . . 20
2.04. Reduction of Commitment; Mandatory Prepayment;
Optional Prepayment . . . . . . . . . 23
2.05. Interest Rate . . . . . . . . . . . . . . . . . . 24
2.06. Interest Payment Dates . . . . . . . . . . . . . 25
2.07. Amortization . . . . . . . . . . . . . . . . . . 25
2.08. Payments . . . . . . . . . . . . . . . . . . . 25
2.09. Use of Proceeds . . . . . . . . . . . . . . . . 27
2.10. Eurodollar Rate Not Determinable; Illegality or
Impropriety . . . . . . . . . . . . . 28
2.11. Reserve Requirements; Capital Adequacy
Circumstances . . . . . . . . . . . . . . . . 29
2.12. Indemnity . . . . . . . . . . . . . . . . . . . 30
2.13. Sharing of Setoffs . . . . . . . . . . . . . . . 31
2.14. Continuation and Conversion of Loans . . . . . 31
2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE III LETTERS OF CREDIT . . . . . . . . . . . . 34
3.01. Letters of Credit . . . . . . . . . . . . . . . . 34
3.02. Participations . . . . . . . . . . . . . . . . 38
ARTICLE IV BORROWING BASE . . . . . . . . . . . . . . . 39
4.01. Condition of Lending and Assisting in
Establishing or Opening Letters of Credit . . . 39
4.02. Mandatory Prepayment. . . . . . . . . . . . . . . 39
4.03. Rights and Obligations Unconditional . . . . . . 39
4.04 Borrowing Base Certificate . . . . . . . . . . . 39
4.05. General Provisions . . . . . . . . . . . . . . . 40
ARTICLE V CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING . . . . . . . . . . . . . 40
5.01. Conditions Precedent to Effectiveness . . . . . . 40
5.02. Conditions Precedent to Loans and Letters
of Credit . . . . . . . . . . . . . . . . . 44
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . 46
6.01. Organization, Good Standing, Etc. . . . . . . . . 46
6.02. Authorization, Etc. . . . . . . . . . . . . . . 46
6.03. Governmental Approvals . . . . . . . . . . . . . 47
6.04. Enforceability of Loan Documents . . . . . . . 47
6.05. Subsidiaries . . . . . . . . . . . . . . . . . 47
6.06. Litigation . . . . . . . . . . . . . . . . . . 47
6.07. Financial Condition . . . . . . . . . . . . . . 47
6.08. Compliance with Law, Etc. . . . . . . . . . . . . 48
6.09. ERISA . . . . . . . . . . . . . . . . . . . . 48
6.10. Taxes, Etc. . . . . . . . . . . . . . . . . . . . 48
6.11. Regulation G, T, U or X . . . . . . . . . . . . . 49
6.12. Nature of Business . . . . . . . . . . . . . . 49
6.13. Adverse Agreements, Etc. . . . . . . . . . . 49
6.14. Holding Company and Investment Company Acts . . 49
6.15. Permits, Etc. . . . . . . . . . . . . . . . . . . 49
6.16. Priority; Title . . . . . . . . . . . . . . . . 49
6.17. Full Disclosure . . . . . . . . . . . . . . . 50
6.18. Operating Lease Obligations . . . . . . . . . 50
6.19. Environmental Matters . . . . . . . . . . . . . . 50
6.20. Schedules . . . . . . . . . . . . . . . . . . . 51
6.21. Insurance . . . . . . . . . . . . . . . . . . 51
6.22. Use of Proceeds . . . . . . . . . . . . . . . 51
6.23. Security Documents . . . . . . . . . . . . . . . 51
6.24. Financial Accounting Practices, Etc. . . . . . . 52
6.25. No Material Adverse Effect . . . . . . . . . . . 52
6.26. Real Property; Leases . . . . . . . . . . . . . . 52
6.27. Location of Bank Accounts . . . . . . . . . . . . 53
6.28. No Event of Default . . . . . . . . . . . . . 53
6.29. Capitalized Leases . . . . . . . . . . . . . . 53
6.30. Tradenames . . . . . . . . . . . . . . . . . . . 53
6.31. Solvency . . . . . . . . . . . . . . . . . . 53
6.32. Inventory . . . . . . . . . . . . . . . . . . . 53
6.33. Intellectual Property . . . . . . . . . . . . 54
6.34. Material Contracts . . . . . . . . . . . . . . 54
6.35. Labor Relations: Collective Bargaining
Agreements . . . . . . . . . . . . . . . . . . 54
6.36. Hechinger Reorganization Memorandum Agreements. . 55
ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . 55
7.01. Reporting Requirements. . . . . . . . . . . . . . 55
7.02. Compliance with Laws, Etc. . . . . . . . . . . . 60
7.03. Preservation of Existence, Etc. . . . . . . . . 60
7.04. Keeping of Records and Books of Account . . . . 60
7.05. Inspection Rights . . . . . . . . . . . . . . . 60
7.06. Maintenance of Properties, Etc. . . . . . . . . 61
7.07. Maintenance of Insurance . . . . . . . . . . . 61
7.08. Environmental . . . . . . . . . . . . . . . . . . 61
7.09. Further Assurances . . . . . . . . . . . . . . 62
7.10. Borrowing Base . . . . . . . . . . . . . . . 62
7.11. Change in Collateral; Collateral Records . . . 62
7.12. Financial Accounting Practices, Etc. . . . . . . 63
7.13. Cash Management System . . . . . . . . . . . . 63
7.14. Landlord and Warehouse Waivers . . . . . . . . . . 64
7.15. Additional Subsidiaries . . . . . . . . . . . . 65
7.16. ERISA . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . . 65
8.01. Liens, Etc. . . . . . . . . . . . . . . . . . . 65
8.02. Indebtedness . . . . . . . . . . . . . . . . . . 67
8.03. Guarantees, Etc. . . . . . . . . . . . . . . 68
8.04. Merger, Consolidation, Sale of Assets, Etc. . . . 68
8.05. Change in Nature of Business . . . . . . . . . 70
8.06. Loans, Advances and Investments, Etc. . . . . . . 70
8.07. Dividends, Prepayments, Etc. . . . . . . . . . . 71
8.08. Federal Reserve Regulations . . . . . . . . . . . 71
8.09. Transactions with Affiliates . . . . . . . . . 71
8.10. Environmental . . . . . . . . . . . . . . . . . 71
8.11. ERISA . . . . . . . . . . . . . . . . . . . . . . 71
8.12. Availability . . . . . . . . . . . . . . . . . 72
ARTICLE IX DEFAULTS . . . . . . . . . . . . . . . . 72
9.01. Events of Default . . . . . . . . . . . . . . . 72
9.02. Consequences of an Event of Default . . . . . . 75
9.03. Deposit for Letters of Credit . . . . . . . . . . 76
9.04. Certain Remedies . . . . . . . . . . . . . . . 76
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . 76
10.01. Holidays . . . . . . . . . . . . . . . . . . . 76
10.02. Records . . . . . . . . . . . . . . . . . . . . 76
10.03. Amendments and Waivers . . . . . . . . . . . . 76
10.04. No Implied Waiver; Cumulative Remedies . . . . 77
10.05. Notices . . . . . . . . . . . . . . . . . . . . 78
10.06. Expenses; Taxes; Attorneys' Fees;
Indemnification . . . . . . . . . . . . . 78
10.07. Application . . . . . . . . . . . . . . . . . . 79
10.08. Severability . . . . . . . . . . . . . . . . . 79
10.09. Governing Law . . . . . . . . . . . . . . . . 80
10.10. Prior Understandings . . . . . . . . . . . . . 80
10.11. Duration; Survival . . . . . . . . . . . . . . 80
10.12. Counterparts . . . . . . . . . . . . . . . . . 80
10.13. Assignments; Participations . . . . . . . 80
10.14. Successors and Assigns . . . . . . . . . . . . 82
10.15. Confidentiality . . . . . . . . . . . . . . . 82
10.16. Waiver of Jury Trial . . . . . . . . . . . . . 83
10.17. Right of Setoff . . . . . . . . . . . . . . . 83
10.18. Headings . . . . . . . . . . . . . . . . . . . 84
10.19. Forum Selection and Consent to Jurisdiction . . 84
10.20. The Administrative Borrower as Agent for
Borrowers . . . . . . . . . . . . . . . . . . 85
ARTICLE XI THE AGENT . . . . . . . . . . . . . . . . 85
11.01. Appointment . . . . . . . . . . . . . . . . . 85
11.02. Nature of Duties . . . . . . . . . . . . . . . 86
11.03. Rights, Exculpation, Etc. . . . . . . . . . . 86
11.04. Reliance . . . . . . . . . . . . . . . . . . . . 87
11.05. Indemnification . . . . . . . . . . . . . . . 87
11.06. CIT Individually . . . . . . . . . . . . . . . 88
11.07. Successor Agent . . . . . . . . . . . . . . . . 88
11.08. Collateral Matters . . . . . . . . . . . . . . . 89
Exhibit A-Form of Note
Exhibit B-Form of Security Agreement
Exhibit C-Form of Letter of Credit Application
Exhibit D-Form of Borrowing Base Certificate
Exhibit E-Form of Assignment and Acceptance
Exhibit F-Form of Notice of Borrowing
Exhibit G-Form of Notice Letter to Depository Banks
Exhibit H-Form of Depository Account Agreement
Exhibit I-Hechinger Reorganization Memorandum
Schedule 1.01(A)-Locations of Eligible Inventory
Schedule 1.01(B)-Revolving Credit Commitments
Schedule 6.05-Subsidiaries
Schedule 6.06-Litigation
Schedule 6.09-Employee Plans
Schedule 6.10-Tax Assessments
Schedule 6.18-Operating Lease Obligations
Schedule 6.19-Environmental Matters
Schedule 6.21-Insurance
Schedule 6.26-Real Property; Leases
Schedule 6.27-Bank Accounts
Schedule 6.30-Tradenames
Schedule 6.34-Material Contracts
Schedule 6.35-Collective Bargaining Agreements
Schedule 8.01-Existing Liens
Schedule 8.02-Indebtedness
Schedule 8.03-Guaranties
Schedule 8.06-Investments
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of
February 20, 1996, among HECHINGER STORES COMPANY, a
Delaware corporation ("Stores"), HECHINGER STORES EAST
COAST COMPANY, a Delaware corporation ("East Coast" and
together with Stores each a "Borrower" and collectively,
the "Borrowers"), the financial institutions from time to
time party hereto (collectively, the "Lenders" and
individually, a "Lender"), and THE CIT GROUP/BUSINESS
CREDIT, INC. ("CIT"), as agent for the Lenders (in such
capacity, the "Agent").
BACKGROUND
WHEREAS, the Borrowers have requested the Agent
and Lenders to provide the Borrowers with a $200 million
revolving credit facility, including an $80 million
subfacility for the issuance of letters of credit and,
subject to the terms and conditions set forth herein, the
Lenders have agreed to provide such facility.
In consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to
other words and terms defined elsewhere in this
Agreement, as used herein the following words and terms
shall have the following meanings, respectively, unless
the context hereof otherwise clearly requires:
"A Cash Concentration Account" shall mean the
deposit account maintained by the Agent at the Cash
Concentration Account Bank, which deposit account shall
be under the sole dominion and control of the Agent and
from which all funds will be transferred to the Agent
Account pursuant to Section 7.13 hereof.
"Accountant's Opinion" shall have the meaning
given that term in Section 7.01(a).
"Actual A Percentage" shall have the meaning
given that term in Section 7.01(m) hereof.
"Actual B Percentage" shall have the meaning
given that term in Section 7.01(m) hereof.
"Administrative Borrower" shall have the
meaning given that term in Section 10.20 hereof.
"Affiliate" of a Person shall mean any other
Person (other than a Subsidiary) which, directly or
indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of
this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the
election of directors of such Person or (b) direct or
cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent Account" shall mean an account in the
name of the Agent designated to the Borrowers from time
to time into which the Borrowers shall make all payments
to the Agent, for the account of the Agent or the
Lenders, as the case may be, under this Agreement.
"Agent Advances" shall have the meaning given
that term in Section 11.08 hereof.
"Agreement" shall mean this Revolving Credit
Agreement as amended, modified, supplemented or restated
from time to time.
"Asset Sale Letter" shall mean the letter,
dated the date hereof, from the Administrative Borrower
to the Lenders identifying certain stores of the
Borrowers that may be sold pursuant to the terms of
Section 8.04(b)(i) hereof.
"Assignment and Acceptance" shall mean an
assignment and acceptance entered into by CIT and an
assignee, and accepted by the Agent, substantially in the
form of Exhibit E hereto.
"Assignment and Assumption" shall mean the
Assignment and Assumption Agreement, dated the date
hereof, between Stores and East Coast with respect to
certain transfers of Inventory.
"Availability" shall mean, at any time, the
difference between (i) the Current Commitment and
(ii) the sum of (A) the aggregate outstanding principal
amount of all Loans and (B) the Letter of Credit
Exposure.
"B Cash Concentration Account" shall mean the
deposit account maintained by the Agent at the Cash
Concentration Account Bank, which deposit account shall
be under the sole dominion and control of the Agent.
"Bank" shall mean Chemical Bank, its successors
or any other bank designated by the Agent to the
Borrowers from time to time that is reasonably acceptable
to the Borrowers.
"Benefit Plan" shall mean a defined benefit
plan as defined in Section 3(35) of ERISA that is subject
to Title IV of ERISA (other than a Multiemployer Plan)
and in respect of which a Borrower or any ERISA Affiliate
is or within the immediately preceding six (6) years was
an "employer" as defined in Section 3(5) of ERISA.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Book Value" shall mean, as to any Inventory in
respect of which such amount is to be determined, the
lower of (i) cost (as reflected in the general ledgers of
a Borrower) or (ii) market value (both cost and market
value being determined in accordance with GAAP calculated
on the first in first out basis).
"Borrower" and "Borrowers" shall each have the
meaning given those terms in the introductory paragraph
to this Agreement.
"Borrowing Base" shall mean an amount equal to
the difference between (i) the sum of (A) 55% of the Book
Value of Eligible Inventory and (B) 55% of the L/C
Inventory, provided that the Inventory with respect
thereto is not otherwise included in the Borrowing Base
and (ii) such reserves as the Agent, in its sole
discretion, exercised reasonably, may deem appropriate.
"Borrowing Base Certificate" shall have the
meaning given that term in Section 4.04(a) hereof.
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which banking
institutions are authorized or obligated to close in New
York, New York, provided, that with respect to the
borrowing, payment, conversion to or continuation of
Eurodollar Loans, Business Day shall also mean a day on
which dealings in Dollars are carried on in the interbank
eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of the Bank's
eurodollar loans are then being conducted.
"Capital Expenditures" shall mean, for any
period, the sum, without duplication, of (i) the
aggregate amount of all expenditures during such period
which, in accordance with GAAP, is required to be
included in property, plant or equipment or similar fixed
asset accounts plus (ii) the entire principal amount of
any debt obligations (including, without limitation,
Capitalized Lease Obligations) assumed in connection with
any such expenditures.
"Capitalized Lease" shall mean any lease which
is required under GAAP to be capitalized on the balance
sheet of the lessee.
"Capitalized Lease Obligations" shall mean the
aggregate amount which is required under GAAP to be
reported as a liability on the balance sheet of a Person
as lessee under a Capitalized Lease.
"Cash Concentration Accounts" shall mean the A
Cash Concentration Account and the B Cash Concentration
Account.
"Cash Concentration Account Agreement" shall
mean an agreement, in form and substance reasonably
satisfactory to the Agent, among the Cash Concentration
Account Bank, the Borrowers and the Agent delivered to
the Agent pursuant to Section 7.13 hereof, as such
Agreement may be modified and supplemented and in effect
from time to time.
"Cash Concentration Account Bank" shall mean
First Union Bank of North Carolina or such other bank as
the Borrowers may select with the written approval of the
Agent not to be unreasonably withheld.
"Change of Control" shall mean (a) any person
or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 51% or more of the
voting power of the then outstanding common stock of the
Parent, other than the Persons that comprise the
Hechinger Family Members; or (b) during any period of 12
consecutive calendar months, individuals who were
directors of the Parent on the first day of such period
shall cease to constitute a majority of the board of
directors of the Parent, provided that a director who has
resigned or is replaced during such time shall not be
included in any determination of whether a change of
control default has occurred pursuant to this clause (b)
to the extent such director is replaced by a successor
director elected by a majority of those directors who
were directors at the commencement of such period.
"CIT" shall have the meaning given that term in
the introductory paragraph to this Agreement.
"CIT Demand Note" shall mean the $50,000,000
Demand Promissory Note, dated February 12, 1996, made
jointly and severally by the Borrowers payable to the
order of CIT.
"Closing Date" shall mean the date on which the
conditions set forth in Section 5.01 hereof shall be
satisfied.
"Code" shall mean the Internal Revenue Code of
1986, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in
effect from time to time. References to sections of the
Code shall be construed also to refer to any successor
sections.
"Collateral" shall mean all of the property
(tangible and intangible) of any Person purported to be
subject to the Lien purported to be created by any
Security Document heretofore or hereafter executed by
such Person as security for all or any part of the
Obligations.
"Collective Bargaining Agreements" shall have
the meaning assigned to that term in Section 5.01(d)
(xvii) hereof.
"Consolidated Subsidiary" of a Person at any
time shall mean those Subsidiaries or other Affiliates of
such Person whose accounts are or should in accordance
with GAAP be consolidated with those of such Person.
"Consolidated Tangible Net Assets" shall have
the meaning given that term in the 1992 Indenture.
"Contribution Agreement" shall mean the
Contribution Agreement, dated the date hereof, between
Stores and East Coast.
"Credit Extension" shall mean (a) the making of
any Loan by a Lender or the Agent on behalf of the
Lenders or (b) the issuance, increase in the Stated
Amount, or extension of the expiration date, of any
Letter of Credit which CIT or any Lender assists any
Borrower in opening or establishing.
"Current Commitment" shall have the meaning
assigned to that term in Section 2.01 hereof.
"Depository Accounts" shall mean the lock-box
or blocked depository accounts maintained by a Borrower
for the collection of the cash of such Borrower and the
proceeds from the sale of the Inventory of such Borrower.
"Depository Account Agreements" shall mean each
agreement, substantially in the form of Exhibit H hereto,
among a Depository Bank, a Borrower and the Agent
delivered to the Agent pursuant to Section 7.13 hereof,
as each such Agreement may be modified and supplemented
and in effect from time to time.
"Depository Bank" shall mean each financial
institution at which a Depository Account is maintained.
"Designated Borrowing Officer" shall mean (a)
the Chairman, Treasurer, Executive Vice President,
Director of Treasury Operations or Treasury Analyst of
the Administrative Borrower or (b) such other officer as
shall be designated from time to time in writing by the
Administrative Borrower to the Agent.
"Designated Financial Officer" of a Person
shall mean the individual designated from time to time by
the Board of Directors or governing body performing like
functions of such Person to be the chief financial
officer or Treasurer of such Person (and individuals
designated from time to time by the Board of Directors or
governing body performing like functions of such Person
to act in lieu of the chief financial officer or the
Treasurer).
"Designated Percentage" shall mean, in the case
of the A Cash Concentration Account, 70% and in the case
of the B Cash Concentration Account, 30%.
"Disbursement Account" shall mean the deposit
account in the name of the Administrative Borrower
maintained at a bank in the United States designated by
the Administrative Borrower to the Agent into which there
shall be deposited proceeds of Loans and funds disbursed
to the Administrative Borrower by the Agent.
"Dividend Letter" shall mean the letter, dated
the date hereof, from the Parent to the Lenders relating
to the Parent's use of the proceeds of dividends, returns
of capital and other payments or distributions of assets
received from a Borrower.
"Designated Sales" shall have the meaning given
that term in Section 8.04(b)(i) hereof.
"Dollar," "Dollars" and the symbol "$" shall
mean lawful money of the United States of America.
"East Coast" shall have the meaning specified
therefor in the preamble hereto.
"Eligible Inventory" shall mean finished goods
Inventory of each Borrower which at the time of
determination meets all the following qualifications:
(i) it is lawfully owned by a Borrower and not
subject to any Lien, other than the Lien in favor of
the Agent that secures the payment of the
Obligations and it is not held on consignment and
may be lawfully sold;
(ii) it is (A) located in a Borrower's
distribution centers, warehouses or store locations
listed on Schedule 1.01(A) hereto or (B) located in
other locations in the continental United States as
the Agent shall have approved in writing from time
to time, which approval shall be given upon a
Borrower providing the Agent with evidence,
reasonably satisfactory to the Agent, of (1) the
Agent's perfected, first priority Lien on all
Inventory of such Borrower located in such locations
and (2) the absence of any other Liens on any
Inventory of such Borrower located in such
locations, which evidence may include the results of
Uniform Commercial Code, tax and judgment lien
searches in such locations and acknowledgment copies
of Uniform Commercial Code financing statements
naming such Borrower, as debtor, and the Agent, as
secured party, filed in such locations;
(iii) it is determined in the reasonable
judgment of the Agent to be, when taken as a whole,
substantially similar in quality and mix (having
regard for seasonal variations) to the Inventory
maintained by such Borrower in recent historical
operations prior to the Closing Date;
(iv) it is Inventory that has been valued after
deducting the aggregate amount of reserves for (1)
shrinkage, (2) lay-a-ways, (3) displays,
(4) rejected, defective, damaged, aged or otherwise
unsalable Inventory, and (5) other reserves required
by the Agent in the exercise of its reasonable
business judgment; and
(v) it was purchased or acquired by a Borrower
on or after August 20, 1994.
"Environmental Actions" shall mean any
complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, proceeding, judgment,
letter or other communication from any Governmental
Authority or any third party involving a Release (i) from
or onto any of the properties presently or formerly owned
or leased by a Borrower or its Subsidiaries or (ii) from
or onto any facilities which received Hazardous Materials
from a Borrower or its Subsidiaries, or involving any
violation of any Environmental Law.
"Environmental Law" shall mean all federal,
state and local laws, statutes, ordinances and
regulations, now or hereafter in effect relating to the
regulation and protection of human health, safety, the
environment and natural resources. Environmental Laws
include but are not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. SECTION 9601 et seq.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49
U.S.C. SECTION 180 et seq.); the Resource Conservation and
Recovery Act, as amended (42 U.S.C. SECTION 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (15
U.S.C. SECTION 2601 et seq.); the Clean Air Act, as amended (42
U.S.C. SECTION 7401 et seq.); the Federal Water Pollution
Control Act, as amended (33 U.S.C. SECTION 1251 et seq.); and
their state and local counterparts or equivalents.
"Environmental Liabilities and Costs" shall
mean all liabilities, monetary obligations, Remedial
Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of
counsel, expert and consulting and costs of investigation
and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any Environmental Action
relating to any environmental condition, violation of
Environmental Law, Remedial Actions or a Release of
Hazardous Materials from or onto (i) any property
presently or formerly owned by a Borrower or any of its
Subsidiaries or (ii) any facility which received
Hazardous Materials generated by a Borrower or any of its
Subsidiaries.
"Environmental Lien" shall mean any Lien
securing Environmental Liabilities and Costs incurred by
a Governmental Authority.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended, and any
successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed also
to refer to any successor sections.
"ERISA Affiliate" shall mean any
(i) corporation which is a member of the same controlled
group of corporations (within the meaning of
Section 414(b) of the Code) as a Borrower,
(ii) partnership or other trade or business (whether or
not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with a Borrower,
or (iii) member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as a
Borrower, any corporation described in clause (i) above
or any partnership or trade or business described in
clause (ii) above.
"Eurodollar Base Rate" shall mean, with respect
to a Eurodollar Loan for the relevant Interest Period,
the rate determined by the Agent to be the rate at which
deposits in Dollars are offered by the Bank to first-
class banks in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations
in respect of its eurodollar loans are then being
conducted at approximately 11:00 a.m., New York City
time, three Business Days prior to the first day of such
Interest Period, in the approximate amount of the
relevant Eurodollar Loan and having a maturity equal to
such Interest Period.
"Eurodollar Loan" shall mean a Loan bearing
interest at the Eurodollar Rate.
"Eurodollar Rate" means with respect to each
day during each Interest Period pertaining to a
Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward
to the nearest 1/100 of 1%):
Eurodollar Base Rate
1.00 - Reserve Requirements
"Event of Default" shall mean any of the Events
of Default described in Section 9.01 hereof.
"Exempted Debt" shall have the meaning given
that term in the 1992 Indenture.
"Fee Letter" shall mean the letter agreement,
dated as of the date hereof, between the Borrowers and
the Agent obligating the Borrowers to jointly and
severally pay certain fees to the Agent in connection
with this Agreement, as such letter agreement may be
modified, supplemented or amended from time to time.
"Financial Statement Letter" shall mean the
letter, dated the date hereof, from the Administrative
Borrower to the Agent describing certain events relating
to the financial condition of the Borrowers that occurred
prior to the Closing Date.
"GAAP" shall mean generally accepted accounting
principles as such principles shall be in effect in the
United States at the relevant date.
"GECC" shall mean General Electric Capital
Corporation.
"GECC Agreement" shall mean the Business
Revolving Charge Program Agreement dated as of April 3,
1992 by and among the Parent, Home Quarters Warehouse,
Inc. and GECC.
"Governmental Authority" shall mean any nation
or government, any federal, state, city, town,
municipality, county, local or other political
subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or
other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining
to government.
"Guarantee" of or by any Person shall mean any
obligation of such Person guaranteeing any Indebtedness
of any other Person (the "primary obligor"), directly or
indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment
of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any security for the
payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the
owner of such Indebtedness against loss, or (iii) to
maintain working capital, equity capital or other
financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the term Guarantee
shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"Hazardous Materials" shall mean (i) any
element, compound or chemical that is defined, listed or
otherwise classified as a solid waste, contaminant,
pollutant, toxic pollutant, hazardous substance,
extremely hazardous substance, toxic substance, hazardous
waste, or special waste under any Environmental Law;
(ii) petroleum and its refined fractions, (iii) any
polychlorinated biphenyls, (iv) any flammable, explosive
or radioactive materials; and (v) any other raw materials
used or stored by a Borrower, building components
(including but not limited to asbestos-containing
materials) and manufactured products containing Hazardous
Materials.
"Hechinger Family Members" shall mean all
members of the Hechinger Family Group and the England
Family Group (as such terms are defined in that certain
voting agreement, dated as of August 23, 1989).
"Hechinger Reorganization Memorandum" shall
mean the memorandum and Appendix A thereto attached
hereto as Exhibit I prepared by the Borrowers describing
certain transactions relating to the Parent and the
Borrowers that occurred prior to the Closing Date and
setting forth the locations of the Borrowers and any
Persons that were merged into the Borrowers pursuant to
such transactions.
"Indebtedness" shall mean as to any Person
(i) indebtedness for borrowed money; (ii) indebtedness
for the deferred purchase price of property or services
(other than current trade payables incurred in the
ordinary course of business and payable in accordance
with customary practices); (iii) indebtedness evidenced
by bonds, debentures, notes or other similar instruments
(other than performance, surety and appeal or other
similar bonds arising in the ordinary course of
business); (iv) obligations and liabilities secured by a
Lien upon property owned by such Person, whether or not
owing by such Person and even though such Person has not
assumed or become liable for the payment thereof;
(v) obligations and liabilities directly or indirectly
Guaranteed by such Person; (vi) obligations or
liabilities created or arising under any conditional
sales contract or other title retention agreement with
respect to property used and/or acquired by such Person,
even though the rights and remedies of the lessor, seller
and/or lender thereunder are limited to repossession of
such property; (vii) Capitalized Lease Obligations;
(viii) all liabilities in respect of letters of credit,
acceptances and similar obligations created for the
account of such Person, and (ix) net liabilities of such
Person under interest rate cap agreements, interest rate
swap agreements, foreign currency exchange agreements and
other hedging agreements or arrangements calculated on a
basis reasonably satisfactory to the Agent and in
accordance with accepted practice.
"Indemnified Parties" shall have the meaning
given that term in Section 10.06 hereof.
"Interest Period" shall mean, with respect to
any Eurodollar Loan, the period commencing on the
borrowing date for, or the date of any continuation of or
conversion for such Eurodollar Loan, as the case may be,
and ending one, two or three months thereafter as the
Administrative Borrower may elect in the applicable
notice given to the Agent pursuant to Section 2.03 or
Section 2.14, as appropriate; provided that (i) any
Interest Period that would otherwise 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;
(ii) any Interest Period that begins on the last Business
Day of a 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 shall end on the last
Business Day of the applicable calendar month; and
(iii) no Interest Period for any Loan shall end after the
Termination Date. Interest shall accrue from and include
the first date of an Interest Period, but exclude the
last day of such Interest Period.
"Inventory" shall mean all goods and
merchandise of a Borrower including, but not limited to,
all raw materials, work in process, finished goods,
materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or
sale of such goods and merchandise, whether now owned or
hereafter acquired and all such property, the sale or
disposition of which would give rise to accounts
receivable or cash.
"L/C Inventory" means the undrawn Stated Amount
of documentary Letters of Credit for the importation of
Eligible Inventory which has been or will be consigned to
a common carrier that has or will issue documents of
title covering such Inventory to CIT or the Letter of
Credit Issuer.
"L/C Notice" shall have the meaning given to
that term in Section 3.01(b).
"Lease" shall mean any lease of real property
to which a Borrower is a party as lessee or lessor.
"Lenders" shall have the meaning given that
term in the introductory paragraph to this Agreement.
"Letter of Credit" shall have the meaning given
to that term in Section 3.01(a).
"Letter of Credit Application" shall have the
meaning given to that term in Section 3.01(a) hereof.
"Letter of Credit Cash Collateral Account"
shall mean the deposit account maintained at the Bank or
such other bank as the Agent may select, which deposit
account shall be under the sole dominion and control of
the Agent.
"Letter of Credit Exposure" shall mean, at any
time, the sum at such time of (a) the aggregate amount of
all Unreimbursed Draws under Letters of Credit (whether
or not such Letters of Credit are then outstanding) and
(b) the aggregate Undrawn Letter of Credit Availability
under all outstanding Letters of Credit.
"Letter of Credit Fee" shall have the meaning
given to that term in Section 2.08(f) hereof.
"Letter of Credit Guaranty" shall mean the
guaranty delivered by CIT to the Letter of Credit
Issuer, guaranteeing the Borrowers' reimbursement
obligations under a reimbursement agreement, Letter of
Credit Application or other like document.
"Letter of Credit Issuer" shall mean the issuer
of the Letters of Credit, which shall be the Bank or The
Dai-Ichi Kangyo Bank, Limited, New York Branch.
"Licensor Waiver Agreement" shall mean the
Licensor Waiver Agreement dated the Closing Date, between
Hechinger Royalty Company, a Delaware corporation, and
the Agent.
"Lien" shall mean any mortgage, deed of trust,
pledge, lien, security interest, charge or other
encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional
sale or title retention arrangement, and any assignment,
deposit arrangement or lease intended as, or having the
effect of, security.
"Loan" or "Loans" shall mean any and all loan
or loans made by the Lenders or by the Agent on behalf of
the Lenders to the Borrowers or made as a result of
charges made to the Loan Account, in each case pursuant
to the terms of this Agreement.
"Loan Account" shall have the meaning given
that term in Section 2.08(a) hereof.
"Loan Documents" shall have the meaning given
to that term in the definition of "Related Documents" set
forth in this Section 1.01.
"Majority Lenders" shall mean, at any time,
Lenders whose Pro Rata Shares aggregate at least sixty-
six and two-thirds percent (66-2/3%).
"Material Adverse Effect" shall mean a material
adverse effect upon (i) the business, operations,
condition (financial or otherwise), or properties of a
Borrower, (ii) the ability of a Borrower to perform its
obligations hereunder, under the Fee Letter or under any
other Related Document, (iii) the Lien arising under the
Related Documents on any Collateral other than on any
Collateral with a de minimis value, (iv) the legality,
validity or enforceability of this Agreement or any
Related Document or the Lien arising under any Related
Document, or (v) the aggregate value of the property
included in the calculation of the Borrowing Base.
"Material Contract" means each contract or
agreement to which a Borrower or the Parent is a party
which is material to the business, operations, condition
(financial or otherwise) performance, or properties of a
Borrower or the Parent, excluding, however, all retail
store leases.
"Minority Lenders" shall have the meaning given
to that term in Section 10.03(b).
"Monogram" shall mean Monogram Credit Card Bank
of Georgia.
"Monogram Agreement" shall mean the Credit Card
Program Agreement dated as of February 5, 1992 by and
among the Parent, Home Quarters Warehouse, Inc. and
Monogram.
"Multiemployer Plan" shall mean a
"multiemployer plan" as defined in Section 4001(a)(3) of
ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was,
contributed to by a Borrower or any ERISA Affiliate.
"Net Proceeds" shall mean, for any asset sale
or disposition, the amount of cash and other payments
received (directly or indirectly) by a Borrower and/or
its Subsidiaries net of the sum of (i) the principal
amount of any Indebtedness secured by any Permitted Lien
on such assets (other than Indebtedness assumed by the
purchaser of such asset) which is required to be, and is,
repaid in connection with the sale or other disposition
thereof (other than Indebtedness under this Agreement),
(ii) reasonable expenses incurred by such Borrower and/or
its Subsidiaries in connection therewith, and (iii)
transfer taxes paid by such Borrower and/or its
Subsidiaries in connection therewith.
"1987 Indenture" shall mean the Indenture,
dated as of March 15, 1987, between the Parent and First
Union National Bank of North Carolina, as indenture
trustee.
"1992 Indenture" shall mean the Indenture,
dated as of October 1, 1992, between the Parent and First
Union National Bank of North Carolina, as indenture
trustee.
"Notes" shall mean the joint and several
promissory notes of the Borrowers executed and delivered
to the Lenders under this Agreement and substantially in
the form of Exhibit A hereto, as modified or restated
from time to time and any promissory note or notes issued
in exchange or replacement thereof, including all
extensions, renewals, refinancings or refundings thereof
in whole or part.
"Notice of Borrowing" shall have the meaning
given to that term in Section 2.03(a) hereof.
"Obligations" shall mean all indebtedness,
obligations and liabilities of each Borrower to any
Lender or the Agent incurred under or related to this
Agreement, the Notes, the Fee Letter or any other Related
Document, whether such indebtedness, obligations or
liabilities are direct or indirect, secured or unsecured,
joint or several, absolute or contingent, due or to
become due, whether for payment or performance, now
existing or hereafter arising, including without
limitation those which are described in either of the
following clauses (i) or (ii):
(i) All indebtedness, obligations (including
Reimbursement Obligations) and liabilities of any
nature whatsoever, including amounts due under
10.06 hereof and similar agreements contained in
the other Related Documents, from time to time
arising under or in connection with or evidenced or
secured by this Agreement, the Notes, the Letters of
Credit or any other Related Document, including but
not limited to the principal amount of Loans
outstanding, together with interest thereon
(including, without limitation, all interest that
accrues after the commencement of any case,
proceeding or other action relating to the
bankruptcy, insolvency or reorganization of a
Borrower), the amount of the Letter of Credit
Exposure, together with interest thereon and all
expenses, fees and indemnities hereunder or under
any other Related Document. Without limitation,
such amounts include all Loans and interest thereon
and the amount of all Letter of Credit Exposure
whether or not such Loans were made or any Letters
of Credit to which such Letter of Credit Exposure
relates were issued in compliance with the terms and
conditions hereof or in excess of any Lender's
obligation to lend and arrange for the issuance of
Letters of Credit hereunder or any Lender's
obligation to participate therein. If and to the
extent any amounts in any account (including the
Agent Account, the Letter of Credit Cash Collateral
Account, the Depository Accounts, the Cash
Concentration Accounts or otherwise) constituting
Collateral are applied to Obligations hereunder, and
any Lender or the Agent is subsequently obligated to
return or repay any such amounts to any Person for
any reason, the amount so returned or repaid shall
be deemed a Loan hereunder and shall constitute an
Obligation.
(ii) All indebtedness, obligations and
liabilities from time to time arising under or in
connection with any account from time to time
maintained by a Borrower or by any Lender or the
Agent pursuant to the terms of this Agreement or any
Related Document, including but not limited to all
reimbursement obligations, service charges and
interest in connection with any overdrafts or
returned items from time to time arising in
connection with any such account, or arising under
or in connection with any cash management services
or other services from time to time performed by any
Lender or the Agent pursuant to or in connection
with this Agreement or any other Related Document.
"Office" when used in connection with the Agent
shall mean its office located at 1211 Avenue of the
Americas, New York, New York 10036 or at such other
office or offices of the Agent as may be designated in
writing from time to time by the Agent to the
Administrative Borrower and when used in connection with
the Bank or the Letter of Credit Issuer shall mean the
office of such entity designated in writing from time to
time by the Agent to the Administrative Borrower. In the
event Chemical Bank shall be the Bank or the Letter of
Credit Issuer, the Office for such entity shall until
further written notice from the Agent to the
Administrative Borrower be its office located at 55 Water
Street, New York, New York 10004.
"Operating Assets" shall mean all merchandise,
inventories, furniture, fixtures and equipment (including
all transportation and warehousing equipment but
excluding office equipment, point-of-sale equipment, cash
registers and data processing equipment) owned by a
Borrower or any Subsidiary.
"Operating Lease Obligations" shall mean all
obligations and indebtedness of a Borrower and its
Subsidiaries in respect of leases of property (whether
real, personal or mixed) other than Capitalized Lease
Obligations.
"Operating Property" shall mean all real
property and improvements thereon owned by a Borrower or
any Subsidiary and constituting, without limitation, any
store, warehouse, service center or distribution center
wherever located, provided that such term shall not
include any store, warehouse, service center or
distribution center which such Borrower's board of
directors declares by resolution not to be of material
importance to the business of such Borrower and its
Subsidiaries, taken as a whole.
"Other Taxes" shall have the meaning given to
that term in Section 2.15.
"Parent" shall mean Hechinger Company, a
Delaware corporation.
"Parent Bonds" shall mean the bonds issued
pursuant to the 1987 Indenture or the 1992 Indenture.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
"Permitted Designated Sales Percentage" shall
mean, in connection with the purchase of Parent Bonds (i)
if after giving effect to any such purchase of Parent
Bonds by the Parent or any of its Subsidiaries, the sum
of available cash of the Borrowers and the Availability
of the Borrowers is equal to or greater than $125
million, 75%; (ii) if after giving effect to any such
purchase of Parent Bonds by the Parent or any of its
Subsidiaries, the sum of available cash of the Borrowers
and the Availability of the Borrowers is equal to or
greater than $150 million, 100%, and (iii) in all other
cases, 0%.
"Permitted Investments" shall mean (a) direct
obligations of the United States of America or of any
agency thereof or obligations guaranteed as to principal
and interest by the United States of America or of any
agency thereof, in either case maturing not more than 90
days from the date of acquisition thereof by such Person;
(b) deposit accounts with or certificates of deposit and
bankers' acceptances issued by any bank or trust company
organized under the laws of the United States of America
or any state thereof and having capital, surplus and
undivided profits of at least $500,000,000, maturing not
more than 90 days from the date of acquisition thereof by
such Person; (c) commercial paper rated A-1 or better or
P-1 or better by Standard & Poor's Corporation ("S&P") or
Moody's Investors Services, Inc. ("Moody's"),
respectively, maturing not more than 90 days from the
date of acquisition thereof by such Person;
(d) Investments in money market funds rated AAAm or AAAm-
G by S&P and Aaa by Moody's and; (e) repurchase
agreements having maturities of not more than 90 days
from the date of acquisition which are entered into with
a bank or trust company described in clause (b) above and
which are secured by readily available direct obligations
of the United States of America or any agency thereof.
"Permitted Liens" shall have the meaning given
that term in Section 8.01.
"Person" shall mean an individual, corporation,
partnership, limited liability company, limited liability
partnership, trust, unincorporated association, joint
venture, joint-stock company, government (including
political subdivisions), Governmental Authority or
agency, or any other entity.
"Plan" shall mean an employee benefit plan
defined in Section 3(3) of ERISA in respect of which a
Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
"Potential Default" shall mean any event or
condition which, with notice or passage of time, or any
combination of the foregoing, would constitute an Event
of Default.
"Prime Loan" shall mean a Loan bearing interest
at the Regular Rate.
"Prime Rate" shall mean the interest rate per
annum publicly announced from time to time by the Bank in
New York, New York as its Prime Rate, such interest rate
to change automatically from time to time effective as of
the announced effective date of each change in the Prime
Rate. The Prime Rate is not intended to be the lowest
rate of interest charged by the Bank to its borrowers.
"Pro Rata Share" shall mean, with respect to
any Lender, a fraction (expressed as a percentage), the
numerator of which shall be the amount of such Lender's
Revolving Credit Commitment and the denominator of which
shall be the aggregate amount of all of the Lenders'
Revolving Credit Commitments, as adjusted from time to
time in accordance with the provisions of Section 10.13
hereof, provided that, if the Revolving Credit
Commitments have been terminated, the numerator shall be
the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Exposure and the denominator
shall be the aggregate amount of all unpaid Loans and
Letter of Credit Exposure.
"Register" shall have the meaning given that
term in Section 10.13(c) hereof.
"Regular Rate" shall mean, for any day, the
Prime Rate for such day plus 1%.
"Reimbursement Obligation" shall mean the
aggregate joint and several obligations of the Borrowers
to reimburse CIT or the Lenders for amounts payable by
CIT or the Lenders under a Letter of Credit Guaranty in
respect of any payment made under any Letter of Credit
issued by the Letter of Credit Issuer, together with
interest thereon and all fees and expenses related
thereto.
"Related Documents" or "Loan Documents" shall
mean this Agreement, the Notes, the Letters of Credit,
each Letter of Credit Application, the Letter of Credit
Guaranty, the Fee Letter, the Depository Account
Agreements, Cash Concentration Account Agreements and the
credit card depository account agreements, the Security
Documents, each notice letter delivered to a Depository
Bank or other financial institution pursuant to
Section 7.13 hereof, the Licensor Waiver Agreement, the
Dividend Letter, the Contribution Agreement, the
Assignment and Assumption and the other documents,
instruments and agreements referred to in Section 5.01
hereof, and all other instruments, agreements and
documents from time to time delivered in connection with
or otherwise relating to any Related Document.
"Release" shall mean any spilling, leaking,
pumping, pouring, emitting, emptying, injection,
discharging, injecting, escaping, leaching, dumping or
disposing (including abandonment or discarding of
barrels, containers and other closed receptacles
containing any hazardous substance, pollutant or
contaminant) of a Hazardous Material into the indoor or
outdoor environment or onto or from any property
presently or formerly owned or operated by a Borrower or
any of its Subsidiaries, or at any disposed facility that
received Hazardous Materials generated by such Borrower
or any of its Subsidiaries.
"Remedial Action" shall mean all actions taken
to (i) monitor, assess, evaluate, investigate, clean up,
remove, remediate, treat, contain or in any other way
address Hazardous Materials in the indoor or outdoor
environment; (ii) prevent or minimize a Release or
threatened Release of Hazardous Materials so that the
Release or threatened Release does not migrate or
endanger or threaten to endanger public health or welfare
or the environment; or (iii) perform pre-remedial studies
and investigations and post-remedial operation and
maintenance activities, or any other actions authorized
by 42 U.S.C. 9601.
"Reportable Event" shall mean any of the events
described in Section 4043(b) of ERISA (other than events
for which the notice requirements have been waived).
"Reserve Requirements" shall mean, for any day
as applied to a Eurodollar Loan, the aggregate (without
duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of
the Board or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of
the Federal Reserve System. Eurodollar Loans shall be
deemed to constitute Eurocurrency Liabilities and to be
subject to such reserve requirements without benefit of
or credit for proration, exceptions or offsets which may
be available from time to time to any Lender or the
Affiliate of any Lender under Regulation D.
"Revolving Credit Commitment" shall mean, with
respect to each Lender, the amount set forth on Schedule
1.01(B) to this Agreement or assigned to such Lender in
accordance with Section 10.13, as such amounts may be
reduced from time to time pursuant to the terms of this
Agreement, and "Revolving Credit Commitments" shall,
collectively, mean the aggregate amount of the Revolving
Credit Commitments of all the Lenders, the maximum amount
of which shall not exceed $200,000,000.
"Sale and Lease-Back Transaction" shall have
the meaning given that term in Section 8.04(b)(v) hereof.
"Security Agreements" shall mean the Security
Agreements, substantially in the form of Exhibit B
hereto, made by each Borrower in favor of the Agent, for
the benefit of the Lenders, as modified and supplemented
and in effect from time to time.
"Security Documents" shall mean, collectively,
the Security Agreements executed and delivered by each
Borrower, and all Uniform Commercial Code financing
statements required by this Agreement and the Security
Agreements to be filed with respect to the security
interests in personal property created pursuant to such
agreements, and all other documents and agreements
executed and delivered by each Borrower and/or its
Subsidiaries in connection with any of the foregoing
documents.
"Settlement Period" shall have the meaning set
forth in Section 2.03 hereof.
"Solvent" means, with respect to any Person on
a particular date, that on such date (a) the fair value
of the property of such Person is not less than the total
amount of its liabilities, (b) the present fair salable
value of the assets of such Person is not less than the
amount that will be required to pay the probable
liability of such Person on its existing debts as they
become absolute and matured, (c) such Person is able to
realize upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments
as they mature in the normal course of business, (d) such
Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and
(e) such Person is not engaged in business or a
transaction, and, is not about to engage in business or a
transaction, for which such Person's property would
constitute unreasonably small capital.
"Stated Amount" shall mean, with respect to a
Letter of Credit, the face amount thereof, drawn or
undrawn, regardless of the existence or satisfaction of
any conditions or limitations on drawing.
"Stores" shall have the meaning specified
therefor in the preamble hereto.
"Subsidiary" shall mean, with respect to any
Person, any corporation, limited or general partnership,
limited liability company, limited liability partnership,
trust, association or other business entity of which an
aggregate of 50% or more of the outstanding stock or
other interests entitled to vote in the election of the
board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes
of such corporation shall have or might have voting power
by reason of the happening of any contingency), managers,
trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the
time, directly or indirectly, owned or controlled by such
Person and/or one or more Subsidiaries of such Person.
"Syndication Date" shall mean the earlier of
(i) the date which is 60 days after the date of the
initial loan and (ii) the date on which the Agent
determines in its sole discretion (and notifies the
Administrative Borrower and the Lenders) that the primary
syndication (and the resulting addition of institutions
as lenders pursuant to Section 10.13) has been completed.
"Taxes" shall have the meaning given to that
term in Section 2.15.
"Termination Date" shall have the meaning given
that term in Section 2.01 hereof.
"Termination Event" shall mean (i) a Reportable
Event with respect to any Benefit Plan; (ii) the
withdrawal of a Borrower or any ERISA Affiliate from a
Benefit Plan during a plan year in which such Borrower or
any ERISA Affiliate was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on a Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit
Plan in a distress termination described in
Section 4041(c) of ERISA; or (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan.
"Undrawn Letter of Credit Availability" shall
mean with respect to a Letter of Credit, at any time, the
maximum amount available to be drawn under such Letter of
Credit at such time, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Unreimbursed Draws" shall mean with respect to
a Letter of Credit, at any time, the aggregate amount at
such time of all payments made by the Letter of Credit
Issuer or payments made by CIT or the Lenders under a
Letter of Credit Guaranty in respect of such payments
under such Letter of Credit, to the extent not repaid by
the Borrowers, provided that Unreimbursed Draws shall not
include any such payments that have been charged to the
Loan Account and constitute a Loan pursuant to the terms
of this Agreement.
"Unused Line Fee" shall have the meaning given
to that term in Section 2.08(e).
1.02. Construction. Unless the context of
this Agreement otherwise clearly requires, references to
the plural include the singular, the singular the plural
and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this
Agreement to "determination" by the Agent include
reasonable good faith estimates by the Agent (in the case
of quantitative determinations) and reasonable good faith
beliefs by the Agent (in the case of qualitative
determinations). The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular
provision of this Agreement. The section and other
headings contained in this Agreement and the Table of
Contents preceding this Agreement are for reference
purposes only and shall not control or affect the
construction of this Agreement or the interpretation
thereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise
specified.
1.03. Accounting Principles. Except as
otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters
and all financial statements to be delivered pursuant to
this Agreement shall be made and prepared in accordance
with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
Notwithstanding the definition of GAAP contained in this
Agreement, no change in GAAP that would affect the method
or calculation of any of the financial covenants,
restrictions or standards or definitions of terms used
herein shall be given effect in such calculations until
such financial covenants, restrictions or standards or
definitions are amended in a manner satisfactory to the
Borrowers and the Majority Lenders so as to reflect such
change in GAAP.
ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans. Subject to
the terms and conditions and relying upon the
representations and warranties herein set forth, each
Lender severally agrees to make Loans to the Borrowers at
any time and from time to time on or after the date
hereof and to, but not including, the Termination Date,
in an aggregate principal amount for the Borrowers not
exceeding at any one time its Pro Rata Share of the
Current Commitment at such time. The "Current
Commitment" at any time shall be equal to the lesser of
(A) $200,000,000, as such amount may have been reduced
pursuant to the terms of this Agreement at such time, and
(B) the Borrowing Base. No Lender shall have an
obligation to make Loans hereunder or arrange for the
issuance of Letters of Credit on or after the Termination
Date or which, when added to the aggregate amount of all
outstanding and contemporaneous Loans and the Letter of
Credit Exposure at such time, would cause the aggregate
amount of all Loans and the Letter of Credit Exposure at
any time to exceed the Current Commitment at such time.
Notwithstanding anything to the contrary, prior to the
Syndication Date, all Loans shall be incurred and be
maintained as Prime Loans. The "Termination Date" means
the date on which the Revolving Credit Commitment of each
Lender expires, which shall be February 19, 1999. Within
the limits of time and amount set forth in this
Section 2.01, and subject to the provisions of this
Agreement, the Borrowers may borrow, repay and reborrow
hereunder.
2.02. Notes. The joint and several
obligation of the Borrowers to repay the unpaid principal
amount of the Loans made to them by each Lender and to
pay interest thereon shall be evidenced in part by a Note
dated the date of this Agreement in the principal amount
of such Lender's Revolving Credit Commitment with the
blanks appropriately filled in. An executed Note for
each Lender shall be jointly delivered by the Borrowers
to the Agent on the date of the execution and delivery of
this Agreement.
2.03. Notice of Borrowing; Making of Loans.
(a) Whenever a Borrower desires to
borrow, the Administrative Borrower shall provide notice
to the Agent of such proposed borrowing (a "Notice of
Borrowing"), each such notice, to be given (i) not later
than 12:00 noon (New York City time) on the date of such
proposed borrowing, in the case of a borrowing consisting
of Prime Loans, or (ii) not later than 12:00 noon (New
York City time) on the third Business Day before the date
of such borrowing, in the case of a borrowing consisting
of Eurodollar Loans, setting forth: (a) the date, which
shall be a Business Day, on which such borrowing is to
occur, (b) whether such Loan is requested to be a Prime
Loan or a Eurodollar Loan and, if a Eurodollar Loan, the
Interest Period requested with respect thereto, (c) the
principal amount of the Loan being borrowed, (d) the
account information where such Loan is to be received and
(e) the Borrower that will receive the proceeds of such
Loan and the use[s] of proceeds of such Loan. Such
notice shall be given by telephone or in writing by a
Designated Borrowing Officer, provided, that, if
requested by the Agent, any such telephonic notice shall
be confirmed in writing by delivery to the Agent, on or
before the date on which such Loan is to be made, of a
written notice substantially in the form of Exhibit F
hereto containing the original or facsimile signature of
a Designated Borrowing Officer. Except for a Notice of
Borrowing when the Agent will fund the related Loan
pursuant to Section 2.03(e) hereof, the Agent shall
provide each Lender with prompt notice of each Notice of
Borrowing. Except as otherwise provided in
Section 2.03(e), on the date specified in such notice,
each Lender shall, subject to the terms and conditions of
this Agreement, make its Pro Rata Share of such Loan in
immediately available funds by wire transfer to the Agent
at its Office not later than 1:30 p.m. (New York City
time). Unless the Agent determines that any applicable
conditions in Section 5.02 have not been satisfied, the
Agent shall make the funds so received from the Lenders
available to a Borrower not later than 2:30 p.m. (New
York City time), on the date specified in such notice in
immediately available funds by (i) depositing such
proceeds in the Disbursement Account of such Borrower if
such Disbursement Account is located at the Bank and
(ii) initiating a wire transfer of same day funds to the
Disbursement Account if such Disbursement Account is not
located at the Bank.
(b) The Agent and each Lender shall be
entitled to rely conclusively on each Designated
Borrowing Officer's authority to request a Loan on behalf
of the Borrowers until the Agent receives written notice
to the contrary. The Agent and the Lenders shall have no
duty to verify the authenticity of the signature
appearing on any written Notice of Borrowing and, with
respect to an oral request for a Loan, the Agent and the
Lenders shall have no duty to verify the identity of any
Person representing himself as a Designated Borrowing
Officer.
(c) The Agent and the Lenders shall not
incur any liability to the Borrowers in acting upon any
telephonic notice referred to above which the Agent and
the Lenders believe in good faith to have been given by a
Designated Borrowing Officer or for otherwise acting in
good faith under this Section 2.03 and, upon the funding
of a Loan by the Lenders (or by the Agent on behalf of
the Lenders) in accordance with this Agreement pursuant
to any such telephonic notice, a Borrower shall have
effected a Loan hereunder.
(d) Each Notice of Borrowing pursuant to
this Section 2.03 shall be irrevocable and the Borrowers
shall be bound to make a borrowing in accordance
therewith. Each Prime Loan shall be in a minimum amount
of $1,000,000 and in multiples of $100,000 if in excess
thereof, and each Eurodollar Loan shall be in a minimum
amount of $5,000,000 and in multiples of $1,000,000 if in
excess thereof, provided that the Borrowers shall not be
entitled to request any Loan that, if made, would result
in an aggregate of more than ten separate Eurodollar
Loans of any Lender being outstanding hereunder at any
one time.
(e) (i) Except as otherwise provided in
this subsection 2.03(e), all Loans under this Agreement
shall be made by the Lenders simultaneously and
proportionately to their Pro Rata Shares, it being
understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall
the Revolving Credit Commitment of any Lender be
increased or decreased as a result of the default by any
other Lender in that other Lender's obligation to make a
Loan requested hereunder.
(ii) Notwithstanding any other
provision of this Agreement, and in order to reduce the
number of fund transfers among the Borrowers, the Lenders
and the Agent, the Borrowers, the Lenders and the Agent
agree that the Agent may (but shall not be obligated to),
and the Borrowers and the Lenders hereby irrevocably
authorize the Agent to, fund, on behalf of the Lenders,
Loans pursuant to Section 2.01, subject to the procedures
for settlement set forth in subsection 2.03(f); provided,
however, that (a) the Agent shall in no event fund such
Loans if the Agent shall have received written notice
from the Majority Lenders on the Business Day prior to
the day of the proposed Loan that one or more of the
conditions precedent contained in Section 5.02 will not
be satisfied on the day of the proposed Loan, and (b) the
Agent shall not otherwise be required to determine that,
or take notice whether, the conditions precedent in
Section 5.02 have been satisfied.
(iii) Unless (A) the Agent has
notified the Lenders that the Agent, on behalf of the
Lenders, will fund a particular Loan pursuant to
subsection 2.03(e)(ii), or (B) the Agent shall have been
notified by any Lender on the Business Day prior to the
day of a proposed Loan that such Lender does not intend
to make available to the Agent such Lender's Pro Rata
Share of the Loan requested on such day, the Agent may
assume that such Lender has made such amount available to
the Agent on such day and the Agent, in its sole
discretion, may, but shall not be obligated to, cause a
corresponding amount to be made available to a Borrower
on such day. If the Agent makes such corresponding
amount available to a Borrower and such corresponding
amount is not in fact made available to the Agent by such
Lender, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender together
with interest thereon, for each day from the date such
payment was due until the date such amount is paid to the
Agent, at the customary rate set by the Agent for the
correction of errors among banks for three Business Days
and thereafter at the Regular Rate. During the period in
which such Lender has not paid such corresponding amount
to the Agent, notwithstanding anything to the contrary
contained in this Agreement or any other Related
Document, the amount so advanced by the Agent to a
Borrower shall, for all purposes hereof, be a Loan made
by the Agent for its own account. Upon any such failure
by a Lender to pay the Agent, the Agent shall promptly
thereafter notify the Administrative Borrower of such
failure and the Borrowers shall immediately pay such
corresponding amount to the Agent for its own account.
(iv) Nothing in this subsection
2.03(e) shall be deemed to relieve any Lender from its
obligation to fulfill its Revolving Credit Commitment
hereunder or to prejudice any rights that the Agent or
the Borrowers may have against any Lender as a result of
any default by such Lender hereunder.
(f) (i) With respect to all periods for
which the Agent has funded Loans pursuant to subsection
2.03(e), within 15 days after the last day of each
calendar month, or such shorter period as it may from
time to time select (any such month or shorter period
being herein called a "Settlement Period"), the Agent
shall notify each Lender of the average daily unpaid
principal amount of the Loans outstanding during such
Settlement Period. In the event that such amount is
greater than the average daily unpaid principal amount of
the Loans outstanding during the Settlement Period
immediately preceding such Settlement Period (or, if
there has been no preceding Settlement Period, the amount
of the Loans made on the date of such Lender's initial
funding), each Lender shall promptly make available to
the Agent its Pro Rata Share of the difference in
immediately available funds. In the event that such
amount is less than such average daily unpaid principal
amount, the Agent shall promptly pay over to each other
Lender its Pro Rata Share of the difference in
immediately available funds. In addition, if the Agent
shall so request at any time when a Potential Default or
an Event of Default shall have occurred and be
continuing, or any other event shall have occurred as a
result of which the Agent shall determine that it is
desirable to present claims against the Borrowers for
repayment, each Lender shall promptly remit to the Agent
or, as the case may be, the Agent shall promptly remit to
each Lender, sufficient funds to adjust the interests of
the Lenders in the then outstanding Loans to such an
extent that, after giving effect to such adjustment, each
Lender's interest in the then outstanding Loans will be
equal to its Pro Rata Share thereof. The obligations of
each Lender under this subsection 2.03(f) shall be
absolute and unconditional. Each Lender shall only be
entitled to receive interest on its Pro Rata Share of the
Loans which have been funded by such Lender.
(ii) In the event that any Lender
fails to make any payment required to be made by it
pursuant to subsection 2.03(f)(i), the Agent shall be
entitled to recover such corresponding amount on demand
from such Lender together with interest thereon, for each
day from the date such payment was due until the date
such amount is paid to the Agent, at the customary rate
set by the Agent for the correction of errors among banks
for three Business Days and thereafter at the Regular
Rate. During the period in which such Lender has not
paid such corresponding amount to the Agent,
notwithstanding anything to the contrary contained in
this Agreement or any other Related Document, the amount
so advanced by the Agent to a Borrower shall, for all
purposes hereof, be a Loan made by the Agent for its own
account. Upon any such failure by a Lender to pay the
Agent, the Agent shall promptly thereafter notify the
Administrative Borrower of such failure and the Borrowers
shall immediately pay such corresponding amount to the
Agent for its own account. Nothing in this subsection
2.03(f)(ii) shall be deemed to relieve any Lender from
its obligation to fulfill its Revolving Credit Commitment
hereunder or to prejudice any rights that the Borrowers
or the Agent may have against any Lender as a result of
any default by such Lender hereunder.
2.04. Reduction of Commitment; Mandatory
Prepayment; Optional Prepayment.
(a) Optional Reduction of the Commitment.
(i) Subject to Section 2.04(e), the Borrowers may at any
time or from time to time and without penalty or premium
reduce the Revolving Credit Commitments of the Lenders to
an amount (which may be zero) not less than the sum of
the unpaid principal amount of all Loans then outstanding
plus the principal amount of all Loans not yet made as to
which notice has been given by the Administrative
Borrower under Section 2.03 hereof plus the Letter of
Credit Exposure at such time plus the Stated Amount of
all Letters of Credit not yet issued as to which a
request has been made unless the request is withdrawn and
the Letter of Credit is not issued by the Letter of
Credit Issuer under Section 3.01 hereof. Any reduction
shall be in an amount which is an integral multiple of
$10,000,000. Reduction of the Revolving Credit
Commitments of the Lenders shall be made by providing not
less than two Business Days' written notice (which notice
shall be irrevocable) to such effect to the Agent (which
notice the Agent shall promptly transmit to each Lender).
Reductions of the Revolving Credit Commitments of the
Lenders are irrevocable and may not be reinstated. Each
such reduction shall reduce the Revolving Credit
Commitment of each Lender proportionately in accordance
with its Pro Rata Share.
(ii) Mandatory Termination of
Commitment. On the date which is sixty (60) days after
the occurrence of a Change of Control, the Revolving
Credit Commitments of all Lenders shall automatically
terminate, provided that the Revolving Credit Commitments
shall not terminate if, before the 60th day after the
occurrence of a Change of Control, all Lenders notify the
Agent that they have elected not to terminate their
Revolving Credit Commitments.
(b) Mandatory Prepayment. (i) Exceeding
Current Commitment. If at any time the Current
Commitment is less than the aggregate unpaid principal
amount of the Loans then outstanding plus the Letter of
Credit Exposure at such time, the Borrowers shall prepay
an amount of the Loans not less than the amount of such
difference or, if the Loans then outstanding are less
than the amount of such difference, provide cash
collateral, or other collateral acceptable to the Agent
in its sole discretion, to the Agent in an amount equal
to 105% of such excess, which cash collateral shall be
deposited and held in the Letter of Credit Cash
Collateral Account until such time as such excess no
longer exists. Any such prepayment will not otherwise
reduce the Revolving Credit Commitments of the Lenders.
Concurrently with any notice of reduction of the
Revolving Credit Commitments of the Lenders, the
Administrative Borrower shall give notice to the Agent of
any mandatory prepayment which notice shall specify a
prepayment date no later than the effective date of such
reduction of the Revolving Credit Commitments of the
Lenders.
(ii) Asset Sales. In connection with
the consummation of any sale or disposition of assets
permitted under Section 8.04(b)(ii) hereof, the Borrowers
shall prepay the Loans in an aggregate principal amount
equal to 50% of all Net Proceeds of such sale or
disposition if any such Net Proceeds have not been used
for the Borrowers' working capital or other general
corporate purposes, in each case which purposes are not
otherwise prohibited by the terms of this Agreement,
within a period of twelve (12) months from the date of
receipt of such Net Proceeds.
(iii) Other Mandatory
Prepayments. The Agent shall on each Business Day apply
funds deposited in the Agent Account to the payment, in
whole or in part, of the Obligations outstanding.
(c) Optional Prepayment. The Borrowers
may at any time or from time to time prepay, in whole or
in part, any or all Loans then outstanding. Any partial
prepayment of a Eurodollar Loan shall not reduce the
aggregate principal amount of such Eurodollar Loan to
less than $5,000,000.
(d) Prepayment Penalty. All prepayments
of Loans under this Section 2.04 shall be without premium
or penalty, except that any prepayment of Eurodollar
Loans shall be subject to the provisions of Section 2.12
hereof.
(e) Termination Fee. Notwithstanding the
foregoing, the Borrowers jointly and severally agree that
if the Revolving Credit Commitments are terminated
(whether such termination is optional or mandatory,
including after the occurrence of an Event of Default) in
whole at any time prior to the Termination Date, the
Borrowers will pay to the Agent, for the account of each
Lender, on the date of such termination (together with
any payments of principal, interest, fees or other
amounts payable hereunder or under the Fee Letter on such
date), a fee equal to 1% of the average outstanding
amount of all outstanding Loans and the Letter of Credit
Exposure from the Closing Date to the date of such
termination, provided that if such termination is made
pursuant to Section 2.04(a)(ii) as a result of a Change
of Control, the fee shall be equal to 1/2% of the average
outstanding amount of all outstanding Loans and Letter of
Credit Exposure from the Closing Date to the date of such
termination.
2.05. Interest Rate.
(a) Each Prime Loan shall bear interest
at a rate per annum for each day until paid equal to the
Regular Rate for such day.
(b) Each Eurodollar Loan shall bear
interest at a rate per annum equal to the Eurodollar Rate
plus 2.75% for the Interest Period in effect for such
Eurodollar Loan.
2.06. Interest Payment Dates. The
Borrowers shall jointly and severally pay interest on the
unpaid principal amount of each Loan from the date of
such Loan until such principal amount shall be paid in
full, which interest shall be payable (i) if such Loan is
a Prime Loan, monthly in arrears on the first day of each
month, commencing March 1, 1996, and (ii) if such Loan is
a Eurodollar Loan, on the last day of the Interest Period
of such Eurodollar Loan. After maturity of any principal
amount of any Loan (by acceleration, at scheduled
maturity or otherwise), interest on such amount shall be
due and payable on demand.
2.07. Amortization. To the extent not due
and payable earlier pursuant to the terms of this
Agreement, the entire unpaid principal amount of each of
the Loans shall be due and payable on the Termination
Date.
2.08. Payments.
(a) Time, Place and Manner. All payments
and prepayments to be made in respect of principal,
interest, fees or other amounts due jointly and severally
from the Borrowers hereunder, under the Fee Letter, the
Notes or any other Related Document shall be payable at
or before 12:00 Noon, New York City time, on the day when
due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived. Such
payments shall be made to the Agent for the account of
the Agent, CIT or the Lenders, as the case may be, at the
Agent Account in Dollars in funds immediately available
at the Bank's Office without setoff, counterclaim or
other deduction of any nature. The Agent shall maintain
a loan account (the "Loan Account") on its books in the
joint name of the Borrowers in which the Borrowers will
be charged with Loans made by the Agent or the Lenders to
any Borrower hereunder and with any other Obligations.
The Borrowers and the Lenders hereby authorize the Agent
to, and the Agent may, from time to time charge the Loan
Account with any interest, fees, expenses and other
Obligations that are due and payable under this Agreement
or any Related Document. The Borrower and the Lenders
confirm that any charges which the Agent may so make to
the Loan Account as herein provided will be made as an
accommodation to the Borrowers and solely at the Agent's
discretion and shall constitute a Loan to the Borrowers
funded by the Agent on behalf of the Lenders and subject
to subsections 2.03(e) and 2.03(f) of this Agreement.
Each of the Lenders and each of the Borrowers agrees that
the Agent shall have the right to make such charges
regardless of whether any Event of Default or Potential
Default shall have occurred and be continuing or whether
any of the conditions precedent in Section 5.02 have been
satisfied. The Loan Account will be credited upon
receipt of "good funds" in the Agent Account with all
amounts actually received by the Agent from the Borrowers
or others for the account of the Borrowers. Interest on
all Loans and all fees that accrue on a per annum basis
shall be computed on the basis of the actual number of
days elapsed in the period during which interest or such
fee accrues and a year of 360 days. In computing
interest on any Loan, the date of the making of such Loan
shall be included and the date of payment shall be
excluded; provided, however, that if a Loan is repaid on
the same day in which it is made, one day's interest
shall be paid on such Loan. It is expressly understood
and agreed by the Borrowers that the Agent and the
Lenders shall have no responsibility to inquire into the
correctness of the apportionment, allocation or
disposition of Loans, Agent Advances or Letters of Credit
made to the Borrowers or any fees, costs or expenses for
which the Borrowers are jointly and severally obligated
under this Agreement.
(b) Periodic Statements. The Agent shall
provide the Lenders and the Borrowers promptly after the
end of each calendar month a summary statement (in the
form from time to time used by the Agent) of (A) the
opening and closing daily balances in the Loan Account
during such month, (B) the amounts and dates of all Loans
made during such month, (C) the amounts and dates of all
payments on account of the Loans made during such month
and each Lender's interest in the Loans, (D) the amount
of interest accrued on the Loans during such month,
(E) any Letters of Credit issued by the Letter of Credit
Issuer during such month, specifying the Stated Amount
thereof, (F) the amount of charges to the Loan Account or
Loans to be made during such month to reimburse CIT, the
Lenders or the Letter of Credit Issuer for drawings made
under Letters of Credit or payments made by CIT or the
Lenders under the Letter of Credit Guaranty, and (G) the
amount and nature of any charges to the Loan Account made
during such month on account of interest, fees and
expenses and other Obligations. All entries on any such
statement shall, 30 days after the same is sent, be
presumed to be correct and shall constitute prima facie
evidence of the information contained in such statement,
subject to the Borrowers' and each Lender's express right
to rebut such presumption by conclusively demonstrating
the existence of any error on the part of the Agent.
(c) Apportionment of Payments. Except as
otherwise provided in this subsection, aggregate
principal and interest payments shall be apportioned
among all outstanding Loans to which such payments relate
and payments of the fees required to be jointly and
severally paid by the Borrowers to the Lenders under
subsections 2.04(e), 2.08(e) and 2.08(f) shall, as
applicable, be apportioned ratably among the Lenders, in
each case according to their Pro Rata Shares. All
payments shall be remitted to the Agent and all such
payments and any other amounts, including, without
limitation, proceeds of Collateral received by the Agent
from or as to the Borrowers shall be applied subject to
the provisions of this Agreement first, to pay principal
of and interest on any Loans funded by the Agent on
behalf of the Lenders and any fees, expense
reimbursements or indemnities then due to the Agent from
the Borrowers; second, to pay any fees, expense
reimbursements or indemnities then due to the Lenders or
the Letter of Credit Issuer hereunder; third, to pay
interest due in respect of Loans and Unreimbursed Draws
under Letters of Credit; and fourth, to pay, prepay or
provide cash collateral, if then required, in respect of
principal of Loans and Letter of Credit Exposure. The
Agent shall promptly distribute to each Lender at its
primary address set forth on the appropriate signature
page hereof, or at such other address as such Lender may
designate in writing, such funds as it may be entitled to
receive. The foregoing apportionment of payments is
solely for the purpose of determining the obligations of
the Borrowers hereunder and, notwithstanding such
apportionment, any Lender may on its books and records
allocate payments received by it in a manner different
from that contemplated hereby. No such different
allocation shall alter the rights and obligations of the
Borrowers under this Agreement determined in accordance
with the apportionments contemplated by this
Section 2.08(c). To the extent that the Borrowers make a
payment or payments to the Agent or the Agent receives
any payment or other amount, which payment(s) or proceeds
or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or
federal law, common law or equitable cause then, to the
extent of such payment or proceeds received, the
Obligations or part thereof intended to be satisfied
shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by
the Agent.
(d) Interest Upon Events of Default. To
the extent permitted by law, after there shall have
occurred and so long as there is continuing an Event of
Default pursuant to Section 9.01, all principal,
interest, fees, indemnities or any other Obligations of
the Borrowers hereunder, under the Fee Letter or under
any Note or any other Related Document (and including
interest accrued under this subsection 2.08(d)) shall
compound on a daily basis as provided in this subsection
2.08(d) and shall bear interest for each day until paid
(before and after judgment), payable on demand, at a rate
per annum of 3% above the Prime Rate for such day, such
interest rate to change automatically from time to time
effective as of the announced effective date of each
change in the Prime Rate.
(e) Unused Line Fee. From and after the
Closing Date until the Termination Date, the Borrowers
shall jointly and severally pay to the Agent, for the
account of each Lender in accordance with such Lender's
Pro Rata Share, an unused line fee (the "Unused Line
Fee") accruing at the rate of one-quarter of one percent
(0.25%) per annum, on the excess, if any, of the
aggregate Revolving Credit Commitments over the sum of
the Loans and Letter of Credit Exposure outstanding from
time to time. All Unused Line Fees shall be payable
monthly in arrears on the first day of each month
commencing March 1, 1996.
(f) Letter of Credit Fees. From and
after the Closing Date until the Termination Date, the
Borrowers shall jointly and severally pay to the Agent,
for the account of each Lender in accordance with such
Lender's Pro Rata Share, a letter of credit fee (the
"Letter of Credit Fee") accruing at the rate of one
percent (1.00%) per annum on the average daily Undrawn
Letter of Credit Availability of all Letters of Credit.
All Letter of Credit Fees shall be payable monthly in
arrears on the first day of each month commencing
March 1, 1996. The Borrowers shall also jointly and
severally pay the customary letter of credit fees and
charges of CIT and the Letter of Credit Issuer for the
administration, issuance, amendment and processing of any
Letters of Credit issued by the Letter of Credit Issuer.
Promptly following the Agent's receipt of any Letter of
Credit Fees described above, the Agent shall pay to each
Lender its Pro Rata Share of the amount of the Letter of
Credit Fees received by the Agent.
(g) Fees. The Borrowers shall jointly
and severally pay to the Agent the fees set forth in the
Fee Letter at the times set forth in the Fee Letter. All
fees required to be paid to the Agent pursuant to the Fee
Letter, this Agreement and any other Related Document
shall be paid to the Agent for its own account as
required therein. All fees under this Agreement, the Fee
Letter and the other Related Documents are non-refundable
under all circumstances.
2.09. Use of Proceeds . The Borrowers
hereby covenant, represent and warrant that, the proceeds
of the Loans will be used (i) to purchase Inventory, (ii)
to pay all or part of the purchase price or construction
costs in respect of Operating Property or Operating
Assets acquired by a Borrower or any of its Subsidiaries,
(iii) to refinance the existing Indebtedness of the
Borrowers outstanding on the Closing Date pursuant to the
CIT Demand Note, and (iv) for other working capital and
general corporate purposes. The Borrowers hereby
covenant, represent and warrant that the proceeds of the
Letters of Credit will be used (A) to import Inventory in
the ordinary course of each Borrower's business and (B)
for general corporate purposes, including but not limited
to workers compensation insurance and general liability
insurance programs. At any time during which the
limitation with respect to Exempted Debt contained in
Sections 3.6 and 3.8 of the 1992 Indenture remains in
effect, both before and after giving effect to the making
of any Loan or the issuance of any Letter of Credit the
proceeds of which will be used for the purposes set forth
in clause (iv) of the first sentence of this Section 2.04
or clause (B) of the second sentence of this Section
2.04, Exempted Debt will not exceed 10% of Consolidated
Tangible Net Assets.
2.10. Eurodollar Rate Not Determinable;
Illegality or Impropriety.
(a) In the event, and on each occasion,
that on or before the day on which the Eurodollar Rate is
to be determined for a borrowing that is to include
Eurodollar Loans, the Agent has determined in good faith
that, or has been advised by the Bank that, the
Eurodollar Rate cannot be determined for any reason or
the Eurodollar Rate will not adequately and fairly
reflect the cost of maintaining Eurodollar Loans or
Dollar deposits in the principal amount of the applicable
Eurodollar Loans are not available in the interbank
eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of the Bank's
eurodollar loans are then being conducted, the Agent
shall, as soon as practicable thereafter, give written
notice of such determination to the Administrative
Borrower and the other Lenders. In the event of any such
determination, any request by the Administrative Borrower
for a Eurodollar Loan pursuant to Section 2.03 shall,
until the Agent shall have advised the Administrative
Borrower and the other Lenders that the circumstances
giving rise to such notice no longer exist, be deemed to
be a request for a Prime Loan. Each determination by the
Agent hereunder shall be conclusive and binding absent
manifest error.
(b) In the event that it shall be
unlawful or improper for any Lender to make, maintain or
fund any Eurodollar Loan as contemplated by this
Agreement, then such Lender shall forthwith give notice
thereof to the Agent and the Administrative Borrower
describing such illegality or impropriety in reasonable
detail. Effective immediately upon the giving of such
notice, the obligation of such Lender to make Eurodollar
Loans shall be suspended for the duration of such
illegality or impropriety and, if and when such
illegality or impropriety ceases to exist, such
suspension shall cease, and such Lender shall notify the
Agent and the Administrative Borrower. If any such
change shall make it unlawful or improper for any Lender
to maintain any outstanding Eurodollar Loan as a
Eurodollar Loan, such Lender shall, upon the happening of
such event, notify the Agent and the Administrative
Borrower, and the Administrative Borrower shall
immediately, or if permitted by applicable law, rule,
regulation, order, decree, interpretation, request or
directive, no later than the date permitted thereby,
convert each such Eurodollar Loan into a Prime Loan.
2.11. Reserve Requirements; Capital
Adequacy Circumstances.
(a) Notwithstanding any other provision
herein, if any change in applicable law or regulation or
in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force
of law) shall impose any tax on or change the basis of
taxation of payments to the Letter of Credit Issuer or
any Lender or any Affiliate of a Lender of the principal
of or interest on any Eurodollar Loan made by such Lender
or of any amounts payable hereunder (other than taxes
imposed on the overall net income of the Letter of Credit
Issuer or such Lender or such Affiliate by the
jurisdiction in which the Letter of Credit Issuer or such
Lender or such Affiliate has its principal office or by
any political subdivision or taxing authority therein),
or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of,
deposits with or for the account of or credit extended by
the Letter of Credit Issuer or such Lender or Affiliate
of such Lender (except any such reserve requirement that
is reflected in Reserve Requirements) or shall impose on
the Letter of Credit Issuer or such Lender or such
Affiliate any other condition affecting this Agreement or
any Eurodollar Loans made by such Lender or any Letter of
Credit Issuer, and the result of any of the foregoing
shall be to increase the cost to the Letter of Credit
Issuer or such Lender of making or maintaining any
Eurodollar Loan or issuing any Letter of Credit or to
reduce the amount of any sum received or receivable by
the Letter of Credit Issuer or such Lender hereunder
(whether of principal, interest or otherwise) in respect
thereof by an amount deemed by the Letter of Credit
Issuer or such Lender to be material, then the Borrowers
shall jointly and severally pay to the Letter of Credit
Issuer or such Lender such additional amount or amounts
as will compensate the Letter of Credit Issuer or such
Lender for such additional costs incurred or reduction
suffered. Any amount or amounts jointly and severally
payable by the Borrowers to the Letter of Credit Issuer
or any Lender in accordance with the provisions of this
Section 2.11(a) shall be paid by the Borrowers to the
Letter of Credit Issuer or such Lender within ten (10)
days after receipt by the Administrative Borrower from
the Letter of Credit Issuer or such Lender of a statement
setting forth in reasonable detail the amount or amounts
due and the basis for the determination from time to time
of such amount or amounts, which statement shall be
conclusive and binding absent manifest error.
(b) If the Letter of Credit Issuer or any
Lender shall have reasonably determined that the adoption
of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency
charged with the interpretation or administration
thereof, or compliance by the Letter of Credit Issuer or
by such Lender (or any lending office of such Lender) or
by any Affiliate of such Lender, as the case may be, with
any request or directive regarding capital adequacy
(whether or not having the force of law) of any such
authority, central bank or comparable agency, has the
effect of reducing the rate of return on the Letter of
Credit Issuer's or such Lender's capital or on the
capital of such Lender's Affiliate, as the case may be,
as a consequence of the Letter of Credit Issuer's
obligations or such Lender's obligations under this
Agreement and the Related Documents to a level below that
which the Letter of Credit Issuer or such Lender or such
Lender's Affiliate, as the case may be, could have
achieved but for such adoption, change or compliance
(taking into consideration the Letter of Credit Issuer's
or such Lender's policies or such Lender's Affiliate's
policies, as the case may be, with respect to capital
adequacy) by an amount deemed by the Letter of Credit
Issuer or such Lender to be material, then, from time to
time, the Borrowers shall jointly and severally reimburse
the Letter of Credit Issuer or such Lender for such
reduction. Any amount or amounts payable by the
Borrowers to the Letter of Credit Issuer or any Lender in
accordance with the provisions of this Section 2.11(b)
shall be paid by the Borrowers to the Letter of Credit
Issuer or such Lender within ten (10) days after receipt
by the Administrative Borrower from the Letter of Credit
Issuer or such Lender of a statement setting forth (i) in
reasonable detail the amount or amounts due, (ii) the
basis for the determination from time to time of such
amount or amounts and (iii) that such amount(s) have been
determined in good faith, which statement shall be
conclusive and binding absent manifest error.
(c) The Letter of Credit Issuer or any
Lender may demand compensation for any increased costs or
reduction in amounts received or receivable or reduction
in return on capital with respect to any period; provided
that the Letter of Credit Issuer or such Lender shall
provide to the Administrative Borrower a certificate
setting forth in reasonable detail the basis on which
such demand is made. The protection of this Section 2.11
shall be available to the Letter of Credit Issuer or any
Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule,
regulation, guideline or other change or condition which
shall have occurred or been imposed. Any request for
payment by such Letter of Credit Issuer or Lender, as the
case may be, shall be accompanied by a statement that the
Letter of Credit Issuer or such Lender, as the case may
be, is using reasonable efforts to collect comparable
amounts from similarly situated account parties or
borrowers having similar relationships with the Letter of
Credit Issuer or the Lender, as the case may be, under
documentation which gives the Letter of Credit Issuer or
the Lender, as the case may be, substantially the same
rights with respect to such increased costs or reductions
of payments as required in this Section 2.11.
2.12. Indemnity.
The Borrowers shall jointly and severally
indemnify each Lender against any loss or expense that
such Lender actually sustains or incurs as a consequence
of (a) any failure by a Borrower to fulfill on the date
of any borrowing hereunder the applicable conditions set
forth in Article V, (b) any failure by a Borrower to
borrow any Eurodollar Loan hereunder or to convert any
Prime Loan into a Eurodollar Loan after notice of such
borrowing or conversion has been given pursuant to
Section 2.03 or Section 2.14, as the case may be, (c) any
payment, prepayment (mandatory or optional) or conversion
of a Eurodollar Loan required by any provision of this
Agreement or otherwise made on a date other than the last
day of the Interest Period applicable thereto, (d) any
default in payment or prepayment of the principal amount
of any Eurodollar Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due
date thereof, by notice of prepayment or otherwise), or
(e) the occurrence of any Event of Default, including, in
each such case, any loss (including, without limitation,
loss of margin) or reasonable expense sustained or
incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Loan or any
part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall include but not be limited to an
amount equal to the excess, if any, as reasonably
determined by such Lender, of (i) its cost of obtaining
the funds for the Loan being paid, prepaid or converted
or not borrowed or converted (based on the Eurodollar
Rate applicable thereto) for the period from the date of
such payment, prepayment, conversion or failure to borrow
or convert on the last day of the Interest Period for
such Loan (or, in the case of a failure to borrow or
convert, the last day of the Interest Period for such
Loan that would have commenced on the date of such
failure to borrow or convert) over (ii) the amount of
interest (as reasonably determined by such Lender) that
would be realized by such Lender in re-employing the
funds so paid, prepaid or converted or not borrowed or
converted for such Interest Period. A certificate of any
Lender setting forth in reasonable detail any amount or
amounts that such Lender is entitled to receive pursuant
to this Section 2.12 and the basis for the determination
of such amount or amounts shall be delivered to the
Borrowers and shall be conclusive and binding absent
manifest error.
2.13. Sharing of Setoffs.
Each Lender agrees that if it shall, through
the exercise of a right of banker's lien, setoff or
counterclaim against a Borrower or other security or
interest arising from, or in lieu of, such secured claim,
received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in
respect of any Obligation as a result of which the
aggregate unpaid amount of the Obligations owing to it
shall be proportionately less than the aggregate unpaid
amount of the Obligations owing to any other Lender, it
shall simultaneously purchase from such other Lender at
face value a participation in the Obligations owing to
such other Lender, so that the aggregate unpaid amount of
the Obligations and participations in Obligations held by
each Lender shall be in the same proportion to the
aggregate unpaid amount of all Obligations owing to such
Lender prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the aggregate unpaid
amount of all Obligations outstanding prior to such
exercise of banker's lien, setoff or counterclaim or
other event; provided that if any such purchase or
purchases or adjustments shall be made pursuant to this
Section 2.13 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustments
restored without interest. Each Borrower expressly
consents to the foregoing arrangements and agrees that
any Lender holding a participation in an Obligation
deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with
respect to any and all moneys jointly and severally owing
by the Borrowers to such Lender by reason thereof as
fully as if such Lender had made a loan directly to the
Borrowers in the amount of such participation.
2.14. Continuation and Conversion of Loans.
Subject to Section 2.03 and Section 2.10 hereof, the
Administrative Borrower shall have the right, at any
time, (i) on three (3) Business Days' prior irrevocable
written or telecopy notice to the Agent, to continue any
Eurodollar Loan or any portion thereof into a subsequent
Interest Period or, after the Syndication Date, to
convert any Prime Loan or portion thereof into a
Eurodollar Loan, or (ii) on one (1) Business Day's prior
irrevocable written or telecopy notice to the Agent, to
convert any Eurodollar Loan or portion thereof into a
Prime Loan, subject to the following:
(A) in the case of a continuation of a
Eurodollar Loan or portion thereof as such or a
conversion of a Prime Loan or portion thereof into a
Eurodollar Loan, (1) no Event of Default or
Potential Default shall have occurred and be
continuing at the time of such continuation or
conversion and (2) Eurodollar Loans resulting from
this Section 2.14 shall be limited in number as
provided in Section 2.03(d);
(B) in the case of a continuation or
conversion of less than all Loans, the aggregate
principal amount of any Eurodollar Loan continued or
converted shall not be less than $5,000,000 and in
multiples of $1,000,000 if in excess thereof;
(C) each conversion shall be effected by
the Lenders by applying the proceeds of the new Loan
to the Loan (or portion thereof) being converted;
and, in the case of a conversion from a Eurodollar
Loan to a Prime Loan, accrued interest on the
Eurodollar Loan (or portion thereof) being converted
shall be jointly and severally paid by the Borrowers
at the time of conversion;
(D) if the new Loan made in respect of a
conversion shall be a Eurodollar Loan, the first
Interest Period with respect thereto shall commence
on the date of conversion;
(E) no portion of any Loan shall be
continued or converted to a Eurodollar Loan with an
Interest Period ending later than the Termination
Date; and
(F) if any conversion of a Eurodollar
Loan shall be effected on a day other than the last
day of an Interest Period, the Borrowers shall
jointly and severally reimburse each Lender on
demand for any loss incurred or to be incurred by it
in the reemployment of the funds released by such
conversion as provided in Section 2.12 hereof.
In the event that the Administrative Borrower shall not
give notice to continue any Eurodollar Loan into a
subsequent Interest Period, such Loan (unless repaid)
shall automatically become a Prime Loan at the expiration
of the then current Interest Period.
2.15. Taxes. (a) All payments made by the
Borrowers hereunder, under the Notes or under any Loan
Document will be made without setoff, counterclaim,
deduction or other defense. All such payments shall be
made free and clear of and without deduction for any
present or future income, franchise, sales, use, excise,
stamp or other taxes, levies, imposts, deductions,
charges, fees, withholdings, restrictions or conditions
of any nature now or hereafter imposed, levied,
collected, withheld or assessed by any jurisdiction
(whether pursuant to United States Federal, state, local
or foreign law) or by any political subdivision or taxing
authority thereof or therein, and all interest, penalties
or similar liabilities, excluding taxes on the overall
net income of the Lenders or the Letter of Credit Issuer
(such nonexcluded taxes are hereinafter collectively
referred to as the "Taxes"). If the Borrowers shall be
required by law to deduct or to withhold any Taxes from
or in respect of any amount payable hereunder, (i) the
amount so payable shall be increased to the extent
necessary so that after making all required deductions
and withholdings (including Taxes on amounts payable to
the Lenders or the Letter of Credit Issuer pursuant to
this sentence) the Lenders or the Letter of Credit Issuer
receive an amount equal to the sum they would have
received had no such deductions or withholdings been
made, (ii) the Borrowers shall make such deductions or
withholdings, and (iii) the Borrowers shall pay the full
amount deducted or withheld to the relevant taxation
authority in accordance with applicable law. Whenever
any Taxes are payable by the Borrowers, as promptly as
possible thereafter, the Borrowers shall send the
Lenders, the Letter of Credit Issuer and the Agent an
official receipt showing payment. In addition, the
Borrowers agree to pay any present or future taxes,
charges or similar levies which arise from any payment
made hereunder or from the execution, delivery,
performance, recordation or filing of, or otherwise with
respect to, this Agreement, the Notes, the Letters of
Credit or any other Loan Document (hereinafter referred
to as "Other Taxes").
(b) The Borrowers will jointly and
severally indemnify the Lenders and the Letter of Credit
Issuer for the amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this
Section 2.15) paid by any Lender or the Letter of Credit
Issuer and any liability (including penalties, interest
and expenses for nonpayment, late payment or otherwise)
arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid within 30
days from the date on which such Lender or such Letter of
Credit Issuer makes written demand.
(c) Each Lender which is a foreign person
(i.e., a Person other than a United States Person for
United States Federal income tax purposes) hereby agrees
that:
(i) it shall, no later than the
Closing Date (or, in the case of a Lender which
becomes a party hereto pursuant to Section 10.13
hereof after the Closing Date, the date upon which
such Lender becomes a party hereto) deliver to the
Administrative Borrower through the Agent:
(A) two accurate and complete signed
originals of Form 4224, or
(B) two accurate and complete signed
originals of Form 1001,
in each case indicating that such Lender is on the date
of delivery thereof entitled to receive payments of
principal, interest and fees for the account of its
lending installation under this Agreement free from
withholding of United States Federal income tax;
(ii) if at any time such Lender
changes its lending installation or installations or
selects an additional lending installation it shall,
at the same time or reasonably promptly thereafter,
deliver to the Administrative Borrower through the
Agent in replacement for, or in addition to, the
forms previously delivered by it hereunder:
(A) if such changed or additional
lending installation is located in the United States, two
accurate and complete signed originals of Form 4224, or
(B) otherwise, two accurate and
complete signed originals of Form 1001,
in each case indicating that such Lender is on the date
of delivery thereof entitled to receive payments of
principal, interest and fees for the account of such
changed or additional lending installation under this
Agreement free from withholding of United States Federal
income tax; and
(iii) it shall, promptly upon a
Borrower's reasonable request to that effect,
deliver to the Administrative Borrower such other
forms or similar documentation as may be required
from time to time by any applicable law, treaty,
rule or regulation in order to establish such
Lender's tax status for withholding purposes.
(d) If a Borrower fails to perform its
obligations under this Section 2.15, the Borrowers shall
jointly and severally indemnify the Lenders and the
Letter of Credit Issuer for any incremental taxes,
interest or penalties that may become payable as a result
of any such failure.
ARTICLE III
LETTERS OF CREDIT
3.01. Letters of Credit.
(a) General. In order to assist the
Borrowers in establishing or opening documentary and
standby letters of credit, which shall not have
expiration dates that exceed one year from the date of
issuance (the "Letters of Credit") with the Letter of
Credit Issuer, the Borrowers have requested CIT to join
in the applications for such Letters of Credit, and/or
guarantee payment or performance of such Letters of
Credit and any drafts or acceptances thereunder through
the issuance of a Letter of Credit Guaranty, thereby
lending CIT's credit to that of the Borrowers, and CIT
has agreed to do so. These arrangements shall be handled
by CIT subject to the terms and conditions set forth
below. CIT shall have no obligation to arrange for the
issuance of Letters of Credit on or after the Termination
Date or which, when added to the aggregate amount of all
outstanding and contemporaneous Loans and the Letter of
Credit Exposure at such time, would cause the amount of
all Loans and the Letter of Credit Exposure at any time
to exceed the Current Commitment at such time. In
addition, CIT shall not be required to be the issuer of
any Letter of Credit. The Borrowers will be, jointly and
severally, the account party for any application for a
Letter of Credit, which shall be substantially in the
form of Exhibit C hereto or on a computer transmission
system approved by CIT and the Letter of Credit Issuer or
such other written form or computer transmission system
or such other form as may from time to time be approved
by the Letter of Credit Issuer and CIT, and shall be duly
completed in a manner acceptable to CIT, together with
such other certificates, agreements, documents and other
papers and information as the Letter of Credit Issuer or
CIT may request (the "Letter of Credit Application"). In
the event of any conflict between the terms of the Letter
of Credit Application and this Agreement, for purposes of
this Agreement the terms of this Agreement shall control.
(i) The aggregate Letter of Credit
Exposure shall not exceed $80 million. In addition,
changes or modifications of the Letters of Credit by the
Borrowers and/or the Letter of Credit Issuer of the terms
and conditions thereof shall in all respects be subject
to the prior approval of CIT in the exercise of its
reasonable discretion, provided, however, that (x) the
expiry date of all Letters of Credit shall be no later
than 15 days prior to the Termination Date unless on or
prior to 15 days prior to the Termination Date such
Letters of Credit shall be cash collateralized in an
amount equal to at least 105% of the Stated Amount of
such Letters of Credit, (y) the Letters of Credit and all
documentation in connection therewith shall be in form
and substance satisfactory to CIT and the Letter of
Credit Issuer, and (z) Letters of Credit shall not be
issued for the benefit of domestic trade creditors in
connection with the purchase of Inventory by a Borrower.
(ii) The Agent shall have the right,
without notice to the Borrowers, to charge the Loan
Account with the amount of any and all indebtedness,
liability or obligation of any kind (including
indemnification for breakage costs, capital adequacy and
reserve requirement charges) incurred by the Agent, CIT
or the Lenders under the Letter of Credit Guaranty at the
earlier of (x) payment by CIT or the Lenders under the
Letter of Credit Guaranty, or (y) with respect to any
Letter of Credit which is not cash collateralized as
provided in this Agreement, the occurrence of an Event of
Default. Any amount charged to the Loan Account shall be
deemed a Loan hereunder made by the Lenders to the
Borrowers, funded by the Agent on behalf of the Lenders
and subject to subsections 2.03(e) and (f). Any charges,
fees, commissions, costs and expenses charged to CIT for
the account of the Borrowers by the Letter of Credit
Issuer in connection with or arising out of Letters of
Credit issued pursuant to this Agreement or out of
transactions relating thereto will be charged to the Loan
Account in full when charged to or paid by CIT and any
such charges by CIT to the Loan Account shall be
conclusive and binding on the Borrowers and the Lenders
absent manifest error. Each of the Lenders and the
Borrowers agree that the Agent shall have the right to
make such charges regardless of whether any Event of
Default or Potential Default shall have occurred and be
continuing or whether any of the conditions precedent in
Section 5.02 have been satisfied.
(iii) The Borrowers agree to
unconditionally and jointly and severally indemnify the
Agent, CIT and each Lender and to hold the Agent, CIT and
each Lender harmless from any and all loss, claim or
liability incurred by the Agent, CIT or any such Lender
arising from any transactions or occurrences relating to
Letters of Credit established or opened for the
Borrowers' account and any drafts or acceptances
thereunder, and all Obligations thereunder, including any
such loss or claim due to any action taken by the Letter
of Credit Issuer, other than for any such loss, claim or
liability arising out of the gross negligence or willful
misconduct of the Agent, CIT or any Lender as determined
by a final judgment of a court of competent jurisdiction.
The Borrowers further agree to jointly and severally hold
the Agent, CIT and each Lender harmless from any errors
or omission, negligence or misconduct by the Letter of
Credit Issuer. The Borrowers' unconditional, joint and
several obligation to the Agent, CIT and each Lender
hereunder shall not be modified or diminished for any
reason or in any manner whatsoever, other than as a
result of the Agent's, CIT's or such Lender's gross
negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. The
Borrowers agree that any charges incurred by CIT for the
Borrowers' account by the Letter of Credit Issuer shall
be conclusive and binding on the Borrowers absent
manifest error and may be charged to the Loan Account.
(iv) None of the Agent, CIT, the
Letter of Credit Issuer or any of the Lenders shall be
responsible for the existence, character, quality,
quantity, condition, packing, value or delivery of the
goods purporting to be represented by any documents; any
difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the
goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any
endorsements thereof even if such documents should in
fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place,
manner or order in which shipment is made; partial or
incomplete shipments, or failure or omission to ship any
or all of the goods referred to in the Letters of Credit
or documents; any deviation from instructions; delay,
default, or fraud by the shipper and/or anyone else in
connection with any such goods or the shipping thereof;
or any breach of contract between the shipper or vendors
and the Borrowers. Furthermore, without being limited by
the foregoing, none of the Agent, CIT, the Letter of
Credit Issuer or any of the Lenders shall be responsible
for any act or omission with respect to or in connection
with any goods covered by Letters of Credit.
(v) The Borrowers jointly and
severally agree that any action taken by the Agent, CIT,
the Letter of Credit Issuer or any Lender, if taken in
good faith, under or in connection with the Letters of
Credit, the guarantees, the drafts or acceptances, or the
goods purported to be represented by any documents, shall
be binding on the Borrowers (with respect to the Letter
of Credit Issuer, the Agent, CIT and the Lenders) and
shall not put the Agent, CIT or the Lenders in any
resulting liability to the Borrowers. In furtherance
thereof, CIT shall have the full right and authority to
clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and
all steamship or airways guaranties (and applications
therefore), indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or
documents; and to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances;
all in CIT's sole name, and the Letter of Credit Issuer
shall be entitled to comply with and honor any and all
such documents or instruments executed by or received
solely from CIT, all without any notice to or any consent
from the Borrowers.
(vi) Without CIT's express consent in
writing or through a computer transmission, the Borrowers
jointly and severally agree: (x) not to execute any
applications for steamship or airway guaranties,
indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances or documents; or
to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letters
of Credit, drafts or acceptances; and (y) after the
occurrence of an Event of Default which is not cured
within any applicable grace period, if any, or waived by
the Agent, not to (A) clear and resolve any questions of
non-compliance of documents, or (B) give any instructions
as to acceptances or rejection of any documents or goods.
(vii) The Borrowers jointly and
severally agree that any necessary and material import,
export or other license or certificates for the import or
handling of Inventory required to be obtained by either
Borrower will have been promptly procured; all foreign
and domestic governmental laws and regulations applicable
to either Borrower in regard to the shipment and
importation of Inventory or the financing thereof will
have been timely and fully complied with, and any
certificates in that regard that CIT may at any time
reasonably request will be promptly furnished. In this
connection, the Borrowers represent and warrant that all
shipments made under any such Letters of Credit are in
compliance with the laws and regulations of the countries
in which the shipments originate and terminate except
where all instances of such non-compliance taken together
will not have a Material Adverse Effect. As between the
Borrowers, on the one hand, and the Agent, CIT, the
Lenders and the Letter of Credit Issuer, on the other
hand, the Borrowers jointly and severally assume all
risk, liability and responsibility for, and agree to pay
and discharge, all present and future local, state,
federal or foreign taxes, duties, or levies. As between
the Borrowers, on the one hand, and the Agent, CIT, the
Lenders and the Letter of Credit Issuer, on the other
hand, any embargo, restriction, laws, customs or
regulations of any country, state, city, or other
political subdivision, where such Inventory is or may be
located, or wherein payments are to be made, or wherein
drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Borrowers' joint and several risk,
liability and responsibility.
(viii) Upon any payments made to
the Letter of Credit Issuer under the Letter of Credit
Guaranty, CIT or the Lenders, as the case may be, shall,
without prejudice to its rights under this Agreement
(including that such unreimbursed amounts shall
constitute Loans hereunder), acquire by subrogation, any
rights, remedies, duties or obligations granted or
undertaken by the Borrowers to the Letter of Credit
Issuer in any Letter of Credit Application, any standing
agreement relating to Letters of Credit or otherwise, all
of which shall be deemed to have been granted to the
Agent and apply in all respects to the Agent and shall be
in addition to any rights, remedies, duties or
obligations contained herein.
(ix) In the event that the Borrowers
are required to provide cash collateral for any Letter of
Credit, the Borrowers shall deposit such cash collateral
in the Letter of Credit Cash Collateral Account, which
cash collateral shall be held in the Letter of Credit
Cash Collateral Account until either all Obligations have
been paid in full in cash or cash collateral is no longer
required under the terms of this Agreement; provided,
that, when the Borrowers elect, and are not required to
provide cash collateral for a Letter of Credit, the cash
collateral for such Letter of Credit shall be returned to
the Borrowers if at such time an Event of Default or
Potential Default has not occurred and is not continuing.
(b) Request for Issuance. The
Administrative Borrower may from time to time, upon
notice (an "L/C Notice") not later than 12:00 noon, New
York City time, at least three Business Days in advance,
request CIT to assist a Borrower in establishing or
opening a Letter of Credit by delivering to the Agent,
with a copy to the Letter of Credit Issuer, a Letter of
Credit Application, together with any necessary related
documents. CIT shall not provide support, pursuant to
the Letter of Credit Guaranty, if the Agent shall have
received written notice from the Majority Lenders on the
Business Day immediately preceding the proposed issuance
day for such Letter of Credit that one or more of the
conditions precedent in Section 5.02 will not have been
satisfied on such date, and neither CIT nor the Agent
shall otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in
Section 5.02 have been satisfied.
3.02. Participations.
(a) Purchase of Participations.
Immediately upon the issuance by the Letter of Credit
Issuer of any Letter of Credit in accordance with the
procedures set forth in Section 3.01, each Lender (other
than CIT) shall be deemed to have irrevocably and
unconditionally purchased and received from CIT, without
recourse or warranty, an undivided interest and
participation, to the extent of such Lender's Pro Rata
Share, in all obligations of CIT with respect to such
Letter of Credit (including, without limitation, all
Undrawn Letter of Credit Availability and Reimbursement
Obligations of the Borrowers with respect thereto
pursuant to the Letter of Credit Guaranty or otherwise).
(b) Sharing of Letter of Credit Payments.
In the event that CIT makes any payment in respect of the
Letter of Credit Guaranty and the Borrowers shall not
have repaid such amount to the Agent for the account of
CIT, the Agent shall charge the Loan Account in the
amount of the Reimbursement Obligation, in accordance
with Section 3.01(a)(ii).
(c) Obligations Irrevocable. The
obligations of a Lender to make payments to the Agent for
the account of the Agent or CIT with respect to a Letter
of Credit shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made
in accordance with, but not subject to, the terms and
conditions of this Agreement under all circumstances,
including, without limitation, any of the following
circumstances:
(i) any lack of validity or
enforceability of this Agreement or any of the other
Related Documents;
(ii) the existence of any claim,
setoff, defense or other right which any Borrower
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), the Agent, Letter of
Credit Issuer, any Lender, 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 any Borrower or any
other party and the beneficiary named in any Letter
of Credit);
(iii) 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;
(iv) the surrender or impairment of
any security for the performance or observance of
any of the terms of any of the Related Documents;
(v) any failure by the Agent to
provide any notices required pursuant to this
Agreement relating to Letters of Credit; or
(vi) the occurrence of any Event of
Default or Potential Default.
ARTICLE IV
BORROWING BASE
4.01. Condition of Lending and Assisting in
Establishing or Opening Letters of Credit. CIT and the
other Lenders shall have no obligation to make a Loan or
assist in establishing or opening a Letter of Credit to
the extent that the aggregate unpaid principal amount of
the Loans plus the Letter of Credit Exposure exceeds, or
after giving effect to a requested Credit Extension would
exceed, the Current Commitment at such time.
4.02. Mandatory Prepayment. Concurrently
with the delivery of any Borrowing Base Certificate, the
Administrative Borrower shall give notice to the Agent of
any mandatory prepayment pursuant to Section 2.04(b)(i),
which notice shall specify a prepayment date no later
than the earlier of the date on which such Borrowing Base
Certificate is given and the date on which such Borrowing
Base Certificate is required to be provided to the
Lenders.
4.03. Rights and Obligations Unconditional.
Without limitation of any other provision of this
Agreement, the rights of the Agent, CIT and the Lenders
and the obligations of the Borrowers under this Article
IV are absolute, unconditional and joint and several and
the Agent, CIT and the Lenders shall not be deemed to
have waived the condition set forth in Section 4.01
hereof or their right to payment in accordance with
Section 4.02 hereof in any circumstance whatever,
including but not limited to circumstances wherein, the
Agent or the Lenders (knowingly or otherwise) make an
advance hereunder in excess of the Borrowing Base.
4.04 Borrowing Base Certificate.
(a) By 12:00 noon, New York City time
five (5) Business Days after the Saturday of each week
(and on any other date on which the Agent reasonably
requests), the Administrative Borrower shall furnish to
the Agent a certificate ("Borrowing Base Certificate")
substantially in the form attached hereto as Exhibit D,
certified as true and correct by a Designated Financial
Officer, setting forth the Borrowing Base and the other
information required therein as of each Borrower's close
of business on the Saturday of the preceding week,
together with such other information with respect to the
Inventory of the Borrowers as the Agent may reasonably
request.
(b) In the event of any dispute about the
eligibility of any asset for inclusion in the Borrowing
Base or the valuation thereof, the Agent's good faith
judgment shall control.
(c) The Borrowing Base set forth in a
Borrowing Base Certificate shall be effective from and
including the date such Borrowing Base Certificate is
duly received by the Agent to but not including the date
on which a subsequent Borrowing Base Certificate is duly
received by the Agent, unless the Agent disputes the
eligibility of any asset for inclusion in the Borrowing
Base or the valuation thereof by notice of such dispute
to the Borrowers, in which case the value of such asset
shall, at the discretion of the Borrowers, either not be
included in the Borrowing Base or be included in the
Borrowing Base with a value reasonably acceptable to the
Agent.
(d) Each Borrowing Base Certificate shall
be accompanied by backup schedules showing the derivation
thereof and containing such detail and such other and
further information as the Agent may reasonably request
from time to time.
4.05. General Provisions. Notwithstanding
anything to the contrary in this Article IV, in no event
shall any single element of value or asset be counted
twice in determining the Borrowing Base.
ARTICLE V
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
5.01. Conditions Precedent to
Effectiveness. This Agreement shall become effective as
of the Business Day when each of the following conditions
precedent shall have been satisfied and the obligation of
any Lender to make the initial Loan hereunder or the
obligation of CIT or any Lender to assist a Borrower in
obtaining the issuance of the initial Letter of Credit
hereunder shall be subject to the satisfaction of the
following conditions precedent:
(a) Payment of Fees, Etc. The Borrowers
shall have paid all fees, costs, expenses and taxes then
payable by the Borrowers including, without limitation,
those due and payable pursuant to Sections 2.08 and 10.06
hereof. The Borrowers shall have paid to counsel to the
Agent all fees and other client charges due to such
counsel on the Closing Date.
(b) Representations and Warranties; No
Event of Default. The representations and warranties
contained in Article VI of this Agreement and in each
other Loan Document and certificate or other writing
delivered to the Agent, the Lenders or the Letter of
Credit Issuer pursuant hereto or thereto or prior to the
Closing Date shall be correct in all material respects on
and as of the Closing Date as though made on and as of
such date; and no Potential Default or Event of Default
shall have occurred and be continuing on the Closing Date
or would result from this Agreement becoming effective in
accordance with its terms.
(c) Legality. The making of the initial
Loans and the issuance of the initial Letter of Credit
shall not contravene any law, rule or regulation
applicable to CIT, the Lenders or the Letter of Credit
Issuer.
(d) Delivery of Documents. The Agent
shall have received on or before the Closing Date the
following, each in form and substance satisfactory to the
Agent and, unless indicated otherwise, dated the Closing
Date:
(i) a Note jointly and severally
payable to the order of each Lender, duly executed
by the Borrowers;
(ii) the Security Agreements, duly
executed by each Borrower;
(iii) appropriate financing
statements on Form UCC-1, duly executed by each
Borrower to be duly filed in such office or offices
as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interests
purported to be created by the Security Documents;
(iv) certified copies of requests for
copies or information on Form UCC-11, listing all
effective financing statements which name as debtor
each Borrower, tax liens and judgment liens and
which are filed in the offices referred to in
paragraph (iii) above, together with copies of such
financing statements, none of which, except as
otherwise agreed to in writing by the Agent, shall
cover any of the Collateral;
(v) a copy of the resolutions
adopted by the Board of Directors of each Borrower,
certified as of the Closing Date by authorized
officers thereof, authorizing (A) in the case of
each such Borrower, the borrowings hereunder and the
transactions contemplated by the Loan Documents to
which each such Borrower is or will be a party, and
(B) the execution, delivery and performance by each
such Borrower of each Loan Document and the
execution and delivery of the other documents to be
delivered by such Borrower in connection therewith;
(vi) a certificate of an authorized
officer of each Borrower, certifying the names and
true signatures of the officers of such Borrower
authorized to sign each Loan Document to which such
Borrower is or will be a party and the other
documents to be executed and delivered by such
Borrower in connection therewith, together with
evidence of the incumbency of such authorized
officers;
(vii) a certificate, dated as of
a date not more than 10 Business Days prior to the
Closing Date, of the appropriate official(s) of the
states of incorporation and each state of foreign
qualification of each Borrower, certifying as to the
subsistence in good standing of, and the payment of
taxes by, such Person in such states and listing all
charter documents of such Person on file with such
official(s), together with confirmation by telephone
or telegram (where available) on the Closing Date
from such official(s) as to such matters;
(viii) a copy of the charter of
each Borrower certified as of a date not more than
10 days prior to the Closing Date by the appropriate
official(s) of the state of incorporation of each
such Borrower and as of the Closing Date by an
authorized officer of each such Borrower;
(ix) a copy of the by-laws of each
Borrower, certified as of the Closing Date by an
authorized officer of each such Person;
(x) an opinion of Skadden, Arps,
Slate, Meagher & Flom, New York, Delaware, Illinois,
Washington, D.C. and Massachusetts counsel to the
Borrowers, and opinions from special Virginia,
Maryland, Pennsylvania, Ohio, Michigan and Missouri
counsel to the Borrowers, each in form and substance
satisfactory to the Agent and as to such other
matters as the Agent may reasonably request;
(xi) a certificate of the Designated
Financial Officer of each Borrower, certifying as to
the matters set forth in subsection (b) of this
Section 5.01;
(xii) a copy of the consolidated
financial statements and consolidated projections of
the Parent and its Subsidiaries referred to in
Section 6.07 hereof together with a certificate of
the Designated Financial Officer of the Parent
setting forth all pending and, to the knowledge of
each Borrower, threatened litigation or claims and
all guarantees and other contingent liabilities of
each Borrower and its Subsidiaries in an amount in
excess of $300,000;
(xiii) a Borrowing Base
Certificate current as of the close of business on a
date not earlier than February 3, 1996, certified by
the Designated Financial Officer of the
Administrative Borrower;
(xiv) a certificate of an
authorized officer of the Administrative Borrower
certifying the names and true signatures of those
officers of the Administrative Borrower that are
authorized to provide Notices of Borrowing and all
other notices under this Agreement and the Loan
Documents;
(xv) a copy of each Material Contract
certified as a true and correct copy thereof by the
Designated Financial Officer of the Administrative
Borrower;
(xvi) a copy of the GECC
Agreement, the Monogram Agreement and each other
credit card servicer agreement to which a Borrower
is a party on the Closing Date, certified as true
and correct copies thereof by the Designated
Financial Officer of the Administrative Borrower;
(xvii) copies, certified as true
and correct by a Designated Financial Officer of the
Administrative Borrower, of any collective
bargaining agreements or any other similar agreement
or arrangements covering the employees of such
Borrower or any of its Subsidiaries (collectively,
the "Collective Bargaining Agreements");
(xviii) a certificate of insurance
evidencing insurance on the property of each
Borrower as is required by Section 7.07 of this
Agreement, naming the Agent as additional insured
and loss payee, using a long form loss payee
endorsement, for all insurance maintenance by each
Borrower;
(xix) the Licensor Waiver
Agreement, duly executed by Hechinger Royalty
Company and the Agent;
(xx) the Contribution Agreement, duly
executed by each of Stores and East Coast;
(xxi) the Dividend Letter, duly
executed by the Parent;
(xxii) the Asset Sale Letter, duly
executed by the Designated Financial Officer of the
Administrative Borrower;
(xxiii) the Financial Statement
Letter, duly executed by the Designated Financial
Officer at the Administrative Borrower;
(xxiv) the Assignment and
Assumption, duly executed by each of Stores and East
Coast; and
(xxv) such other agreements,
instruments, approvals, opinions and other documents
as the Agent may reasonably request.
(e) Proceedings; Receipt of Documents.
All proceedings in connection with the transactions
contemplated by this Agreement and the Related Documents
and all documents incidental thereto, shall be
satisfactory to the Agent and its special counsel, and
the Agent and such special counsel shall have received
all such information and such counterpart originals or
certified or other copies of such documents, in form and
substance reasonably satisfactory to the Agent, as the
Agent or such special counsel may reasonably request.
(f) Cash Management System. The cash
management system of the Borrowers shall be satisfactory
to the Agent.
(g) Audit. The Agent shall have
completed and shall be satisfied (in its sole discretion)
with the results of an audit of the Inventory, assets and
liabilities and books and records of the Borrowers and
the Borrowers shall have paid all fees and expenses
payable in connection with such audit.
(h) Appraisal. The Agent shall have
received a report on the Inventory of each Borrower,
prepared by Alco Capital Group, Inc., which report shall
be in form and substance satisfactory to the Agent.
(i) Lien Priority. The Lien in favor of
the Agent pursuant to the Related Documents shall be a
valid and perfected first priority Lien on the
Collateral, which shall be subject to no other Liens
except for Permitted Liens.
(j) Compliance. The Agent shall have
received evidence reasonably satisfactory to the Agent of
each Borrower's compliance with all Environmental Laws,
ERISA, tax and labor matters.
(k) Legal Restraints/Litigation. On the
Closing Date, there shall be no (1) litigation,
investigation or proceeding (judicial or administrative)
pending or, to the knowledge of each Borrower or
threatened, against a Borrower or its Subsidiaries, or
their assets, by any agency, division or department of
any county, city, state or federal government arising out
of the transactions contemplated by the Loan Documents,
(2) injunction, writ or restraining order restraining or
prohibiting the transactions contemplated pursuant to the
transactions contemplated by the Loan Documents, or
(3) suit, action, investigation or proceeding (judicial
or administrative) pending or, to the knowledge of a
Borrower, threatened against such Borrower or its
Subsidiaries, or their assets, which, could have a
Material Adverse Effect.
(l) Existing Loans. The loans made by
CIT to the Borrowers pursuant to the CIT Demand Note and
outstanding immediately prior to the Closing Date shall
be repaid in full (which may be with the proceeds of the
Loans).
5.02. Conditions Precedent to Loans and
Letters of Credit. In addition to the requirements of
Section 5.01, the obligation of each Lender to make any
Loan and the obligation of CIT or any Lender to assist
the Administrative Borrower in obtaining the issuance of
any Letter of Credit is subject to the fulfillment, in a
manner satisfactory to the Agent, of each of the
following conditions precedent:
(a) Payment of Fees, Etc. The Borrowers
shall have paid all fees, costs, expenses and taxes then
payable by the Borrowers pursuant to Sections 2.08 and
10.06 hereof.
(b) Representations and Warranties; No
Event of Default. The following statements shall be
true, and the submission by the Administrative Borrower
to the Agent of a Notice of Borrowing with respect to a
Loan and a Borrower's acceptance of the proceeds of such
Loan, or the submission by the Administrative Borrower to
the Agent and the Letter of Credit Issuer of an L/C
Notice with respect to a Letter of Credit and the
issuance of such Letter of Credit shall be deemed to be
a representation and warranty by each Borrower on the
date of such Loan and the date of the issuance of such
Letter of Credit that, (i) the representations and
warranties contained in Article VI of this Agreement and
in each other Loan Document and certificate or other
writing delivered to the Agent, the Lenders and the
Letter of Credit Issuer pursuant hereto on or prior to
the date of such Loan or Letter of Credit are correct in
all material respects on and as of such date as though
made on and as of such date (except for representations
and warranties which relate to a specific date) and;
(ii) no Potential Default or Event of Default has
occurred and is continuing or would result from the
making of the Loan to be made on such date or the
issuance of the Letter of Credit to be issued on such
date.
(c) Legality. The making of such Loan or
the issuance of such Letter of Credit shall not
contravene any law, rule or regulation applicable to CIT,
the Lenders or the Letter of Credit Issuer.
(d) Borrowing Notice. The Agent shall
have received a Notice of Borrowing pursuant to
Section 2.03 hereof no later than 12:00 noon (New York
City time) three Business Days prior to the date of the
proposed borrowing with respect to a Eurodollar Loan or
on the date of a proposed borrowing of a Prime Loan or an
L/C Notice and a Letter of Credit Application pursuant to
Section 3.01 hereof not later than 12:00 noon (New York
City time) three Business Days prior to the proposed date
of issuance of a Letter of Credit.
(e) Delivery of Documents. The Agent
shall have received such other agreements, instruments,
approvals and other documents, each in form and substance
satisfactory to the Agent, as the Agent may reasonably
request.
(f) Proceedings; Receipt of Documents.
All proceedings in connection with the making of such
Loan or the issuance of such Letter of Credit and the
other transactions contemplated by this Agreement, and
all documents incidental thereto, shall be satisfactory
to the Agent and its special counsel, and the Agent and
such special counsel shall have received all such
information and such counterpart originals or certified
or other copies of such document, in form and substance
satisfactory to the Agent, as the Agent or such special
counsel may reasonably request.
(g) Commitment. The aggregate unpaid
principal amount of the Loans and the Letter of Credit
Exposure shall not exceed, and after giving effect to the
requested Credit Extension will not exceed, the Current
Commitment.
(h) Delivery of Certificate Regarding
Compliance with Exempted Debt to Consolidated Tangible
Net Asset Test. At any time during which the limitation
with respect to Exempted Debt contained in Sections 3.6
and 3.8 of the 1992 Indenture remains in effect, in
connection with Loans and Letters of Credit, the proceeds
of which will not be used to purchase or import
Inventory, to purchase Operating Property or Operating
Assets or to refinance existing Indebtedness owing to CIT
pursuant to the CIT Demand Note, the Administrative
Borrower shall deliver to the Agent a certificate of its
Designated Financial Officer (which may be contained in
the Notice of Borrowing or Letter of Credit Application,
as applicable) setting forth the calculations
establishing that, both before and after the making of
such Loan or the issuance of such Letter of Credit,
Exempted Debt is not greater than 10% of Consolidated
Tangible Net Assets.
Any oral or written request by the Administrative
Borrower for any Credit Extension hereunder shall
constitute a representation and warranty by the Borrowers
that the conditions set forth in this Section 5.02 have
been satisfied as of the date of such request. Failure
of the Agent to receive notice from the Administrative
Borrower to the contrary before such Credit Extension is
made shall constitute a further representation and
warranty by the Borrowers that the conditions set forth
in this Section 5.02 have been satisfied as of the date
of such Credit Extension.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to
the Agent and the Lenders as follows:
6.01. Organization, Good Standing, Etc.
Each Borrower and its Subsidiaries (i) is a corporation
duly organized, validly existing and in good standing
under the laws of the state of its organization, (ii) has
all requisite power and authority to conduct its business
as now conducted and as presently contemplated and (in
the case of each Borrower) to make the borrowings
hereunder and to consummate the transactions contemplated
hereby, and (iii) is duly qualified to do business and is
in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in
which the transaction of its business makes such
qualification necessary, except, with respect to this
clause (iii), where all instances of such failure to
qualify taken together will not have a Material Adverse
Effect.
6.02. Authorization, Etc.. The execution,
delivery and performance by each Borrower of each Loan
Document to which it is a party, (i) have been duly
authorized by all necessary corporate action, (ii) do not
and will not contravene its charter or by-laws, any other
applicable law or any contractual restriction binding on
or otherwise affecting it or any of its properties or
result in a default under any agreement or instrument to
which a Borrower is a party or by which such Borrower or
its properties may be subject, (iii) do not and will not
result in or require the creation of any Lien (other than
pursuant to any such Loan Document) upon or with respect
to any of its properties, and (iv) do not and will not
result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to its operations or
any of its properties.
6.03. Governmental Approvals. No
authorization, consent, approval, license, exemption or
other action by, and no registration, qualification,
designation, declaration or filing with, any Governmental
Authority is or will be necessary in connection with the
execution and delivery by each Borrower of each Loan
Document to which it is a party, consummation of the
transactions therein contemplated, performance of or
compliance with the terms and conditions thereof or to
ensure the legality, validity, enforceability and
admissibility in evidence thereof, except for the filings
and recordings in respect of the Liens created pursuant
to the Security Documents.
6.04. Enforceability of Loan Documents.
This Agreement is, and each other Loan Document to which
a Borrower is or will be a party, when delivered
hereunder, will be, a legal, valid and binding obligation
of such Borrower, enforceable against such Borrower in
accordance with its terms.
6.05. Subsidiaries. Schedule 6.05 hereto
is a complete and correct description of the name,
jurisdiction of incorporation and ownership of the
outstanding capital stock of each Subsidiary of each
Borrower in existence on the Closing Date. All shares of
such stock owned by each Borrower or one or more of its
Subsidiaries, as indicated in such Schedule, are owned
free and clear of all Liens, except for the Liens in
favor of the Agent that secure payment of the
Obligations. There are no options, warrants or other
rights to acquire shares of capital stock of any
Subsidiary of a Borrower.
6.06. Litigation. Except as set forth on
Schedule 6.06 hereto, there is no pending or, to the
knowledge of each Borrower, threatened action, suit or
proceeding requesting damages in an amount in excess of
$300,000 affecting a Borrower or any of its Subsidiaries
before any court or other Governmental Authority or any
arbitrator in existence on the Closing Date. There is no
pending or, to the knowledge of each Borrower, threatened
action, suit or proceeding affecting a Borrower or any of
its Subsidiaries before any court or other Governmental
Authority or any arbitrator which may have a Material
Adverse Effect.
6.07. Financial Condition.
(a) Historical Statements. The Borrowers
have heretofore furnished to the Lenders a balance sheet
of the Parent and its Consolidated Subsidiaries for the
fiscal year ended January 28, 1995 and the related
statements of operations and cash flows for the fiscal
year then ended, as examined and reported on by Ernst &
Young, independent certified public accountants, and a
balance sheet and related statements of operations and
cash flows of the Parent and its Consolidated
Subsidiaries for and as of the end of the nine-month
period ended October 29, 1995, as certified by a
Designated Financial Officer of the Parent. Such
financial statements (including the notes thereto)
present fairly, in all material respects, the financial
condition of the Parent and its Consolidated Subsidiaries
as of the end of such fiscal year and such nine month
period and the results of its operations and the cash
flows for the fiscal year and such nine month period then
ended, all in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal year except
as disclosed therein. Except as disclosed in the
Financial Statement Letter or in the Schedules hereto,
the Parent and its Consolidated Subsidiaries do not have
any material contingent liabilities (including
liabilities for taxes), unusual forward or long term
commitments or unrealized or anticipated losses from
unfavorable commitments.
(b) The Borrowers have heretofore
furnished to the Lenders month-to-month projections of
the Parent and its Consolidated Subsidiaries for the
twelve months ending January 31, 1997 and such
projections have been prepared in accordance with the
standard set forth in the second sentence of Section 6.17
hereof.
6.08 Compliance with Law, Etc. Each Borrower
and its Subsidiaries is not in violation of its charter
or by-laws, any law (including but not limited to
violations pertaining to the conduct of its business or
the use, maintenance or operation of the real and
personal properties owned or possessed by it) or any term
of any material agreement or instrument binding on or
otherwise affecting it or any of its properties, except,
in the case of violations of law, where all such
violations taken together will not have a Material
Adverse Effect.
6.09. ERISA. (i) Each Plan is in
substantial compliance with the applicable provisions of
ERISA and the Code, (ii) no Termination Event has
occurred nor is reasonably expected to occur with respect
to any Benefit Plan, (iii) the most recent annual report
(Form 5500 Series) with respect to each Plan, including
Schedule B (Actuarial Information) thereto, copies of
which have been filed with the Internal Revenue Service,
is complete and correct in all material respects and
fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no
material adverse change in such funding status, (iv) no
Benefit Plan had an accumulated or waived funding
deficiency or permitted decreases which would create a
deficiency in its funding standard account within the
meaning of Section 412 of the Code at any time during the
previous 60 months, and (v) no Lien imposed under the
Code or ERISA exists or is likely to arise on account of
any Benefit Plan within the meaning of Section 412 of the
Code. Neither Borrower nor any of their respective ERISA
Affiliates has incurred any withdrawal liability under
ERISA with respect to any Multiemployer Plan, and neither
Borrower is aware of any facts indicating that such
Borrower or any of its ERISA Affiliates may in the future
incur any such withdrawal liability. Except as required
by Section 4980B of the Code or as disclosed on Schedule
6.09, the Borrowers do not maintain a welfare plan (as
defined in Section 3(1) of ERISA) which provides benefits
or coverage after a participant's termination of
employment. Neither Borrower nor any of their respective
ERISA Affiliates have incurred any liability under the
Worker Adjustment and Retraining Notification Act. All
Plans in existence on the Closing Date are set forth on
Schedule 6.09 hereto.
6.10. Taxes, Etc. All tax returns required
to be filed by the Borrowers and any of their respective
Subsidiaries have been properly prepared, executed and
filed. All taxes, assessments, fees and other
governmental charges upon the Borrowers and their
respective Subsidiaries or upon any of their respective
properties, income, sales or franchises which are shown
thereon as due and payable have been paid, unless payment
thereof is being contested in good faith by appropriate
proceedings which stay the imposition of any penalty,
fine or Lien resulting from the non-payment thereof and
with respect to which, adequate reserves therefor are
being maintained. The reserves and provisions for taxes,
if any, on the books of the Borrowers are adequate for
all open years and for its current fiscal period. Except
as set forth on Schedule 6.10, the Borrowers do not know
of any proposed additional assessment or basis for any
material assessment for additional taxes (whether or not
reserved against). The federal income tax liabilities of
the Borrowers and their respective Subsidiaries have been
finally determined by the Internal Revenue Service, or
the time for audit has expired, for all fiscal periods
ending on or prior to February 2, 1991 and all such
liabilities (including all deficiencies assessed
following audit) have been satisfied.
6.11. Regulation G, T, U or X. The
Borrowers are not and will not be engaged in the business
of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation
G, T, U or X issued by the Board), and no proceeds of any
Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
6.12. Nature of Business. Except as
otherwise permitted by Section 8.05 hereof, neither
Borrower nor any of their respective Subsidiaries is
engaged in any business other than the operation of
department stores selling a variety of hard goods and the
support of each Borrower's business and operations as
presently conducted.
6.13. Adverse Agreements, Etc. Neither
Borrower nor any of their respective Subsidiaries is a
party to any agreement or instrument, or subject to any
charter or other corporate restriction or any judgment,
order, regulation, ruling or other requirement of a court
or other Governmental Authority or regulatory body, which
has a Material Adverse Effect, or, to the best knowledge
of either Borrower, is reasonably likely to have a
Material Adverse Effect.
6.14. Holding Company and Investment
Company Acts. Neither Borrower nor any of their
respective Subsidiaries is a (i) a "holding company" or a
"subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of
1935, as amended, or (ii) an "investment company" or an
"affiliated person" or "promoter" of, or "principal
underwriter" of or for, an "investment company", as such
terms are defined in the Investment Company Act of 1940,
as amended.
6.15. Permits, Etc. The Borrowers and
their respective Subsidiaries have all material permits,
licenses, authorizations and approvals required for them
lawfully to own and operate their business.
6.16. Priority; Title. Except for
Permitted Liens, the Liens granted under the Security
Documents constitute and shall at all times constitute
perfected, first priority Liens on the Collateral which
are subject to no other Liens other than Permitted Liens,
and each Borrower is the sole and absolute owner of the
Collateral with full right to pledge, sell, consign,
transfer and create Liens therein. No Person has any
right of first refusal, option or other preferential
right to purchase any Collateral. The Borrowers jointly
and severally will at their expense forever warrant and,
at the Agent's request, defend the same from any and all
claims and demands of any other Person other than the
Permitted Liens; and neither Borrower will grant, create
or permit to exist, any Lien upon the Collateral, or any
proceeds thereof, in favor or any other Person other than
Permitted Liens. The Borrowers and their respective
Subsidiaries have good and marketable title to all of
their properties and assets, free and clear of all Liens
except Permitted Liens,
6.17. Full Disclosure. The representations
or warranties made by the Borrowers under this Agreement
and the other Loan Documents, taken as a whole, are not
false or misleading in any material respect and the Loan
Documents, the schedules and exhibits thereto and the
certificates, reports, statements and other documents or
information furnished to the Agent or the Lenders in
connection herewith or therewith or with the consummation
of the transactions contemplated hereby and thereby,
taken as a whole, do not contain any material
misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained
herein or therein not misleading. To the extent the
Borrowers furnishes any projections of the financial
position and results of operations of the Borrowers for,
or as at the end of, certain future periods, such
projections were believed at the time furnished to be
reasonable, have been or will have been prepared on a
reasonable basis and in good faith by the Borrowers, and
have been or will be based on assumptions believed by the
Borrowers to be reasonable at the time made and upon the
best information then reasonably available to the
Borrowers. Except as disclosed in the Financial
Statement Letter, there is no fact materially adversely
affecting the condition or operations, financial or
otherwise, or the business of a Borrower which has not
been set forth in a footnote included in the financial
statements referred to in Section 6.07(a) hereof or a
Schedule hereto.
6.18. Operating Lease Obligations. On the
Closing Date, (i) the Borrowers do not have any
obligations as lessee for the payment of rent for any
real property other than the Operating Lease Obligations
set forth in Schedule 6.18 hereto and (ii) the Borrowers
do not have any personal property leases providing for
total rent payments in excess of $6,300,000 in the
aggregate.
6.19. Environmental Matters. Except as
disclosed in Schedule 6.19 hereto (i) none of the
operations of the Borrowers are the subject of any
federal, state or local investigation to determine
whether any Remedial Action is needed to address the
presence, disposal, Release or threatened Release,
(ii) the operations of the Borrowers and their respective
Subsidiaries are in compliance with all Environmental
Laws; (iii) there has been no Release at any of the
properties owned or operated by the Borrowers, their
respective Subsidiaries or any predecessor in interest or
title, or at any disposal or treatment facility which
received Hazardous Materials generated by the Borrowers,
their respective Subsidiaries or any predecessor in
interest or title which is reasonably likely to result in
Environmental Liabilities and Costs of $500,000 or more;
(iv) no Environmental Actions have been asserted against
the Borrowers, their respective Subsidiaries or any
predecessor in interest or title nor do the Borrowers or
their respective Subsidiaries have knowledge or notice of
any threatened or pending Environmental Action against
the Borrowers, their respective Subsidiaries or any
predecessor in interest or title which, if adversely
determined, is reasonably likely to result in
Environmental Liabilities and Costs of $500,000 or more;
(v) the Borrowers and their respective Subsidiaries have
obtained all permits, approvals, authorizations and
licenses required by Environmental Laws necessary for
their operations, and all such permits, approvals,
authorizations and licenses are in effect and the
Borrowers and their respective Subsidiaries are in
compliance with all terms and conditions of such permits,
approvals, authorizations and licenses, (vi) to the
knowledge of each Borrower, no Environmental Actions have
been asserted against any facilities that may have
received Hazardous Materials generated by the Borrowers,
their respective Subsidiaries or any predecessor in
interest or title which, if adversely determined, is
reasonably likely to result in Environmental Liabilities
and Costs of $500,000 or more.
6.20. Schedules. All of the information
which is required to be scheduled to this Agreement is
set forth on the Schedules attached hereto, is correct
and accurate and does not omit to state any information
material thereto.
6.21. Insurance. The Borrowers and their
respective Subsidiaries keep their properties adequately
insured and maintain (i) insurance to such extent and
against such risks, including fire, as is customary with
companies in the same or similar businesses, (ii) workers
compensation insurance in the amount required by
applicable law, (iii) public liability insurance in the
amount customary with companies in the same or similar
business against claims for personal injury or death on
properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or by
the Loan Documents. Schedule 6.21 hereto sets forth a
list of all insurance maintained by the Borrowers and
their respective Subsidiaries on the Closing Date.
6.22. Use of Proceeds. The proceeds of the
Loans shall be used (i) to purchase Inventory, (ii) to
pay all or part of the purchase price or construction
costs in respect of Operating Property or Operating
Assets acquired by a Borrower or any of its Subsidiaries,
(iii) to refinance the existing Indebtedness of the
Borrowers outstanding on the Closing Date pursuant to the
CIT Demand Note, and (iv) for other working capital and
general corporate purposes. The Letters of Credit will
be used (A) to import Inventory in the ordinary course of
each Borrower's business, and (B) for general corporate
purposes, including but not limited to workers
compensation insurance and general liability insurance
programs. At any time during which the limitation with
respect to Exempted Debt contained in Sections 3.6 and
3.8 of the 1992 Indenture remains in effect, both before
and after giving effect to the making of any Loan or the
issuance of any Letter of Credit the proceeds of which
will be used for the purposes set forth in clause (iv) of
the first sentence of this Section 6.22 or clause (B) of
the second sentence of this Section 6.22, Exempted Debt
will not exceed 10% of Consolidated Tangible Net Assets.
6.23. Security Documents. The Security
Documents create and grant to the Agent, for the benefit
of the Lenders, a legal, valid and perfected first
priority Lien on the Collateral, subject to no other
Liens except for Permitted Liens.
6.24. Financial Accounting Practices, Etc..
(a) The Borrowers and their respective
Subsidiaries make and keep books, records and accounts
which, in reasonable detail, accurately and fairly
reflect their respective transactions and dispositions of
their respective assets and maintain a system of internal
accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in
accordance with management's general or specific
authorization, (ii) transactions are recorded as
necessary (A) to permit preparation of financial
statements in conformity with GAAP except as previously
disclosed to the Agent and (B) to maintain accountability
for assets, and (iii) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(b) The Borrowers and their respective
Subsidiaries maintain a system of internal procedures and
controls sufficient to provide reasonable assurance that
the information required to be set forth in each
Borrowing Base Certificate (including, without
limitation, information relating to the identification of
assets which are Inventory and the valuation thereof) is
accurate.
6.25. No Material Adverse Effect. Except
as disclosed in the Financial Statement Letter, since
October 28, 1995, there has not occurred any Material
Adverse Effect or any event which could have a Material
Adverse Effect.
6.26. Real Property; Leases.
(a) Schedule 6.26 hereto sets forth a
complete and accurate description and list as of the
Closing Date of the location, by state and street
address, of all real property owned and leased by the
Borrowers, together with, in the case of real property
that is owned, a statement as to whether such real
property is the subject of a contract of sale (and, if
so, a statement as to the status of such sale).
(b) As of the Closing Date, the Borrowers
have valid leasehold interests in the Leases described in
Schedule 6.26 hereto. Schedule 6.26 hereto sets forth
with respect to each Lease, the commencement date,
termination date, renewal options (if any) and annual
base rents. Each such Lease is valid and enforceable in
accordance with its terms in all material respects and is
in full force and effect. No consent or approval of any
landlord or other third party in connection with the
Leases is necessary for the Borrowers to enter into and
execute the Loan Documents, except as set forth on
Schedule 6.26 hereto. No Borrower or, to the knowledge
of the Borrowers, any other party to any Lease is in
default of its obligations thereunder and neither the
Borrowers has at any time delivered or received any
notice of default which remains uncured under any such
Lease and, as of the Closing Date, no event has occurred
which, with the giving of notice or the passage of time,
or both, would constitute a default under any such Lease,
except for defaults the consequence of which in the
aggregate would have no Material Adverse Effect.
(c) All permits required to have been
issued to the Borrowers with respect to the real property
owned or leased by the Borrowers to enable such property
to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used (separate and
apart from any other properties), have been lawfully
issued and are in full force and effect, other than such
permits which, if not obtained, would not have a Material
Adverse Effect, and all such real property complies in
all material respects with all applicable legal and
insurance requirements.
(d) The Borrowers have not received any
notice, nor do the Borrowers have any knowledge, of any
pending, threatened or contemplated condemnation
proceeding affecting any real property owned or leased
by the Borrowers or any Subsidiary.
(e) No portion of any real property owned
or leased by the Borrowers or any of their respective
Subsidiaries has suffered any damage by fire or other
casualty loss which has not heretofore been completely
repaired and restored to its condition existing prior to
such casualty or which if not repaired or restored is not
reasonably likely to result in a Material Adverse Effect.
6.27. Location of Bank Accounts. Schedule
6.27 hereto sets forth a complete and accurate list as of
the Closing Date of all deposit and other accounts,
including the Cash Concentration Accounts and all
Depository Accounts, maintained by the Borrowers and
their respective Subsidiaries together with a description
thereof (i.e. the bank at which such deposit or other
account is maintained and the account number and the
purpose thereof).
6.28. No Event of Default. No event has
occurred and is continuing and no condition exists which
constitutes an Event of Default or Potential Default.
6.29. Capitalized Leases. As of the
Closing Date, Capitalized Lease Obligations of the
Borrowers and their respective Subsidiaries do not exceed
$20,000,000 in the aggregate.
6.30. Tradenames. Schedule 6.30 hereto
sets forth a complete and accurate list as of the Closing
Date of all tradenames used by each Borrower and its
Subsidiaries.
6.31. Solvency. After giving effect to the
transactions contemplated by this Agreement and the
Related Documents and each Credit Extension, each
Borrower is, and the Borrowers taken as a whole are,
Solvent.
6.32. Inventory. There is no location at
which a Borrower has any Inventory (except for Inventory
in transit) other than (i) those locations listed on
Schedule 1.01(A) hereto and (ii) any other locations
approved in writing by the Agent pursuant to the
definition of "Eligible Inventory". Schedule 1.01(A)
hereto contains a true, correct and complete list, as of
the Closing Date, of the legal names and addresses of
each store and warehouse at which Inventory of each
Borrower is stored. None of the receipts received by a
Borrower from any warehouse states that the goods covered
thereby are to be delivered to bearer or to the order of
a named Person or to a named Person and such named
Person's assigns.
6.33. Intellectual Property. The Borrowers
and their respective Subsidiaries own or license or
otherwise have the right to use all material licenses,
permits, patents, patent applications, trademarks,
trademark applications, service marks, trade names,
copyrights, copyright applications, franchises,
authorizations and other intellectual property rights
that are necessary for the operations of their businesses
and, to the knowledge of the Borrowers or such
Subsidiary, without infringement upon or conflict with
the rights of any other Person with respect thereto,
except for such infringements and conflicts which,
individually or in the aggregate, could not have a
Material Adverse Effect. To the best knowledge of the
Borrowers and their respective Subsidiaries, no slogan or
other advertising device, product, process, method,
substance, part or other material now employed, or now
contemplated to be employed, by the Borrowers or any of
their respective Subsidiaries infringes upon or conflicts
with any rights owned by any other Person, and no claim
or litigation regarding any of the foregoing is pending
or threatened, except for such infringements and
conflicts which could not have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge
of the Borrowers and their respective Subsidiaries, no
patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is
pending or proposed, which, individually or in the
aggregate, could have a Material Adverse Effect.
6.34. Material Contracts. Set forth in
Schedule 6.34 hereto is a complete and accurate list as
of the Closing Date of all Material Contracts of the
Parent, each Borrower and its Subsidiaries, showing the
parties and subject matter thereof and amendments and
modifications thereto. Each such Material Contract
(i) is in full force and effect and is binding upon and
enforceable against the Parent, such Borrower or its
Subsidiaries, as the case may be, and, to each Borrower's
knowledge, all other parties thereto in accordance with
its terms, (ii) has not been otherwise amended or
modified in any material respect, and (iii) there exists
no default under any Material Contract by the Borrowers
or any of their respective Subsidiaries or, to each
Borrower's knowledge, any other party thereto which has
not been cured or waived.
6.35 Labor Relations: Collective Bargaining
Agreements. (a) Set forth on Schedule 6.35 hereto is a
list (including dates of termination) of all Collective
Bargaining Agreements between or applicable to a Borrower
or any of its Subsidiaries and any union, labor
organization or other bargaining agent in respect of the
employees of such Borrower or any of its Subsidiaries.
(b) Neither Borrower nor any Subsidiary
is engaged in any unfair labor practice that is
reasonably likely to have a Material Adverse Effect.
There is (i) no significant unfair labor practice
complaint pending against a Borrower or any of its
Subsidiaries or, to the best knowledge of a Borrower or
any of its Subsidiaries, threatened against any of them,
before the National Labor Relations Board, and no
significant grievance or significant arbitration
proceeding arising out of or under any Collective
Bargaining Agreement is now pending against a Borrower or
any of its Subsidiaries or, to the best knowledge of a
Borrower or any of its Subsidiaries, threatened against
any of them, (ii) no significant strike, labor dispute,
slowdown or stoppage is pending against a Borrower or any
of its Subsidiaries or, to the best knowledge of a
Borrower or any of its Subsidiaries, threatened against
such Borrower or any of its Subsidiaries, and (iii) to
the best knowledge of a Borrower or any of its
Subsidiaries, no union representation question existing
with respect to the employees of such Borrower or any of
its Subsidiaries, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not
reasonably likely to have a Material Adverse Effect.
6.36. Hechinger Reorganization Memorandum.
Each of the transactions described in the Hechinger
Reorganization Memorandum have occurred and are in
effect. Appendix A to the Hechinger Reorganization
Memorandum contains a complete and accurate listing of
each former direct or indirect Subsidiary of the Parent
that was merged with or into Stores or with or into
Hechinger Company of Pennsylvania prior to its name
change to Hechinger Stores East Coast Company and each
former location[s] and place[s] of business of each such
former Subsidiary.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any principal of or interest on the
Loans or the Reimbursement Obligations or any other
Obligations (whether or not due) shall remain unpaid or
the Lenders shall have any Revolving Credit Commitment
hereunder, the Borrowers will, unless the Majority
Lenders shall otherwise consent in writing:
7.01. Reporting Requirements. Furnish to
the Lenders:
(a) As soon as practicable and in any
event within 90 days after the close of each fiscal
year of the Parent, a consolidated statement of
operations and cash flows of the Parent and its
Consolidated Subsidiaries for such fiscal year and a
consolidated and balance sheet of the Parent and its
Consolidated Subsidiaries as of the close of such
fiscal year, and notes to each, all in reasonable
detail, setting forth in comparative form the
corresponding figures for the preceding fiscal year,
which consolidated statements and balance sheet
shall be audited and accompanied by an opinion of
Ernst & Young or other independent certified public
accountants of recognized national standing selected
by the Parent and reasonably satisfactory to the
Agent. The opinion of such accountants (the
"Accountant's Opinion") shall be without a "going
concern" qualification or like qualification or
exception or qualification arising out of the scope
of the audit with respect to such statements and
balance sheet being prepared in compliance with GAAP
and shall in any event contain a written statement
of such accountants substantially to the effect that
(i) such accountants examined such statements and
balance sheet in accordance with generally accepted
auditing standards and accordingly made such tests
of accounting records and such other auditing
procedures as such accountants considered necessary
in the circumstances and (ii) in the opinion of such
accountants such statements and balance sheet
present fairly, in all material respects, the
financial position of the Parent and its
Consolidated Subsidiaries as of the end of such
fiscal year and the results of its operations and
the changes in its financial position for such
fiscal year, in conformity with GAAP applied on a
basis consistent with that of the preceding fiscal
year (except for changes in application in which
such accountants concur). A copy of the
Accountant's Opinion shall be delivered to the Agent
and each Lender and signed by such independent
public accountants. Each set of statements and
balance sheets delivered pursuant to this
Section 7.01(a) shall be accompanied by (1) a
certificate or report dated the date of such
statements and balance sheet by the accountants who
certified or reported on such statements and balance
sheet stating in substance that they have reviewed
this Agreement and that in making the examination
necessary for their certification of such statements
and balance sheet they did not become aware of any
Event of Default or Potential Default, or if they
did become so aware, such certificate or report
shall state the nature and period of existence
thereof, if determinable and (2) a certificate dated
the date of the delivery of such statements and
balance sheet by the Designated Financial Officer of
the Administrative Borrower stating in substance
that he has reviewed this Agreement and that in
making the examination necessary for this
certification, he did not become aware of any Event
of Default or Potential Default, or if he did become
so aware, such certificate shall state the nature
and period of existence thereof if determinable in
form and substance satisfactory to the Agent.
(b) As soon as practicable and in any
event within 45 days after the close of each of the
first three fiscal quarters of each of the Parent's
fiscal years, unaudited consolidated statements of
operations and cash flows of the Parent and its
Consolidated Subsidiaries and a consolidated balance
sheet of the Parent and its Consolidated
Subsidiaries as of the close of such fiscal quarter,
all in reasonable detail setting forth in
comparative form the corresponding figures for the
corresponding fiscal quarter for the preceding
fiscal year, which statements and balance sheet
shall be certified by a Designated Financial Officer
of the Parent as presenting fairly, in all material
respects, the financial position of the Parent and
its Consolidated Subsidiaries as of the end of such
quarter and the results of its operations and the
changes in its financial position for such quarter,
in conformity with GAAP applied in a manner
consistent except as otherwise disclosed therein
with that of the most recent audited financial
statements furnished to the Lenders, subject to
year-end adjustments. Each set of statements and
balance sheets delivered pursuant to this
Section 7.01(b) shall be accompanied by a
certificate of a Designated Financial Officer of the
Administrative Borrower dated the date of delivery
of such statements and balance sheet (1) stating
that he has reviewed this Agreement and that to the
best of his knowledge he did not become aware of any
Event of Default or Potential Default, or if he did
become so aware, such certificate shall state the
nature and period of existence thereof, if
determinable, in form and substance satisfactory to
the Agent and (2) containing a calculation of the
ratio of Exempted Debt to Consolidated Tangible Net
Assets.
(c) As soon as practicable and in any
event within 30 days after the end of each fiscal
month of the Parent (other than the last month of
each of the first three fiscal quarters of the
Parent) unaudited consolidated statements of
operations and cash flows for the Parent and its
Consolidated Subsidiaries for such fiscal month and
for the period from the beginning of such fiscal
year to the end of such fiscal month, and an
unaudited consolidated balance sheet of the Parent
and its Consolidated Subsidiaries as of the end of
such fiscal month, all in reasonable detail, setting
forth in comparative form the corresponding figures
for the same periods during the preceding fiscal
year (except for the balance sheet, which shall set
forth in comparative form the corresponding balance
sheet as of the prior fiscal year end), and
accompanied by (1) a certificate of a Designated
Financial Officer of the Parent (A) stating that
such statements present fairly, in all material
respects, the financial position of the Parent and
its Consolidated Subsidiaries as of the end of such
fiscal month and the results of its operations and
cash flows for such fiscal month, applied in a
manner consistent with prior practice, and, subject
to year-end adjustments, and (B) containing a
calculation of the ratio of Exempted Debt to
Consolidated Tangible Net Assets and (2) a
Certificate of the Designated Financial Officer of
the Administrative Borrower stating that he has
reviewed this Agreement and that to the best of his
knowledge he did not become aware of any Event of
Default or Potential Default, or if he did become so
aware, such certificate shall state the nature and
period of existence thereof, if determinable.
(d) As soon as practicable and in any
event within five (5) Business Days after the end of
each fiscal month (including the fiscal month in
which this Agreement is executed), the
Administrative Borrower shall furnish to the Lenders
a monthly inventory report in form and substance
reasonably satisfactory to the Agent and certified
by a Designated Financial Officer of the
Administrative Borrower, which shall be accompanied
by a reconciliation from the monthly inventory
report as of the Borrowers' close of business on the
last day of the preceding month delivered by the
Borrower to the Lenders pursuant to paragraph (e) of
this Section 7.01.
(e) As soon as practicable and in any
event within 5 Business Days after the end of each
week (including the week in which this Agreement is
executed), weekly sales reports, weekly inventory
report (including a breakdown of Inventory that was
purchased by the Borrowers on a date that occurred
on or before August 20, 1994 and a Borrowing Base
Certificate, each as of the Borrowers' close of
business on the Saturday of the preceding week and
in form and substance reasonably satisfactory to the
Agent and certified by a Designated Financial
Officer of the Administrative Borrower.
(f) As soon as possible, and in any event
within 3 days after the occurrence of a Potential
Default or an Event of Default or a Material Adverse
Effect, the written statement of the Designated
Financial Officer of the Administrative Borrower,
setting forth the details of such Potential Default
or Event of Default, Material Adverse Effect and the
action which such Borrower proposes to take with
respect thereto.
(g) Promptly upon their becoming
available, a copy of (1) all reports, financial
statements or other information delivered by the
Parent to its shareholders, (2) all reports, proxy
statements, financial statements and other
information generally distributed by the Parent or a
Borrower to its creditors or the financial community
in general, and (3) any accountant's management
letters and any audit or other reports submitted to
a Borrower by independent accountants in connection
with any annual, interim or special audit of such
Borrower.
(h) (1) As soon as possible and in any
event (A) within 30 days after a Borrower or any of
its ERISA Affiliates knows or has reason to know
that any Termination Event described in clause (i)
of the definition of Termination Event with respect
to any Benefit Plan has occurred, and (B) within 20
days after a Borrower or any of its ERISA Affiliates
knows or has reason to know that any other
Termination Event with respect to any Benefit Plan
has occurred, or that a Borrower or any of its ERISA
Affiliates has failed to make a required installment
to a Benefit Plan within the meaning of
Section 412(m) of the Code, a statement of the
Designated Financial Officer of such Borrower
describing such Termination Event and the action, if
any, which such Borrower or such ERISA Affiliate
proposes to take with respect thereto, (2) promptly
and in any event within three (3) Business Days
after receipt thereof by a Borrower or any of its
ERISA Affiliates from the PBGC, copies of each
notice received by such Borrower or any of its ERISA
Affiliates of the PBGC's intention to terminate any
Plan or to have a trustee appointed to administer
any Plan, (3) promptly and in any event within 30
days after the filing thereof with the Internal
Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form
5500 Series) with respect to each Benefit Plan and
Multiemployer Plan, (4) promptly and in any event
within five Business Days after receipt thereof by
such Borrower or any of its ERISA Affiliates from a
sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by such Borrower or any
of its ERISA Affiliates concerning the imposition or
amount of withdrawal liability under Section 4202 of
ERISA or indicating that such Multiemployer Plan may
enter reorganization status under Section 4241 of
ERISA, (5) promptly, and in any event within ten
(10) days after a Borrower or any of their
respective ERISA affiliates is required to send a
notice of a plant closing or mass layoff (as defined
in the Worker Adjustment and Retraining Notification
Act), and (6) promptly and in any event within 30
days after a Borrower or any ERISA Affiliate takes
action to establish Benefit Plan or contribute to a
Multiemployer Plan, a statement of the Designated
Financial Officer of such Borrower describing such
Benefit Plan or Multiemployer Plan.
(i) Promptly after, and in any event
within 5 days after, an officer of a Borrower learns
of any of the following, notice thereof:
(i) the receipt by such Borrower or
any of its Subsidiaries of notification that any
real or personal property of such Borrower or such
Subsidiary is subject to any Environmental Lien;
(ii) notice of violation of any
Environmental Law which could reasonably be expected
to subject such Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs of $500,000
or more; or
(iii) notice of the commencement
of any Environmental Action by a Borrower or any of
its Subsidiaries of any Environmental Law, which if
adversely determined, could reasonably be expected
to subject such Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs of $500,000
or more.
(j) Promptly after the commencement
thereof but in any event not later than 5 days after
service of process with respect thereto on, or the
obtaining of knowledge thereof by, a Borrower or any of
its Subsidiaries, notice of each action, suit or
proceeding involving such Borrower or any of its
Subsidiaries before any court or other Governmental
Authority or other regulatory body or any arbitrator
which could have a Material Adverse Effect.
(k) Promptly after submission to any
Governmental Authority all documents and information
furnished to such Governmental Authority in connection
with any investigation of a Borrower or any of its
Subsidiaries other than routine inquiries by such
Governmental Authority.
(l) As soon as available, and in any
event within 5 Business Days after (1) receipt or
delivery thereof, copies of any material notices that a
Borrower receives or delivers in connection with any
Material Contract and, (2) the Parent or any Borrower
enters into a Material Contract, a copy of such Material
Contract.
(m) Within 10 Business Days after the end
of each six-month period ending on August 31 and
February 28 of each year, a certificate of the Designated
Financial Officer of the Administrative Borrower setting
forth (1) the percentage obtained by dividing (A) the
proceeds from the sale of Inventory and all other cash
receipts that were transferred to the A Cash
Concentration Account during such six month period
pursuant to Section 7.13 hereof by (B) the total proceeds
from the sale of Inventory and all other cash receipts
that were transferred to the Cash Concentration Accounts
during such six-month period (the "Actual A Percentage")
and (2) the percentage obtained by dividing (A) the
proceeds form the sale of Inventory and all other cash
receipts that were transferred to the B Cash
Concentration Account during such six month period
pursuant to Section 7.13 hereof by (B) the total proceeds
from the sale of Inventory and all other cash receipts
that were transferred to the Cash Concentration Accounts
during such six month period (the "Actual B Percentage"),
and (x), if the Actual A Percentage is more than five
percent greater than or less than the Designated
Percentage for the A Cash Concentration Account, (y) if
the Actual B Percentage is more than five percent greater
than or less than the Designated Percentage for the B
Cash Concentration Account or (z) if a Borrower closes or
sells any stores, the Administrative Borrower will
propose an adjustment to the allocation of the Depository
Accounts to the Cash Concentration Accounts or such other
adjustments that will result in each Cash Concentration
Account receiving its Designated Percentage of the
proceeds from the sale of Inventory and all other cash
receipts.
(n) Within 10 Business Days after the
receipt by a Borrower of Net Proceeds from the sale of
other disposition of assets, pursuant to clauses (i),
(ii) or (v) of Section 8.04(b) hereof, a certificate of
the Designated Financial Officer of the Administrative
Borrower setting forth the clause of Section 8.04(b)
pursuant to which such sale or other disposition was made
and the amount of such Net Proceeds.
(o) Promptly upon request, such other
information concerning the condition or operations,
financial or otherwise, of the Borrowers or any of their
respective Subsidiaries as the Agent or any Lender from
time to time may reasonably request.
7.02. Compliance with Laws, Etc. Comply,
and cause each of their respective Subsidiaries to comply
with all applicable laws, rules, regulations and orders
(including, without limitation, Environmental Laws and
compliance in respect of their businesses, or use,
maintenance or operation of real and personal properties
owned or leased by them), such compliance to include,
without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or
profits or upon any of its properties, and (ii) paying
all lawful claims which if unpaid might become a Lien or
charge upon any of its properties, except to the extent
contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which
adequate reserves in accordance with GAAP have been set
aside for the payment thereof, except, in the case of all
such non-compliance (other than non-compliance in the
payment of federal, state and local taxes which, if
unpaid, could result in a Lien on any Collateral or any
other non-compliance that may result in a Lien on
Collateral), where all such instances of non-compliance
taken together will not have Material Adverse Effect.
7.03. Preservation of Existence, Etc.
Maintain and preserve its existence, rights and
privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character
of the properties owned or leased by them or in which the
transaction of their business makes such qualification
necessary, except where all instances of such failure to
qualify or remain in good standing or such failure to
maintain rights and privileges taken together will not
have a Material Adverse Effect.
7.04. Keeping of Records and Books of
Account. Keep, and cause each of their respective
Subsidiaries to keep, adequate records and books of
account, with complete entries made in accordance with
generally accepted accounting principles consistently
applied.
7.05. Inspection Rights. Permit, and cause
each of its Subsidiaries to permit, the Agent or any
Lender, or any agents or representatives thereof or such
professionals or other Persons as the Agent may designate
(i) to examine and inspect the books and records of the
Borrowers and take copies and extracts therefrom at
reasonable times and during normal business hours,
(ii) to verify materials, leases, notes, receivables,
deposit accounts and other assets of the Borrowers from
time to time, and (iii) to conduct Inventory appraisals
and/or valuations at the distribution center and retail
stores of the Borrowers provided that, in the absence of
a continuing Event of Default, all such action described
in clauses (i) through (iii) above shall be conducted at
reasonable times, and during normal business hours and
upon prior notice.
7.06. Maintenance of Properties, Etc.
Maintain and preserve, and cause each of their respective
Subsidiaries to maintain and preserve, all of their
properties (including all real properties leased or owned
by them) which are necessary or useful in the proper
conduct of their business in good working order and
condition, ordinary wear and tear excepted, and comply,
and cause each of their respective Subsidiaries to
comply, at all times with the provisions of all Leases to
which each of them is a party as lessee or under which
each of them occupies property, so as to prevent any loss
or forfeiture thereof or thereunder.
7.07. Maintenance of Insurance. Maintain,
and cause each of their respective Subsidiaries to
maintain, with responsible and reputable insurance
companies or associations, insurance (including, without
limitation, comprehensive general liability, hazard, rent
and business interruption insurance) with respect to
their properties (including all real properties leased or
owned by them) and business, in such amounts and covering
such risks, as is required by any Governmental Authority
or other regulatory body having jurisdiction with respect
thereto or as is carried generally in accordance with
sound business practice by companies in similar
businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Agent.
All policies covering the Collateral are to be made
payable to the Agent, in case of loss, under a standard
non-contributory "lender" or "secured party" clause and
are to contain such other provisions as the Agent may
require to fully protect the Agent's interest in the
Collateral and to any payments to be made under such
policies. All original policies or true copies thereof
are to be delivered to the Agent, premium prepaid, with
the loss payable and additional insured endorsement in
the Agent's favor, and shall provide for not less than
thirty (30) days prior written notice to the Agent of the
exercise of any right of cancellation. At a Borrower's
request, or if a Borrower fails to maintain such
insurance, the Agent may arrange for such insurance, but
at the Borrowers' joint and several expense and without
any responsibility on the Agent's part for: obtaining
the insurance, the solvency of the insurance companies,
the adequacy of the coverage, or the collection of
claims. Upon the occurrence of an Event of Default, the
Agent shall have the sole right, in the name of the Agent
and the Borrowers, to file claims under any insurance
policies, to receive, receipt and give acquittance for
any payments that may be payable thereunder, and to
execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or
settlement of any claims under any such insurance
policies.
7.08. Environmental. Comply, and cause
each of their respective Subsidiaries to comply in all
material respects, with the requirements of all
Environmental Laws and provide to the Agent all
documentation in connection with such compliance that the
Agent may reasonably request; not cause or permit the
Collateral or any property or facility owned, operated or
occupied by the Borrowers or any of their respective
Subsidiaries to be used for any activities involving,
directly or indirectly, the use, generation, treatment,
storage, release or disposal of any Hazardous Materials
except in compliance with applicable laws; and
immediately notify the Agent of any Release of Hazardous
Materials in excess of any reportable quantity and take
any Remedial Actions required to abate such Release. On
behalf of the Borrowers and their respective
Subsidiaries, the Borrowers hereby jointly and severally
agree to defend, indemnify, and hold harmless the Agent,
the Lenders and the Letter of Credit Issuer, their
employees, agents, officers, and directors, from and
against any claims, demands, penalties, fines,
liabilities (including strict liability), settlements,
damages, costs, or expenses (including, without
limitation, attorney and consultant fees, investigation
and laboratory fees, court costs, and litigation
expenses) and Environmental Liabilities and Costs arising
out of (i) any Release, or threatened Release on any
property presently or formerly owned or occupied by the
Borrowers or any of their respective Subsidiaries (or
their predecessors in interest or title) or at any
disposal facility which received Hazardous Materials
generated by the Borrowers or any of their respective
Subsidiaries; (ii) any violation of Environmental Laws,
(iii) any Environmental Actions, (iv) any personal injury
(including wrongful death) or property damage (real or
personal) arising out of or related to exposure to
Hazardous Materials used, handled, generated, transported
or deposited by the Borrowers or any of their respective
Subsidiaries (or any predecessor in interest or title);
and/or (v) the breach of any representation or warranty
made by the Borrowers in Section 6.19 hereof or the
breach of any covenant made by any of the Borrowers in
this Section 7.08. This environmental indemnity shall
survive the repayment of the Obligations and discharge or
release of any security interest granted under the Loan
Documents.
7.09. Further Assurances. Do, execute,
acknowledge and deliver, and cause each of their
respective Subsidiaries to do, execute, acknowledge and
deliver, at the sole cost and expense of the Borrowers
all such further acts, deeds, conveyances, mortgages,
assignments, estoppel certificates, financing statements,
notices of assignment, transfers and assurances as the
Agent may require from time to time in order (a) to carry
out more effectively the purposes of this Agreement or
any other Related Document, (b) to subject to valid and
perfected first priority Liens all of the Collateral,
(c) to perfect and maintain the validity, effectiveness
and priority of any of the Related Documents and the Lien
intended to be created thereby, and (d) to better assure,
convey, grant, assign, transfer and confirm unto the
Agent, the Lenders and the Letter of Credit Issuer the
rights now or hereafter intended to be granted to the
Agent, the Lenders and the Letter of Credit Issuer under
this Agreement, any Loan Document or any other instrument
under which a Borrower or any Subsidiary may be or may
hereafter become bound to convey, mortgage or assign to
the Agent, the Lenders and the Letter of Credit Issuer.
7.10. Borrowing Base. Maintain all Loans
and Letters of Credit in compliance with the then current
Borrowing Base.
7.11. Change in Collateral; Collateral
Records. Give the Agent not less than thirty days' prior
written notice of any change in the location of any
Collateral, other than to locations, that as of the date
hereof, are known to the Agent and at which the Agent has
filed financing statements and otherwise fully perfected
its Liens thereon. The Borrowers shall also advise the
Agent promptly of any other change in the location of any
Collateral. The Borrowers shall also advise the Agent
promptly, in sufficient detail, of any material adverse
change relating to the type, quantity or quality of the
Collateral or the security interests granted therein.
The Borrowers agree to execute and deliver to the Agent
for the benefit of the Agent from time to time, solely
for the Agent's convenience in maintaining a record of
the Collateral, such written statements and schedules as
the Agent may reasonably require, designating,
identifying or describing the Collateral. The Borrowers'
failure, however, to promptly give the Agent such
statements or schedules shall not affect, diminish,
modify or otherwise limit the Agent's security interest
in the Collateral.
7.12. Financial Accounting Practices, Etc.
(a) Make and keep books, records and
accounts which, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of
assets of each Borrower and its Subsidiaries and maintain
a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are
executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as
necessary (A) to permit preparation of financial
statements in conformity with GAAP and (B) to maintain
accountability for assets, and (iii) the recorded
accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(b) Maintain a system of internal
procedures and controls sufficient to provide reasonable
assurance that the information required to be set forth
in each Borrowing Base Certificate (including, without
limitation, information relating to the identification of
assets which are Eligible Inventory as provided herein
and the valuation thereof) is accurate in all material
respects.
7.13. Cash Management System.
(a) Each Borrower agrees and covenants to
(i) cause all cash and all proceeds from accounts
receivable and from the sale of Inventory and any
insurance proceeds paid with respect to Inventory to be
deposited on a daily basis (other than Sunday) into the
Depository Accounts in the ordinary course of business of
such Borrower consistent with past practice, (ii) cause
all remittances on credit card sales to be transferred on
a daily basis into the a Cash Concentration Account or a
Depository Account consistent with the terms of the
relevant credit card servicer agreement, (iii) cause all
good funds in the Depository Accounts to be transferred
on a daily basis into a Cash Concentration Account in the
ordinary course of business of such Borrower consistent
with past practice, provided that the Borrowers shall in
good faith estimate the good funds that are available in
each Depository Account after taking into consideration
bank fees, deposited checks returned because of
insufficient funds, change orders and the payment of
deposited checks, (iv) cause not less than 70% of all
funds described in clauses (ii) and (iii) above to be
transferred to the A Cash Concentration Account and cause
the remaining funds described in clauses (ii) and (iii)
above to be transferred to the B Cash Concentration
Account, (v) cause all cash deposited in the A Cash
Concentration Account to be sent by wire transfer or such
other method of transfer that is acceptable to the Agent
to the Agent Account on a daily basis, (vi) instruct the
Agent to cause all funds transferred to the Agent Account
to be credited to the Loan Account and applied to reduce
the Obligations outstanding from time to time, (vii) in
the absence of an Event of Default, use all cash
deposited in the B Cash Concentration Account for general
corporate purposes of the Borrower other than Inventory
purchases, (viii) take all such actions as the Agent
deems necessary or advisable to send all cash, all
proceeds from the sale of or insurance proceeds with
respect to Inventory, all remittances or other proceeds
of Collateral to a Cash Concentration Account to be
applied according to this Section 7.13, (ix) on or before
March 22, 1996, (A) deliver to the Agent a revised
Schedule 6.27 to this Agreement, which Schedule (x)
shall, without further action, amend Schedule 6.27 to
this Agreement existing on the Closing Date and (y) shall
be reasonably acceptable to the Agent, (B) execute and
deliver to the Agent an original notice letter for each
Depository Bank listed on Schedule 6.27, substantially in
the form of Exhibit G hereto, which will be sent to each
such Depository Bank, and (C) use its reasonable best
efforts (but not requiring any payment to be made by a
Borrower) to deliver to the Agent a credit card bank
depository account agreement, in form and substance
satisfactory to the Agent, duly executed by the
applicable Borrower and each of GECC, Monogram and each
other credit card servicer, (x) on or before March 5,
1996 deliver to the Agent (A) a Cash Concentration
Account Agreement executed by the Borrowers and the Cash
Concentration Account Bank and (B) a certificate of
Designated Financial Officer of the Administrative
Borrower setting forth the initial allocation of
Depository Accounts from which the proceeds from the sale
of Inventory are to be transferred to each Cash
Concentration Account during the first six-month period
ending on August 30, 1996, and the funds projected to be
received by each Cash Concentration Account during such
six-month period, and (xi) take such actions as the Agent
deems necessary or advisable to grant to the Agent
dominion and control over the funds in each Depository
Account and Cash Concentration Account. Upon and during
the continuance of an Event of Default, the Agent may
instruct the Cash Concentration Account Bank to remit all
amounts deposited in each Cash Concentration Account to
the Agent Account or as the Agent may otherwise direct.
(b) Each Borrower shall promptly, and in
any event not later than five (5) days after the opening
of any such new account, notify the Agent in writing of
the creation of any new Depository Account and shall at
the time of such notice execute and deliver to the Agent
a notice letter, substantially in the form of Exhibit G
hereto. Upon and during the continuance of an Event of
Default, at the request of the Agent, the Borrowers shall
use their reasonable best efforts (but not requiring any
payment to be made by a Borrower) to cause each
Depository Bank maintaining a Depository Account to
promptly, and in any event within thirty (30) days after
the date of such request, enter into a Depository Account
Agreement. If, after any such request by the Agent, such
Borrower is unable to obtain a Depository Account
Agreement from any financial institution that receives
remittances or other proceeds of sales of Inventory
within such thirty (30) day period, the Borrowers shall
promptly thereafter terminate such accounts and establish
new accounts at a financial institution that will enter
into a Depository Account Agreement.
(c) Each Borrower shall promptly, and in
any event not later than five (5) days after the
establishment of any new credit card relationship, notify
the Agent in writing of the creation of such new
relationship and shall use its reasonable best efforts
(but not requiring any payment to be made by a Borrower)
to deliver to the Agent a credit card bank depository
account agreement, in form and substance satisfactory to
the Agent, duly executed by such Borrower and such new
credit card servicer.
7.14 Landlord and Warehouse Waivers. As soon
as practicable and in any event within 90 days of the
Closing Date, the Borrowers shall use their reasonable
best efforts (but not requiring any payment by a
Borrower) to deliver to the Agent (i) a landlord waiver,
in form and substance satisfactory to the Agent, to each
of the Borrowers' landlords identified in Schedule 6.26
hereto and (ii) a warehouse waiver, in form and substance
satisfactory to the Agent, to each of the Borrowers'
warehouses listed on Schedule 1.01(A) hereto.
7.15 Additional Subsidiaries . (a) If a Person
shall be come a Subsidiary of a Borrower after the
Closing Date, such Borrower shall (i) notify the Agent
promptly after such Person becomes a Subsidiary of the
Borrower and (ii) if such Person has assets with a fair
market value in excess of $3,000,000, promptly, and in
any event within ten (10) Business Days of such Person
becoming a Subsidiary, cause such Subsidiary to execute
and deliver a guaranty in form and substance satisfactory
to the Agent, in respect of the Obligations and to
deliver proof of corporate action, incumbency of
officers, opinions of counsel and other documents as the
Agent may reasonably request.
7.16 ERISA . Upon the Agent's request, the
Borrowers shall deliver to the Agent a copy of each Plan
and for each such Plan (a) that is a "single employer
plan" (as defined in Section 4001(a)(15) of ERISA), the
most recently completed actuarial valuation prepared
therefore by such Plan's regular enrolled actuary and the
Schedule B, "Actuarial Information" to the IRS Form 5500
(Annual Report) most recently filed with the Internal
Revenue Service and (b) that is a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA), each of the
documents referred to in clause (a) either in the
possession of such Borrower or reasonably available
thereto from the sponsor or trustees of such Plan.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any principal of or interest on the
Loans or the Reimbursement Obligations or any Obligations
(whether or not due) shall remain unpaid or any Lender
shall have any Revolving Credit Commitment hereunder, the
Borrowers will not, without the prior written consent of
the Majority Lenders:
8.01. Liens, Etc. Create or suffer to
exist, or permit any of their respective Subsidiaries to
create or suffer to exist, any Lien upon or with respect
to any of their properties, rights or other assets,
whether now owned or hereafter acquired, or assign or
otherwise transfer, or permit any of its Subsidiaries to
assign or otherwise transfer, any right to receive
income, other than the following ("Permitted Liens"):
(a) Liens created pursuant to the Loan
Documents;
(b) Liens existing on the date hereof, as set
forth in Schedule 8.01 hereto;
(c) Liens for taxes, assessments or
governmental charges or levies to the extent that the
payment thereof shall not be required by Section 7.02
hereof;
(d) Liens created by operation of law other
than Environmental Liens, such as materialmen's liens,
mechanics' liens and other similar liens, arising in the
ordinary course of business which secure amounts not
overdue for a period of more than 60 days or which are
being contested in good faith by appropriate proceedings;
(e) deposits, pledges or Liens (other than
Liens arising under ERISA) securing (1) obligations
incurred in respect of workers' compensation,
unemployment insurance or other forms of governmental
insurance or benefits, (2) the performance of bids,
tenders, leases, contracts (other than for the payment of
money) and statutory obligations, or (3) obligations on
surety or appeal bonds, but only to the extent such
deposits, pledges or Liens are incurred or otherwise
arise in the ordinary course of business and secure
obligations which are not past due;
(f) restrictions on the use of real property
and minor irregularities in the title thereto which do
not (1) secure obligations for the payment of money or
(2) materially impair the value of such property or its
use by a Borrower or any of its Subsidiaries in the
normal conduct of such Person's business;
(g) purchase money Liens on or purchase money
security interests in equipment or real property acquired
or held in the ordinary course of its business securing
Indebtedness, provided that the Indebtedness secured by
such Liens or security interests shall not exceed the
aggregate principal amount of (1) $75,000,000 from the
Closing Date through the first anniversary thereof,
(2) an additional $45,000,000 from the first anniversary
of the Closing Date through the second anniversary
thereof and (3) an additional $45,000,000 from the second
anniversary of the Closing Date through the Termination
Date;
(h) Liens securing Capitalized Leases;
(i) to the extent the same constitutes Liens,
the interest of the consignor in Inventory held by a
Borrower on consignment;
(j) Liens on real property of the Borrowers
which secure Indebtedness incurred by the Borrowers;
provided that (1) after giving effect to the creation of
any such Liens and any Sale Lease Back Transaction
entered into by a Borrower pursuant to the terms of
clause (v) of Section 8.04(b) hereof, the Borrowers own
real property with an aggregate book value of not less
than $50,000,000 that is free and clear of all Liens
other than the Liens described in clauses (c) and (f) of
this Section 8.01 and (2) the proceeds of the
Indebtedness secured by such Liens are used for working
capital purposes or general corporate purposes, in each
case which purposes are not otherwise prohibited by the
terms of this Agreement;
(k) Liens on the cash surrender value of life
insurance policies owned by a Borrower, provided that the
proceeds of the Indebtedness secured by such Liens are
used for working capital purposes or general corporate
purposes, in each case which purposes are not otherwise
prohibited by the terms of this Agreement;
(l) Liens upon any property or assets of
any Subsidiary of a Borrower existing at the time
such Subsidiary is acquired by, merged into or
consolidated with a Borrower in accordance with the
terms of this Agreement, provided that such Liens
were not created in contemplation of any such
acquisition, merger or consolidation;
(m) Liens upon any property or assets
existing at the time such property or assets are
acquired by a Borrower, provided that such Liens
were not created in contemplation of such
acquisition; and
(n) Renewals and replacements of the
Liens described in clauses (b), (g), (k), (l) and
(m) of this Section 8.01, provided that any such
renewal or replacement Lien shall be limited to the
property or assets covered by the Lien renewed or
replaced and the Indebtedness secured by any such
renewal or replacement Lien shall be in an amount
not greater than the amount of Indebtedness secured
by the Lien renewed or replaced.
8.02. Indebtedness. Create, incur or
suffer to exist, or permit any of its Subsidiaries to
create, incur or suffer to exist, any Indebtedness, other
than:
(a) Indebtedness created hereunder or under
the Notes or any Letter of Credit;
(b) Indebtedness existing on the date hereof,
as set forth in Schedule 8.02 hereto, and any extension
of maturity, refinancing or other modification of the
terms thereof, provided, however, that such extension,
refinancing or modification (A) is pursuant to terms that
are not less favorable to the Borrower and its
Subsidiaries than the terms of the Indebtedness being
extended, refinanced or modified, and (B) after giving
effect to the extension, refinancing or modification of
such Indebtedness, the amount of such Indebtedness
outstanding is not greater than the amount of such
Indebtedness outstanding immediately prior to such
extension, refinancing or modification;
(c) Indebtedness in connection with
Capitalized Leases;
(d) To the extent the same constitutes
Indebtedness, Indebtedness secured by Liens or security
interests permitted by Section 8.01 hereof;
(e) Unsecured Indebtedness in an aggregate
principal amount not to exceed $25,000,000 at any one
time outstanding; and
(f) Indebtedness secured by the cash surrender
value of life insurance policies owned by a Borrower,
provided that the proceeds of the Indebtedness are used
for working capital purposes or general corporate
purposes, in each case which purposes are not otherwise
prohibited by the terms of this Agreement.
8.03. Guarantees, Etc. Become liable, or
permit any of its Subsidiaries to become liable, under
any Guarantee in connection with any Indebtedness of any
other Person, other than:
(a) guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary
course of business;
(b) guaranties existing on the date hereof, as
set forth in Schedule 8.03 hereto, but not any renewal or
other modification thereof;
(c) guaranties of obligations under leases for
stores of the Borrowers which are no longer operated by a
Borrower; and
(d) guaranties of developers in connection
with the construction of a Borrower's stores, provided
that such guaranties plus all loans permitted pursuant to
Section 8.06(e) hereof shall be in an aggregate amount
not to exceed $10,000,000.
8.04. Merger, Consolidation, Sale of
Assets, Etc.
(a) Merge or consolidate with any Person,
or permit any of their respective Subsidiaries to merge
or consolidate with any Person; provided, however, that
any Subsidiary of a Borrower may be merged into such
Borrower or another such Subsidiary, or may consolidate
with another such Subsidiary, so long as (i) no other
provision of this Agreement would be violated thereby,
and (ii) such Borrower gives the Agent at least 30 days'
prior written notice of such merger or consolidation.
(b) Sell, assign, lease or otherwise
transfer or dispose of, or permit any of their respective
Subsidiaries to sell, assign, lease or otherwise transfer
or dispose of, whether in one transaction or in a series
of related transactions, any of their properties, rights
or other assets whether now owned or hereafter acquired
to any Person, provided that:
(i) the Borrowers may sell the stores and
assets described in the Asset Sale Letter (the
"Designated Sales"), provided that (A) the
consideration received in connection with the
Designated Sales shall be at least equal to the fair
market value of such stores and assets (as
determined by the Board of Directors of the Parent
in good faith), and at least 80% of such
consideration shall be received in cash, (B) the Net
Proceeds received in connection with the Designated
Sales shall be used for working capital purposes or
general corporate purposes, in each case which
purposes are not otherwise prohibited by the terms
of this Agreement, provided further that on or after
January 31, 1997, the Permitted Designated Sales
Percentage of the Net Proceeds of the Designated
Sales received by a Borrower may be used to purchase
or redeem Parent Bonds if, after giving effect to
any such purchases, all trade payables and other
obligations of the Parent and its Subsidiaries are
current, (C) any Net Proceeds not so applied by the
Borrowers, shall be applied to the payment of the
Obligations if an Event of Default has occurred and
is continuing, and (D) the Net Proceeds of the sale
of Inventory located at such stores shall be
deposited in a Depository Account or a Cash
Concentration Account pursuant to the terms of
Section 7.13 hereof,
(ii) a Borrower may sell or dispose of
other assets, including stores not covered by clause
(i) above, provided that (A) the consideration
received in connection with any such sale shall be
at least equal to the fair market value of such
assets or stores (as determined by the Parent in
good faith), and at least 80% of such consideration
shall be received in cash, (B) the Net Proceeds
received in connection with any such sales shall be
used for working capital purposes or general
corporate purposes, in each case which purposes are
not otherwise prohibited by the terms of this
Agreement, (C) any Net Proceeds not so applied by
the Borrowers shall be applied to the payment of the
Obligations if an Event of Default has occurred and
is continuing, (D) if any Net Proceeds of such sales
or dispositions are not applied by the Borrowers
within 12 months of receipt of such Net Proceeds,
50% of all Net Proceeds of such sales or
dispositions shall be applied to the payment of the
Obligations pursuant to Section 2.04(b)(ii) hereof,
and (E) the Net Proceeds of the sale of Inventory
from such stores shall be deposited in a Depository
Account or a Cash Concentration Account pursuant to
the terms of Section 7.13 hereof,
(iii) a Borrower may sell Inventory in
the ordinary course of business, provided that the
Net Proceeds of such sales of Inventory shall be
deposited in a Depository Account or a Cash
Concentration Account pursuant to the terms of
Section 7.13 hereof;
(iv) a Borrower and its Subsidiaries may
dispose of obsolete or worn-out property in the
ordinary course of business,
(v) a Borrower may enter into any
arrangement, whereby it shall sell or transfer any
real property used or usable in its business and
thereafter rent or lease such property or other
property that it intends to use for substantially
the same purpose or purposes as the property being
sold or transferred (a "Sale and Lease-Back
Transaction") provided that (A) no Event of Default
has occurred and is continuing, (B) the
consideration received for the sale portion of the
Sale and Lease-Back Transaction shall be equal to
the fair market value of such property (as
determined by the Parent in good faith) and at least
80% of such consideration shall be received in cash,
(C) after giving effect to all Sale and Lease-Back
Transactions and all Liens incurred pursuant to
Section 8.01(j) hereof, the Borrowers own real
property with an aggregate book value of not less
than $50,000,000 that is free and clear of all Liens
other than Liens described in Sections 8.01(c) and
(f), and (D) the proceeds of the sale portion of the
Sale and Lease-Back Transaction are used for working
capital purposes or general corporate purposes, in
each case which purposes are not otherwise
prohibited by the terms of this Agreement; and
(vi) a Borrower may (A) sell or discount
without recourse its accounts receivable in
connection with the compromise thereof or the
assignment of past due accounts receivable for
collection and (B) sell or discount its accounts
receivable in connection with the credit card
servicing arrangements existing on the Closing Date
and other similar arrangements entered into
thereafter.
8.05. Change in Nature of Business. Make,
or permit any of their respective Subsidiaries to make,
any change in the nature of its business as carried on at
the date hereof except for changes that will not
fundamentally and substantively alter the character of
their business from that conducted by the Borrowers on
the Closing Date.
8.06. Loans, Advances and Investments, Etc.
Make, or permit any of their respective Subsidiaries to
make, any loan or advance to any Person or purchase or
otherwise acquire, or permit any of their respective
Subsidiaries to purchase or otherwise acquire, any
capital stock, properties, assets or obligations of, or
any interest in, any Person, other than:
(a) Permitted Investments;
(b) receivables owing to a Borrower or
any of its Subsidiaries, if created or acquired in
the ordinary course of business and payable or
dischargeable in accordance with the customary trade
terms of such Borrower or its applicable Subsidiary,
as the case may be;
(c) loans and advances to employees in
the ordinary course of business in an aggregate
principal amount not to exceed $1,000,000 at any
time outstanding;
(d) investments existing on the date
hereof, as set forth in Schedule 8.06 hereto;
(e) loans to developers in connection
with the construction of a Borrower's stores, provided
that such loans plus all guaranties permitted pursuant to
Section 8.03(d) hereof shall be in an aggregate amount
not to exceed $10,000,000 in any twelve month period;
(f) investments in Parent Bonds with the
Permitted Designated Sales Percentage of the Net Proceeds
of a Designated Sale pursuant to the terms of Section
8.04(b)(i) hereof; and
(g) other investments not otherwise
prohibited by the terms of this Agreement in an aggregate
amount not to exceed $10,000,000 from the Closing Date
through the Termination Date.
8.07. Dividends, Prepayments, Etc. Declare
or pay any dividends, purchase or otherwise acquire for
value any of their capital stock now or hereafter
outstanding, return any capital to their stockholders as
such, or make any other payment or distribution of assets
to its stockholders as such, or permit any of their
Subsidiaries to do any of the foregoing or to purchase or
otherwise acquire for value any stock of a Borrower or
make any payment or prepayment of principal of, premium,
if any, or interest on, or redeem, defease or otherwise
retire, any other Indebtedness of a Borrower before its
scheduled due date, other than:
(a) dividends by East Coast to Stores;
(b) dividends by Stores to the Parent for
(i) the payment of operating expenses of the Parent and
its Consolidated Subsidiaries, (ii) the payment of debt
service of the Parent and its Consolidated Subsidiaries,
(iii) stock redemptions and repurchases pursuant to
management and employee stock incentive plans or benefit
plans in an aggregate amount not in excess of $5,000,000,
(iv) the payment of cash dividends if the consolidated
net income of the Parent and its Consolidated
Subsidiaries for any fiscal year (without taking into
account any extraordinary gains for such year), equals
or exceeds $25,000,000, and (v) any other purposes which
would be permitted under the terms of this Agreement if
such amounts were used by either Borrower.
8.08. Federal Reserve Regulations. Permit
any Loan or the proceeds of any Loan under this Agreement
to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve
System.
8.09. Transactions with Affiliates. Enter
into or be a party to, or permit any of their
Subsidiaries to enter into or be a party to, any
transaction with any Affiliate of a Borrower except as
otherwise provided herein or in the ordinary course of
business in a manner and to an extent consistent with
past practice and necessary or desirable for the prudent
operation of its business for fair consideration and on
terms no less favorable to such Borrower or such
Subsidiary as are available from unaffiliated third
parties.
8.10. Environmental. Permit the use,
handling, generation, storage, treatment, Release or
disposal of any Hazardous Material at property owned or
leased by a Borrower or its Subsidiaries except in
compliance with Environmental Laws.
8.11. ERISA.
(a) Engage, or permit any ERISA Affiliate to
engage, in any prohibited transaction described in
Section 406 of ERISA or 4975 of the Code for which a
statutory or class exemption is not available or a
private exemption has not previously been obtained from
the Department of Labor and that would have a Material
Adverse Effect;
(b) permit, or permit any ERISA Affiliate to
permit, any enforceable Lien from arising under
Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to
amend any Benefit Plan in a manner that would require
security under Section 307 of ERISA; or
(d) request or permit any ERISA Affiliate to
request a waiver of the minimum funding requirements
under Section 412 of the Code in respect of any Benefit
Plan.
8.12. Availability. Permit the aggregate
Availability for the Borrowers to be less than
$25,000,000 at any time.
ARTICLE IX
DEFAULTS
9.01. Events of Default. An Event of
Default shall mean the occurrence or existence of one or
more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary,
involuntary or effected by operation of law):
(a) The Borrowers shall fail to make any
payment of principal under this Agreement on any Loan or
any Reimbursement Obligation when due; or the Borrowers
shall fail to pay when due any other amount payable under
this Agreement or any other Related Document (including
but not limited to the making of deposits in the
Depository Accounts, the Cash Concentration Accounts or
the Letter of Credit Cash Collateral Account), including
any interest or fee due hereunder or under the Fee Letter
or any other Related Document, and in the case of this
clause (ii) such failure shall continue unremedied for
more than five (5) days; or
(b) Any representation or warranty made by a
Borrower under this Agreement or any other Related
Document or any statement made by a Borrower in any
financial statement, certificate, report or document
furnished to the Agent or the Lenders pursuant to or in
connection with this Agreement or any other Related
Document, shall prove to have been false or misleading in
any material respect as of the time when made (including
by omission of material information necessary to make
such representation, warranty or statement, in light of
the circumstances under which it was made, not
misleading); or
(c) The Borrowers shall default in the
performance or observance of (i) the covenants contained
in Sections 7.02, 7.03, 7.05, 7.07, 7.10 and 7.11 or
Article VIII hereof or Section 5 of each Security
Agreement; or
(d) The Borrowers shall default in the
performance or observance of (i) the covenant contained
in Section 7.01 (other than paragraphs (d) and (e)
thereof), and such default shall have continued
unremedied for a period of five (5) days, (ii) the
covenants contained in paragraphs (d) and (e) of Section
7.01 and such default shall have continued unremedied for
a period of three (3) days, (iii) the covenant contained
in Section 7.13 and such default shall have continued
unremedied for a period of one (1) Business Day, and (iv)
for any other covenant, agreement or duty under this
Agreement or any other related Document (to the extent
not otherwise set forth in this Section 9.01) and such
default shall have continued unremedied for a period of
twenty (20) days; or
(e) The Borrowers or any Subsidiary shall have
entered into any consent or settlement decree or
agreement or similar arrangement with a Governmental
Authority or any judgment, order, decree or similar
action shall have been entered against any such Person
based on or arising from the violation of or pursuant to
any Environmental Law, or the generation, storage,
transportation, treatment, disposal or Release of any
Hazardous Material and, in connection with any of the
foregoing, any such Person shall incur Environmental
Liabilities and Costs which are unstayed, due and owing
in an amount in excess of $2,000,000; or
(f) The Borrowers or any Subsidiary shall fail
to pay any principal or interest on any of its
Indebtedness (excluding Indebtedness evidenced by the
Notes) in excess of $2,000,000, or any interest or
premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable
grace period, if any, specified in the agreement or
instrument relating to such Indebtedness, or any other
default under any agreement or instrument relating to any
such Indebtedness, or any other event, shall occur and
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect
of such default or event is to accelerate, or to permit
the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness in excess of such amount shall
be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(g) The Borrowers or any Subsidiary (i) shall
institute any proceeding or voluntary case seeking to
adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of
debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or
other similar official for a Borrower or any Subsidiary
or for any substantial part of its property, (ii) shall
be generally not paying its debts as such debts become
due, or shall admit in writing its inability to pay its
debts generally, (iii) shall make a general assignment
for the benefit of creditors, or (iv) shall take any
action to authorize or effect any of the actions set
forth above in this subsection (g); or
(h) Any proceeding shall be instituted against
a Borrower or any Subsidiary seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official
for such Borrower or any Subsidiary or for any
substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a
period of 30 days or any of the actions sought in such
proceeding (including, without limitation, the entry of
an order for relief against it or the appointment of a
receiver, trustee, custodian or other similar official
for it or for any substantial part of its property) shall
occur; or
(i) Any material provision of any Loan
Document shall at any time for any reason be declared to
be null and void, or the validity or enforceability
thereof shall be contested by a Borrower, or a proceeding
shall be commenced by a Borrower, or by any Governmental
Authority or other regulatory body having jurisdiction
over a Borrower, seeking to establish the invalidity or
unenforceability thereof, or a Borrower shall deny in
writing that such Borrower has any liability or
obligation purported to be created under any Loan
Document; or
(j) The Security Agreements or any other
Security Document, after delivery thereof pursuant
hereto, shall for any reason fail or cease to create a
valid and perfected and, except to the extent permitted
by the terms hereof or thereof, first priority Lien on or
security interest in any Collateral purported to be
covered thereby; or
(k) One or more judgments or orders (other
than a judgment described in subsections (g) or (h) of
this Section 9.01) for the payment of money exceeding any
applicable insurance or bond coverage by more than
$2,000,000 in the aggregate shall be rendered against a
Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor
upon any such judgment or order, or (ii) there shall be
any period of 20 consecutive days during which a stay of
enforcement of any such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(l) A Borrower or any of its ERISA Affiliates
shall have made a complete or partial withdrawal from a
Multiemployer Plan, and, as a result of such complete or
partial withdrawal, such Borrower or such ERISA Affiliate
incurs a withdrawal liability in an annual amount
exceeding $1,000,000; or a Multiemployer Plan enters
reorganization status under Section 4241 of ERISA, and,
as a result thereof, such Borrower's or such ERISA
Affiliate's annual contribution requirement with respect
to such Multiemployer Plan increases in an annual amount
exceeding $1,000,000; or
(m) Any Termination Event with respect to any
Benefit Plan shall have occurred, and, 30 days after
notice thereof shall have been given to a Borrower by the
Agent, (i) such Termination Event (if correctable) shall
not have been corrected, and (ii) the then current value
of such Benefit Plan's vested benefits exceeds the then
current value of assets allocable to such benefits in
such Benefit Plan by more than $1,000,000 (or in the case
of a Termination Event involving liability under
Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of
ERISA, the liability is in excess of such amount); or
(n) (i) The Parent shall cease to directly own
and control, of record and beneficially, 100% of the
outstanding common stock of Stores, free and clear of all
Liens; or (ii) Stores shall cease to directly own and
control, of record and beneficially, 100% of the
outstanding common stock of East Coast free and clear of
all Liens.
9.02. Consequences of an Event of Default.
If an Event of Default shall occur and be continuing or
shall exist the Agent may, and upon the direction of the
Majority Lenders, shall by notice to the Borrowers,
(a) declare the Revolving Credit Commitment of
each Lender and the Current Commitment terminated,
whereupon the Revolving Credit Commitment of each Lender
and the Current Commitment will terminate immediately
without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived, and
an action therefor shall immediately accrue; or
(b) declare the unpaid principal amount of the
Notes, interest accrued thereon, the total amount of the
Letter of Credit Exposure that is not cash collateralized
in accordance with this Agreement, any fees due hereunder
and all other amounts owing by the Borrowers hereunder or
under the Notes to be immediately due and payable without
presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived, and an
action therefor shall immediately accrue; or
(c) give notice to the Borrowers of the
occurrence and continuance of an Event of Default; or
(d) at any time when there are no Loans
outstanding, maintain cash collateral (to the extent a
Borrower has or receives cash) equal to 105% of all
outstanding Letters of Credit; or
(e) apply all funds deposited in each Cash
Concentration Account, and in the Letter of Credit Cash
Collateral Account to the payment, in whole or in part,
of the Obligations; or
(f) set-off amounts in the Cash Concentration
Accounts, the Letter of Credit Cash Collateral Account,
or any other account under the dominion and control of
the Agent and apply such amounts to the Obligations of
the Borrowers hereunder and under the Related Documents;
provided, however, that upon the occurrence of any Event
of Default described in subsections (g) or (h) of
Section 9.01, the Loans and all Reimbursement
Obligations, all interest thereon, all fees hereunder and
all other amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by
the Borrowers.
9.03. Deposit for Letters of Credit. Upon
demand by the Letter of Credit Issuer after the
occurrence of any Event of Default, the Borrowers shall
deposit with the Agent for the benefit of the Letter of
Credit Issuer with respect to each Letter of Credit then
outstanding cash in an amount equal to the greatest
amount for which such Letter of Credit may be drawn.
Such deposits shall be held by the Agent for the benefit
of the Letter of Credit Issuer in the Letter of Credit
Cash Collateral Account as security for, and to provide
for the payment of, the Letter of Credit Exposure.
9.04. Certain Remedies. If an Event of
Default occurs, each of the Agent and the Lenders may
exercise all rights and remedies which it may have
hereunder or under any other Related Document or at law
or in equity or otherwise. All such remedies shall be
cumulative and not exclusive.
ARTICLE X
MISCELLANEOUS
10.01. Holidays. Except as otherwise
provided herein, whenever any payment or action to be
made or taken hereunder or under the Notes shall be
stated to be due on a day which is not a Business Day,
such payment or action shall be made or taken on the next
following Business Day and such extension of time shall
be included in computing interest or fees, if any, in
connection with such payment or action.
10.02. Records. The unpaid principal amount
of the Notes, the unpaid interest accrued thereon, the
interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability, the
Current Commitment, the Stated Amount of each Letter of
Credit, the principal amount of all Reimbursement
Obligations, the Letter of Credit Exposure, and the
accrued and unpaid Agent's fee, Unused Line Fee and
Letter of Credit Fees shall at all times be ascertained
from the records of the Agent, which shall be conclusive
and binding absent manifest error.
10.03. Amendments and Waivers. (a) No
amendment or modification of any provision of this
Agreement or of any of the Notes or of any other Related
Document shall be effective without the written agreement
of the Majority Lenders and the Borrowers and no
termination or waiver of any provision of this Agreement
or of any of the Notes, or consent to any departure by
the Borrowers therefrom, shall in any event be effective
without the written concurrence of the Majority Lenders,
which the Majority Lenders shall have the right to grant
or withhold at their sole discretion; except that any
amendment, modification, or waiver (i) of any provision
of Article II or III which amendment, modification or
waiver increases the Revolving Credit Commitment of any
Lender, reduces the principal of, or interest on, the
Loans or the Reimbursement Obligations payable to any
Lender, reduces the amount of any fee payable for the
account of any Lender, or postpones or extends any date
fixed for any payment of principal of, or interest or
fees on, the Loans or Letter of Credit Exposure payable
to any Lender, (ii) that increases the aggregate amount
of the Revolving Credit Commitments, of the Lenders,
(iii) of the definitions of "Termination Date", "Majority
Lenders" or "Pro Rata Shares", (iv) of the definitions of
"Eligible Inventory" or "Borrowing Base" if the effect of
such amendment, modification or waiver is to increase the
Availability of the Borrowers, (v) of any provision of
this Agreement or any Related Document that would permit
Liens on the Collateral or release all or a substantial
portion of Collateral (except as set forth in
Section 11.08 hereof or except as otherwise permitted
herein), (vi) of the mandatory termination of the
Revolving Credit Commitments contained in Section
2.04(a)(ii) hereof, or (vii) of the provisions contained
in this Section 10.03, shall be effective only if
evidenced by a writing signed by or on behalf of (A) any
Lender affected thereby in the case of the amendments,
modifications or waivers described in clause (i) above or
(B) all Lenders in the case of the amendments, no
definitions or waivers described in clauses (ii) through
(vii) above. No amendment, modification, termination, or
waiver of any provision of Article XI or any other
provision referring to the Agent shall be effective
without the written concurrence of the Agent. Any waiver
or consent shall be effective only in the specific
instance and for the specific purpose for which it was
given. No notice to or demand on the Borrowers in any
case shall entitle the Borrowers to any other or further
notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent effected in
accordance with this Section 10.03 shall be binding on
each Lender, each future Lender, and, if signed by the
Borrowers, on the Borrowers.
(b) Notwithstanding anything to the
contrary contained in subsection 10.03(a), in the event
that the Borrowers request that this Agreement or any
other Related Document be amended or otherwise modified
in a manner which would require the unanimous consent of
all of the Lenders and such amendment or other
modification is agreed to by the Majority Lenders, then,
with the consent of the Borrowers and the Majority
Lenders, the Borrowers and the Majority Lenders may amend
this Agreement without the consent of the Lender or
Lenders which did not agree to such amendment or other
modification (collectively the "Minority Lenders") to
provide for (w) the termination of the Revolving Credit
Commitment of each of the Minority Lenders, (x) the
addition to this Agreement of one or more other Lenders,
or an increase in the Revolving Credit Commitment of one
or more of the Majority Lenders, so that the Revolving
Credit Commitments after giving effect to such amendment
shall be in the same aggregate amount as the Revolving
Credit Commitments immediately before giving effect to
such amendment, (y) if any Loans are outstanding at the
time of such amendment, the making of such additional
Loans by such new Lenders or Majority Lenders, as the
case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately
before giving effect to such amendment and (z) the
payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and
such other modifications to this Agreement as the
Borrowers and the Majority Lenders may determine to be
appropriate.
10.04. No Implied Waiver; Cumulative
Remedies. No course of dealing and no delay or failure
of the Lenders or the Agent in exercising any right,
power or privilege under this Agreement, the Notes or any
other Related Document shall affect any other or future
exercise thereof or exercise of any other right, power or
privilege; nor shall any single or partial exercise of
any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any
other right, power or privilege. The rights and remedies
of the Lenders or the Agent under this Agreement, the
Notes and the other Related Documents are cumulative and
not exclusive of any rights or remedies which the Lenders
or the Agent have thereunder or at law or in equity or
otherwise. The Lenders or the Agent may exercise their
rights and remedies against the Borrowers and the
Collateral as the Lenders and the Agent may elect, and
regardless of the existence or adequacy of any other
right or remedy.
10.05. Notices.
(a) All notices, requests, demands,
directions and other communications (collectively
"Notices") under the provisions of this Agreement or the
Notes shall be in writing and shall be mailed (by
certified mail, postage prepaid and return receipt
requested), telecopied, or delivered by recognized
overnight courier and shall be effective (i) if mailed,
three days after being deposited in the mails, (ii) if
telecopied, when sent, confirmation received and (iii) if
delivered, upon delivery with a receipt therefor. All
notices shall be sent to the applicable party at the
address stated on the signature page hereof together
with, in the case of a letter of credit request and
Letter of Credit Application sent pursuant to
Section 3.01(a), a copy to the Agent at the address for
the Agent provided on the signature page hereof, or in
accordance with the last unrevoked written direction from
such party to the other parties hereto.
(b) The Lenders and the Agent may rely,
and shall be fully protected in relying, on any notice
purportedly made by or on behalf of the Borrowers and the
Lenders and the Agent shall have no duty to verify the
identity or authority of any Person giving such notice.
The preceding sentence shall apply to all notices whether
or not made in a manner authorized or required by this
Agreement or any other Related Document.
10.06. Expenses; Taxes; Attorneys' Fees;
Indemnification. The Borrowers jointly and severally
agrees to pay or cause to be paid, on demand, and to save
the Agent (and, in the case of clauses (c) through (m)
below, the Lenders) harmless against liability for the
payment of, all reasonable out-of-pocket expenses,
regardless of whether the transactions contemplated
hereby are consummated, including but not limited to
reasonable fees and expenses of counsel for the Agent
(and, in the case of clauses (c) through (m) below, the
Lenders), accounting, due diligence, periodic field
audits, appraisals, investigations, monitoring of assets,
syndication, miscellaneous disbursements, examination,
travel, lodging and meals, incurred by the Agent (and, in
the case of clauses (c) through (m) below, the Lenders)
from time to time arising from or relating to: (a) the
negotiation, preparation, execution, delivery,
performance and administration of this Agreement and the
other Related Documents, (b) any requested amendments,
waivers or consents to this Agreement or the other
Related Documents whether or not such documents become
effective or are given, (c) the preservation and
protection of any of the Agent's and the Lenders' rights
under this Agreement or the other Related Documents,
(d) the defense of any claim or action asserted or
brought against the Agent or the Lenders by any Person
that arises from or relates to this Agreement, any other
Related Document, the Agent's or the Lenders' claims
against a Borrower, or any and all matters in connection
therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or
related to this Agreement or any other Related Document,
(f) the filing of any petition, complaint, answer, motion
or other pleading by the Agent or the Lenders, or the
taking of any action in respect of the Collateral or
other security, in connection with this Agreement or any
other Related Document, (g) the protection, collection,
lease, sale, taking possession of or liquidation of, any
Collateral or other security in connection with this
Agreement or any other Related Document, (h) any attempt
to enforce any Lien in any Collateral or other security
in connection with this Agreement or any other Related
Document, (i) any attempt to collect from a Borrower,
(j) the receipt of any advice with respect to any of the
foregoing, (k) all Environmental Liabilities and Costs
arising from or in connection with the past, present or
future operations of a Borrower or any of its
Subsidiaries involving any damage to real or personal
property or natural resources or harm or injury alleged
to have resulted from any Release of Hazardous Materials
on, upon or into such property, (l) any costs or
liabilities incurred in connection with the
investigation, removal, cleanup and/or remediation of any
Hazardous Materials present or arising out of the
operations of any facility of a Borrower or any of its
Subsidiaries, or (m) any costs or liabilities incurred in
connection with any Environmental Lien. Without
limitation of the foregoing or any other provision of any
Related Document: (x) the Borrowers jointly and
severally agree to pay all stamp, document, transfer,
recording or filing taxes or fees (including, without
limitation, mortgage recording taxes) and similar
impositions now or hereafter determined by the Agent or
any of the Lenders to be payable in connection with this
Agreement or any other Related Document, and the
Borrowers jointly and severally agree to save the Agent
and the Lenders harmless from and against any and all
present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay
in paying any such taxes, fees or impositions, and (y) if
a Borrower either fails to perform any covenant or
agreement contained herein or in any other Related
Document, the Agent may itself perform or cause
performance of such covenant or agreement, and the
expenses of the Agent incurred in connection therewith
shall be reimbursed on demand by the Borrowers. The
Borrowers jointly and severally agree to indemnify and
defend the Agent and the Lenders and their directors,
officers, agents, employees and affiliates (collectively,
the "Indemnified Parties") from, and hold each of them
harmless against, any and all losses, liabilities,
claims, damages, costs or expenses of any nature
whatsoever (including reasonable attorneys' fees and
amounts paid in settlement) incurred by, imposed upon or
asserted against any of them arising out of or by reason
of any investigation, litigation or other proceeding or
claim brought or threatened relating to, or otherwise
arising out of or relating to, the execution of this
Agreement or any other Related Document, the transactions
contemplated hereby or thereby or any Loan or proposed
Loan or Letter of Credit or proposed Letter of Credit
hereunder (including, but without limitation, any use
made or proposed to be made by a Borrower or any of its
Affiliates of the proceeds of any thereof, or the
delivery or use or transfer of or the payment or failure
to pay under any Loan or Letter of Credit) but excluding
any such losses, liabilities, claims, damages, costs or
expenses to the extent finally judicially determined to
have resulted from the gross negligence or willful
misconduct of the Indemnified Party.
10.07. Application. Except to the extent,
if any, expressly set forth in this Agreement or in the
Related Documents, the Agent and the Lenders shall have
the right to apply any payment received or applied by it
in connection with the Obligations to such of the
Obligations then due and payable as it may elect.
10.08. Severability. The provisions of this
Agreement are intended to be severable. If any provision
of this Agreement shall be held invalid or unenforceable
in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
10.09. Governing Law. This Agreement and
the Notes shall be deemed to be contracts under the laws
of the State of New York, without regard to choice of law
principles, and for all purposes shall be governed by and
construed and enforced in accordance with the laws of
said State.
10.10. Prior Understandings. This Agreement
supersedes all prior understandings and agreements,
whether written or oral, among the parties hereto
relating to the transactions provided for herein other
than the Fee Letter.
10.11. Duration; Survival. All
representations and warranties of the Borrowers contained
herein or made in connection herewith shall survive the
making of the Loans and the issuance of any Letter of
Credit and shall not be waived by the execution and
delivery of this Agreement, the Notes or any other
Related Document, any investigation by or knowledge of
the Agent or the Lenders, the making of any Loan or the
issuance of any Letter of Credit hereunder, or any other
event whatsoever. All covenants and agreements of the
Borrowers contained herein shall continue in full force
and effect from and after the date hereof so long as the
Borrowers may borrow hereunder and until the Obligations
have been paid in full and no Letters of Credit remain
outstanding. Without limitation, it is understood that
all obligations of the Borrowers to make payments to or
indemnify the Agent and the Lenders (including, without
limitation, obligations arising under Section 10.06
hereof) shall survive the payment in full of the Notes
and all Reimbursement Obligations and of all other
obligations of the Borrowers thereunder and hereunder,
termination of this Agreement and all other events
whatsoever and whether or not any Loans are made or
Letters of Credit issued hereunder.
10.12. Counterparts. This Agreement may be
executed in any number of counterparts and by the
different parties hereto on separate counterparts each of
which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the
same instrument.
10.13. Assignments; Participations.
(a) Each Lender may with the written consent of the
Agent, which consent shall not be unreasonably withheld,
assign to one or more commercial banks or other financial
institutions a portion of its rights and obligations
under this Agreement (including, without limitation, a
portion of its Revolving Credit Commitment, the Loans
owing to it and its rights and obligations as a Lender
with respect to Letters of Credit) and the other Related
Documents; provided, however, that (i) each such
assignment shall be in a principal amount of not less
than $10,000,000 and in multiples of $1,000,000 in excess
thereof (or the remainder of such Lender's Revolving
Credit Commitment), (ii) no such assignment shall be
made, other than by CIT, prior to the Syndication Date,
and (iii) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and
recording in the Register (as hereinafter defined), an
Assignment and Acceptance. Upon such execution,
delivery, acceptance and recording, from and after the
effective date specified in each Assignment and
Acceptance, (A) the assignee thereunder shall be a party
hereto and to the other Related Documents and, to the
extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations (including,
without limitation, the obligation to participate in
Letters of Credit) of a Lender hereunder and thereunder
and (B) the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under
this Agreement.
(b) By executing and delivering an
Assignment and Acceptance, the assignor and the assignee
thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, the assigning
lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties
or representations made in or in connection with this
Agreement or any other Related Document or the execution,
legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other
Related Document furnished pursuant hereto; (ii) the
assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial
condition of a Borrower or any of its Subsidiaries or the
performance or observance by a Borrower of any of its
obligations under this Agreement or any other Related
Document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement
and the other Related Documents, together with such other
documents and information it has deemed appropriate to
make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the assigning
Lender, the Agent or any Lender and based on such
documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the
other Related Documents; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement
and the other Related Documents as are delegated to the
Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this
Agreement and the other Related Documents are required
to be performed by it as a Lender.
(c) The Agent shall maintain at its
address referred to on the signature page hereto, a copy
of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the
names and addresses of the Lenders and the Revolving
Credit Commitment of, and principal amount of the Loans
owing to and the participation interest in the Letters of
Credit of, each Lender from time to time (the
"Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest
error, and the Borrowers, the Agent and the Lenders may
treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the
Borrowers and any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender, an assignee
Lender, together with the Note subject to such
assignment, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the
form of Exhibit E hereto, (i) accept such Assignment and
Acceptance, (ii) give prompt notice thereof to the
Borrowers and (iii) record the information contained
therein in the Register. Within five Business Days after
its receipt of such notice, the Borrowers, at their own
expense, shall execute and deliver to the Agent in
exchange for the surrendered Note a new Note to the order
of such assignee Lender in an aggregate principal amount
equal to the Revolving Credit Commitment assumed by it
pursuant to such Assignment and Acceptance, and a new
Note to the order of the assigning Lender in an aggregate
principal amount equal to the Revolving Credit Commitment
retained by it hereunder, in each case prepared by the
Agent. Such new Note shall be in an aggregate principal
amount equal to the aggregate principal amount of such
surrendered Note, shall be dated the date of the Agent's
acceptance of such assignment and acceptance and shall
otherwise be in substantially the form of Exhibit A
hereto.
(e) Each Lender may sell participations
to one or more banks or other entities in or to all or a
portion of its rights and obligations under this
Agreement and the other Related Documents (including,
without limitation, all or a portion of its Revolving
Credit Commitment and the Loans owing to it and its
participation in Letters of Credit); provided that
(i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit
Commitment hereunder) and the other Related Documents
shall remain unchanged; (ii) such Lender shall remain
solely responsible to the other parties hereto for the
performance of such obligations, and the Borrowers, the
Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and
the other Related Documents; and (iii) a participant
shall not be entitled to require such Lender to take or
omit to take any action hereunder except (A) action
directly effecting an extension of the maturity dates or
decrease in the principal amount of the Loans or
Reimbursement Obligations, or (B) action directly
effecting an extension of the due dates of or a decrease
in the rate of interest payable on the Loans or the fees
payable under this Agreement, or (C) actions directly
effecting a release of all or a substantial portion of
the Collateral (except as set forth in Section 11.08 of
this Agreement or any Related Document).
(f) Notwithstanding the foregoing
provisions of this Section 10.13, each Lender may at any
time sell, assign, transfer, or negotiate all or any part
of its rights and obligations under this Agreement and
the Related Documents to any Affiliate of such Lender.
10.14. Successors and Assigns. This
Agreement and the other Related Documents shall be
binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns except
that the Borrowers may not assign or transfer any of its
rights hereunder or thereunder without the prior written
consent of all of the Lenders.
10.15. Confidentiality. Upon delivering to
any Lender or the Agent, or permitting any Lender or the
Agent to inspect, any written information pursuant to
this Agreement or the other Related Documents, each
Lender and the Agent shall treat such information as
confidential to the extent such information is
conspicuously marked confidential. Each Lender and the
Agent agrees to hold such information in confidence from
the date of disclosure thereof. Subject to the other
provisions of this Section 10.15, each Lender and the
Agent may disclose confidential information to its
officers, directors, employees, attorneys, accountants or
other professionals engaged by any Lender or the Agent
only after determining that such third party has been
instructed to hold such information in confidence to the
same extent as if it were a Lender. Notwithstanding the
foregoing, the provisions of this Section 10.15 shall not
apply to information within any one of the following
categories or any combination thereof: (i) information
the substance of which, at the time of disclosure by any
Lender or the Agent, has been disclosed to or is known to
any creditor (other than information as to which such
creditor is then under an obligation of nondisclosure),
or any Person other than (A) a director, officer,
employee or agent of any of a Borrower or a professional
engaged by a Borrower or (B) a Person who is then under
an obligation of nondisclosure (otherwise than as a
consequence of a wrongful act of any Lender or the
Agent), (ii) information which any Lender or the Agent
had in its possession prior to receipt thereof from the
disclosing party, or (iii) information received by any
Lender or the Agent from a third party having no
obligations of nondisclosure with respect thereto.
Nothing contained in this Section 10.15 shall prevent any
disclosure: (x) believed in good faith by any Lender or
the Agent to be required by any law or guideline or
interpretation or application thereof by any Governmental
Authority, arbitrator or grand jury charged with the
interpretation or administration thereof or compliance
with any request or directive of any Governmental
Authority, arbitrator or grand jury (whether or not
having the force of law), (y) determined by counsel for
any Lender or the Agent to be necessary or advisable in
connection with enforcement or preservation of rights
under or in connection with this Agreement or any other
Related Document or (z) of any information which has been
made public by a Person other than any Lender or the
Agent. The Lenders and the Agent shall have the right to
disclose any confidential information described in this
Section 10.15 to the Letter of Credit Issuer and to an
assignee or prospective assignee or to a participant or
prospective participant in Loans hereunder, provided that
the assigning or selling Lender shall have obtained from
such assignee or prospective assignee or participant or
prospective participant an agreement to hold such
information in confidence to the same extent as if it
were a Lender.
10.16. Waiver of Jury Trial. BY ITS
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE AGENT, EACH
LENDER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT, THE NOTES OR ANY OTHER RELATED DOCUMENT, ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS,
OR THE BORROWERS IN CONNECTION HEREWITH OR THEREWITH.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND
THE LENDERS TO ENTER INTO THIS AGREEMENT.
10.17. Right of Setoff. Upon the occurrence
and during the continuance of any Event of Default any
Lender, the Agent and the Letter of Credit Issuer may,
and is hereby authorized to, at any time from time to
time, without notice to the Borrowers (any such notice
being expressly waived by the Borrowers) and to the
fullest extent permitted by law, set off and apply any
and all deposits (general or special, time or demand,
provision or final) at any time held and other
indebtedness at any time owing by such Lender, the Agent
or the Letter of Credit Issuer to or for the credit or
the account of the Borrowers against any an all
Obligations of the Borrowers now or hereafter existing
under the Loan Documents, irrespective of whether or not
any Lender, the Agent and the Letter of Credit Issuer
shall have made any demand hereunder or thereunder and
although such Obligations may be contingent or unmatured.
Each Lender, the Agent and the Letter of Credit Issuer
agrees promptly to notify a Borrower after any such
setoff and application made by such Lender, the Agent or
the Letter of Credit Issuer; provided, however, that the
failure to give such notice shall not affect the validity
of such setoff and application. The rights of each
Lender, the Agent and the Letter of Credit Issuer under
this Section 10.17 are in addition to the other rights
and remedies (including, without limitation, other rights
of setoff under applicable law or otherwise) which such
Lender, the Agent or the Letter of Credit Issuer may
have.
10.18. Headings. Section headings herein
are included for convenience of reference only and shall
not constitute a part of this Agreement for any other
purpose.
10.19. Forum Selection and Consent to
Jurisdiction. Any litigation based hereon, or arising
out of, under or in connection with, this Agreement or
any other Loan Document, or any course of conduct, course
of dealing, statement (whether verbal or written) or
action of the Agent, any Lender, the Agent, the Letter of
Credit Issuer or the Borrowers may be brought and
maintained exclusively in the courts of the State of New
York or the United States District Court for the Southern
District of New York; provided, however, that any suit
seeking enforcement against any Collateral or other
property may be brought, at the Agent's option, in the
courts of any jurisdiction where such Collateral or other
property may be found. The Borrowers hereby expressly
and irrevocably submit to the jurisdiction of the courts
of the State of New York and of the United States
District Court for the Southern District of New York for
the purpose of any such litigation and irrevocably agree
to be bound by any judgment rendered thereby in
connection with such litigation. The Borrowers further
irrevocably consent to the service of process (i) by
registered or certified mail, postage prepaid, to the
Administrative Borrower at its address for notices
contained in Section 10.05 hereof, such service to become
effective five days after such mailing, or (ii) by
personal service within or without the State of New York.
Nothing herein shall affect the right of the Agent, any
Lender or the Letter of Credit Issuer to service of
process in any other manner permitted by law. The
Borrowers hereby expressly and irrevocably waive, to the
fullest extent permitted by law, any objection which it
may now or hereafter have to the laying of venue of any
such litigation brought in any such court referred to
above and any claim that any such litigation has been
brought in an inconvenient forum. To the extent that the
Borrowers have or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise)
with respect to itself or its property, the Borrowers
hereby irrevocably waive such immunity in respect of its
obligations under this Agreement and the other Loan
Documents.
10.20. The Administrative Borrower as Agent
for Borrowers. Each Borrower hereby irrevocably appoints
Stores as the Administrative Borrower, agent and
attorney-in-fact for the Borrowers which appointment
shall remain in full force and effect unless and until
the Agent shall have received prior written notice signed
by both of the Borrowers 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 the Agent with all notices with
respect to Loans 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 Loans and to exercise such other powers as are
reasonably incidental thereto to carry out the purposes
of this Agreement. Each Borrower hereby irrevocably
appoints and authorizes the Administrative Borrower to
provide the Agent with all notices and to take all action
as the Administrative Borrower deems appropriate with
respect to all Letters of Credit under this Agreement.
It is understood that the handling of the Loan Account
and Collateral of the Borrowers in a combined fashion, as
more fully set forth herein, is done solely as an
accommodation to the Borrowers in order to utilize the
collective borrowing powers of the Borrowers in the most
efficient and economical manner and at their request, and
that neither the Agent, the Letter of Credit Issuer nor
the Lenders shall incur liability to the Borrowers as a
result hereof. Each of the Borrowers 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 Agent, the Letter of
Credit Issuer and the Lenders to do so, and in
consideration thereof, each of the Borrowers hereby
jointly and severally agrees to indemnify the Indemnified
Parties and hold the Indemnified Parties harmless against
any and all liability, expense or loss made against such
Indemnified Parties by either of the Borrowers or by any
third party whosoever, arising from or incurred by reason
of (a) the handling of the Loan Account and Collateral of
the Borrowers as herein provided or (b) the Agent, the
Lenders and the Letter of Credit Issuer relying on any
instructions of the Administrative Borrower.
ARTICLE XI
THE AGENT
11.01. Appointment. Each Lender (and each
subsequent holder of any Note by its acceptance thereof)
hereby irrevocably appoints and authorizes CIT, in its
capacity as Agent (i) to receive on behalf of each Lender
any payment of principal of or interest on the Notes
outstanding hereunder and all other amounts accrued
hereunder for the account of the Lenders and paid to the
Agent, and, subject to Section 2.03 of this Agreement, to
distribute promptly to each Lender its Pro Rata Share of
all payments so received, (ii) to distribute to each
Lender copies of all material notices and agreements
received by the Agent and not required to be delivered to
each Lender pursuant to the terms of this Agreement,
provided that the Agent shall not have any liability to
the Lenders for the Agent's inadvertent failure to
distribute any such notice or agreements to the Lenders,
and (iii) subject to Section 10.03 of this Agreement, to
take such action as the Agent deems appropriate on its
behalf to administer the Loans, Letters of Credit and the
Loan Documents and to exercise such other powers
delegated to the Agent by the terms hereof or the Loan
Documents (including, without limitation, the power to
give or to refuse to give notices, waivers, consents,
approvals and instructions and the power to make or to
refuse to make determinations and calculations) together
with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any
matters not expressly provided for by this Agreement and
the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall
not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the
Majority Lenders, and such instructions of the Majority
Lenders shall be binding upon all Lenders and all holders
of Notes; provided, however, that the Letter of Credit
Issuer shall not be required to refuse to honor a drawing
under any Letter of Credit and the Agent shall not be
required to take any action which, in the reasonable
opinion of the Agent, exposes the Agent to liability or
which is contrary to this Agreement or any Loan Document
or applicable law.
11.02. Nature of Duties. The Agent shall
have no duties or responsibilities except those expressly
set forth in this Agreement or in the Related Documents.
The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by
reason of this Agreement or any Related Document a
fiduciary relationship in respect of any Lender. Nothing
in this Agreement or any of the Related Documents,
express or implied, is intended to or shall be construed
to impose upon the Agent any obligations in respect of
this Agreement or any of the Related Documents except as
expressly set forth herein or therein. Each Lender shall
make its own independent investigation of the financial
condition and affairs of the Borrowers in connection with
the making and the continuance of the Loans hereunder and
with the issuance of the Letters of Credit and shall make
its own appraisal of the creditworthiness of the
Borrowers and the value of the Collateral, and the Agent
shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any
credit or other information with respect thereto, whether
coming into its possession before the initial Credit
Extension hereunder or at any time or times thereafter,
provided that, upon the reasonable request of a Lender,
the Agent shall provide to such Lender any documents or
reports delivered to the Agent by the Borrowers pursuant
to the terms of this Agreement or any Related Document.
If the Agent seeks the consent or approval of the
Majority Lenders to the taking or refraining from taking
any action hereunder, the Agent shall send notice thereof
to each Lender. The Agent shall promptly notify each
Lender any time that the Majority Lenders have instructed
the Agent to act or refrain from acting pursuant hereto.
11.03. Rights, Exculpation, Etc. The Agent
and its directors, officers, agents or employees shall
not be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement
or the other Loan Documents, except for their own gross
negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Without
limiting the generality of the foregoing, the Agent
(i) may treat the payee of any Note as the holder thereof
until the Agent receives written notice of the assignment
or transfer thereof, pursuant to Section 10.13 hereof,
signed by such payee and in form satisfactory to the
Agent; (ii) may consult with legal counsel (including,
without limitation, counsel to the Agent or counsel to
the Borrowers), independent public accountants, and other
experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it
in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible
to any Lender for any statements, certificates,
warranties or representations made in or in connection
with this Agreement or the other Loan Documents;
(iv) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other
Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement
or the other Loan Documents on the part of any Person,
the existence or possible existence of any Potential
Default or Event of Default, or to inspect the Collateral
or other property (including, without limitation, the
books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan
Documents or any other instrument or document furnished
pursuant hereto or thereto; and (vi) shall not be deemed
to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the
existence, priority or perfection of the Agent's Lien
thereon, or the Borrowing Base or any certificate
prepared by a Borrower in connection therewith, nor shall
the Agent be responsible or liable to the Lenders for any
failure to monitor or maintain the Borrowing Base or any
portion of the Collateral. The Agent shall not be liable
for any apportionment or distribution of payments made by
it in good faith pursuant to Section 2.08(c), and if any
such apportionment or distribution is subsequently
determined to have been made in error the sole recourse
of any Lender to whom payment was due but not made, shall
be to recover from other Lenders any payment in excess of
the amount which they are determined to be entitled. The
Agent may at any time request instructions from the
Lenders with respect to any actions or approvals which by
the terms of this Agreement or of any of the Related
Documents the Agent is permitted or required to take or
to grant, and if such instructions are promptly
requested, the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any
approval under any of the Related Documents until it
shall have received such instructions from the Majority
Lenders. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against the Agent as
a result of the Agent acting or refraining from acting
under this Agreement, the Notes, or any of the other
Related Documents in accordance with the instructions of
the Majority Lenders.
11.04. Reliance. The Agent shall be
entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and
correct and to have been signed, sent or made by the
proper Person, and with respect to all matters pertaining
to this Agreement or any of the Related Documents and its
duties hereunder or thereunder, upon advice of counsel
selected by it.
11.05. Indemnification. To the extent that
the Agent is not reimbursed and indemnified by the
Borrowers, the Lenders will reimburse and indemnify the
Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement
or any of the Related Documents or any action taken or
omitted by the Agent under this Agreement or any of the
Related Documents, in proportion to each Lender's Pro
Rata Share, including, without limitation, advances and
disbursements made pursuant to Section 11.08; provided,
however, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses,
advances or disbursements for which there has been a
final judicial determination that such resulted from the
Agent's gross negligence or willful misconduct. The
obligations of the Lenders under this Section 11.05 shall
survive the payment in full of the Loans and
Reimbursement Obligations and the termination of this
Agreement.
11.06. CIT Individually. With respect to
its Pro Rata Share of the Revolving Credit Commitments
hereunder, the Loans made by it and the Note issued to or
held by it, CIT shall have and may exercise the same
rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set
forth herein for any other Lender or holder of a Note.
The terms "Lenders" or "Majority Lenders" or any similar
terms shall, unless the context clearly otherwise
indicates, include CIT in its individual capacity as a
Lender or one of the Majority Lenders. CIT and its
Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other
business with a Borrower or any of its Subsidiaries as if
it were not acting as Agent pursuant hereto without any
duty to account to the Lenders. The Lenders acknowledge
and agree that Chemical Bank, as the Letter of Credit
Issuer, is an Affiliate of the Agent, and may take
actions which are not in the interests of, or may have an
adverse effect on, the Lenders, or may omit to take
actions which would be in the interests of, or would have
a favorable effect on, the Lenders, and the Lenders will
not assert any claim against the Agent based on actions
or omissions by the Letter of Credit Issuer and will not
assert any such actions or omissions as a defense or
offset to the Lenders' obligations hereunder.
11.07. Successor Agent.
(a) The Agent may resign from the
performance of all its functions and duties hereunder and
under the other Related Documents at any time by giving
at least thirty (30) Business Days' prior written notice
to the Borrowers and each Lender. Such resignation shall
take effect upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation,
the Majority Lenders shall appoint a successor Agent who
shall be reasonably satisfactory to the Borrowers. Upon
the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Related
Documents. After any Agent's resignation hereunder as
the Agent, the provisions of this Article XI shall inure
to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement and
the other Related Documents.
(c) If a successor Agent shall not have
been so appointed within said thirty (30) Business Day
period, the retiring Agent, with the consent of the
Borrowers, shall then appoint a successor Agent who shall
serve as Agent until such time, if any, as the Majority
Lenders, with the consent of the Borrowers, appoint a
successor Agent as provided above.
11.08. Collateral Matters.
(a) The Agent may from time to time,
during the occurrence and continuance of an Event of
Default, make such disbursements and advances ("Agent
Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the
Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the
Borrowers of the Loans and other Obligations or to pay
any other amount chargeable to the Borrowers pursuant to
the terms of this Agreement, including, without
limitation, costs, fees and expenses as described in
Section 10.06. The Agent Advances shall be repayable on
demand and be secured by the Collateral. The Agent
Advances shall not constitute Loans but shall otherwise
constitute Obligations hereunder. The Agent shall notify
each Lender and the Administrative Borrower in writing of
each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance.
Without limitation to its obligations pursuant to
Section 11.05, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in
Dollars in immediately available funds, the amount equal
to such Lender's Pro Rata Share of each such Agent
Advance. If such funds are not made available to the
Agent by such Lender the Agent shall be entitled to
recover such funds, on demand from such Lender together
with interest thereon, for each day from the date such
payment was due until the date such amount is paid to the
Agent, at the customary rate set by the Agent for the
correction of errors among banks for three Business Days
and thereafter at the Regular Rate.
(b) The Lenders hereby irrevocably
authorize the Agent, at its option and in its discretion,
to release any Lien granted to or held by the Agent upon
any Collateral upon termination of the Revolving Credit
Commitments and payment and satisfaction of all Loans,
Reimbursement Obligations, other Letter of Credit
Exposure (whether or not due) and all other Obligations
which have matured and which the Agent has been notified
in writing are then due and payable; or constituting
property being sold or disposed of if a Borrower
certifies to the Agent that the sale or disposition is
made in compliance with Section 8.04 (b) hereof (and the
Agent may rely conclusively on any such certificate,
without further inquiry); or constituting property in
which a Borrower owned no interest at the time the Lien
was granted or at any time thereafter; or if approved,
authorized or ratified in writing by the Majority
Lenders. Upon request by the Agent at any time, the
Lenders will confirm in writing the Agent's authority to
release particular types or items of Collateral pursuant
to this Section 11.08(b).
(c) Without in any manner limiting the
Agent's authority to act without any specific or further
authorization or consent by the Majority Lenders (as set
forth in Section 11.08(b)), each Lender agrees to confirm
in writing, upon request by the Agent, the authority to
release Collateral conferred upon the Agent under
Section 11.08(b). So long as no Event of Default is then
continuing, upon receipt by the Agent of confirmation
from the Majority Lenders of its authority to release any
particular item or types of Collateral, and upon at least
five (5) Business Days' prior written request by the
Administrative Borrower, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such
documents as may be necessary to evidence the release of
the Liens granted to the Agent for the benefit of the
Lenders upon such Collateral; provided, however, that
(i) the Agent shall not be required to execute any such
document on terms which, in the Agent's opinion, would
expose the Agent to liability or create any obligations
or entail any consequence other than the release of such
Liens without recourse or warranty, and (ii) such release
shall not in any manner discharge, affect or impair the
Obligations or any Lien upon (or obligations of the
Borrowers in respect of) all interests in the Collateral
retained by the Borrowers.
(d) The Agent shall have no obligation
whatsoever to any Lenders to assure that the Collateral
exists or is owned by the Borrowers or is cared for,
protected or insured or has been encumbered or that the
Lien granted to the Agent pursuant to the Security
Documents has been properly or sufficiently or lawfully
created, perfected, protected or enforced or is 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 the Agent in this Section 11.08 or in any of the
Related Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event
related thereto, the Agent may act in any manner it may
deem appropriate, in its sole discretion, given the
Agent's own interest in the Collateral as one of the
Lenders and that the Agent shall have no duty or
liability whatsoever to any other Lender.
IN WITNESS WHEREOF, the parties hereto, by
their officers thereunto duly authorized, have executed
and delivered this Agreement as of the date first above
written.
BORROWERS:
HECHINGER STORES COMPANY
By: /s/ W. Clark McClelland
Name: W. Clark McClelland
Title: Executive Vice President
Address for Notices:
3500 Pennsy Drive
Landover, MA 20785
Attention: Mark R. Adams
Senior Vice President, Treasurer
& Secretary
Telephone: (301) 341-0452
Telecopier: (301) 341-0980
HECHINGER STORES EAST COAST COMPANY
By: /s/ W. Clark McClelland
Name: W. Clark McClelland
Title: Executive Vice President
Address for Notices:
3500 Pennsy Drive
Landover, MA 20785
Attention: Mark R. Adams
Senior Vice President, Treasurer
& Secretary
Telephone: (301) 341-0452
Telecopier: (301) 341-0980
AGENT AND LENDER:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Carl A. Toriello
Name: Carl A. Toriello
Title: Vice President
Address for Notices:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Frank A. Grimaldi, Vice President
Telephone: (212) 536-1259
Telecopier: (212) 536-1295
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Frederic L. Ragucci, Esq.
Telephone: (212) 758-0404
Telecopier: (212) 593-5955
EXHIBIT A
NOTE
$200,000,000 New York, New York
February 20, 1996
FOR VALUE RECEIVED, each of HECHINGER STORES
COMPANY, a Delaware corporation and HECHINGER STORES EAST
COAST COMPANY, a Delaware corporation (collectively, the
Borrowers ), HEREBY JOINTLY AND SEVERALLY PROMISE TO
PAY, to the order of The CIT Group/Business Credit, Inc.
(the "Lender") on the Termination Date (as defined in the
Credit Agreement referred to below), and at such earlier
dates as may be required by the Credit Agreement, the
lesser of (i) the principal amount of Two Hundred Million
and 00/100 Dollars ($200,000,000) and (ii) the aggregate
unpaid principal amount of all Loans made by the Lender
to the Borrowers pursuant to the Credit Agreement. The
Borrowers further jointly and severally promise to pay to
the order of the Lender interest on the unpaid principal
amount hereof from time to time outstanding at the rate
or rates per annum determined pursuant to the Credit
Agreement, payable on the dates set forth in the Credit
Agreement. Payments of principal and interest on this
Note shall be made in lawful money of the United States
of America and in the manner set forth in the Credit
Agreement.
This Note is one of the "Notes" referred to in,
and is entitled to the benefits of, the Revolving Credit
Agreement, dated as of February 20, 1996 (as the same may
be amended, restated, modified or supplemented from time
to time, the "Credit Agreement"), among the Borrowers,
the Lenders party thereto and The CIT Group/Business
Credit, Inc., as agent for the Lenders (the "Agent"),
which among other things, provides for the acceleration
of the maturity hereof upon the occurrence of certain
events and for prepayments in certain circumstances, all
upon certain terms and conditions specified therein.
Notwithstanding any other provision of this Note,
interest paid or becoming due hereunder shall in no event
exceed the maximum rate permitted by applicable law.
Terms defined in the Credit Agreement have the same
meanings herein.
This Note is entitled to the benefits of the
Credit Agreement and the other Related Documents referred
to in the Credit Agreement. Except as otherwise set
forth in the Credit Agreement, the Borrowers hereby
expressly waive presentment, demand, notice, protest and
all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement
of this Note, and an action for amounts due hereunder
shall immediately accrue.
This Note and interests herein may only be
transferred to the extent and in the manner set forth in
the Credit Agreement.
This Note shall be governed by, construed and
enforced in accordance with, the internal laws of the
State of New York applicable to contracts made and to be
performed therein without consideration as to choice of
law.
HECHINGER STORES COMPANY
By: ____________________________
Name:
Title:
HECHINGER STORES EAST COST COMPANY
By: ____________________________
Name:
Title:
EXHIBIT B
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 20,
1996, made by [HECHINGER STORES COMPANY] [HECHINGER
STORES EAST COAST COMPANY], a Delaware corporation (the
"Grantor"), in favor of THE CIT GROUP/BUSINESS CREDIT,
INC., as agent for the Lenders parties to the Credit
Agreement referred to below (in such capacity, the
"Agent").
W I T N E S S E T H :
WHEREAS, the Grantor, [HECHINGER STORES
COMPANY] [HECHINGER STORES EAST COAST COMPANY] (each a
Borrower and collectively, the Borrowers ) the Agent
and certain financial institutions from time to time
party thereto (the "Lenders") are parties to a Revolving
Credit Agreement, dated as of February 20, 1996 (such
Agreement, as amended or otherwise modified from time to
time, being hereinafter referred to as the "Credit
Agreement");
WHEREAS, pursuant to the Credit Agreement, the
Lenders have agreed to make loans (the "Loans") to the
Borrowers in an aggregate principal amount at any one
time outstanding not to exceed $200,000,000, which may
include letters of credit (the "Letters of Credit")
issued with the assistance of the Agent and the Lenders
for the account of the Borrowers;
WHEREAS, it is a condition precedent to the
Lenders making any Loan or assisting the Borrowers in
obtaining the issuance of any Letter of Credit pursuant
to the Credit Agreement that the Grantor shall have
executed and delivered to the Agent a security agreement
providing for the grant to the Agent for the benefit of
the Lenders of a security interest in certain inventory
of the Grantor;
NOW, THEREFORE, in consideration of the
premises and the agreements herein and in order to induce
the Lenders to make and maintain the Loans and to assist
the Grantor in obtaining the issuance of Letters of
Credit pursuant to the Credit Agreement, the Grantor
hereby agrees with the Agent as follows:
SECTION 1. Definitions. Reference is hereby
made to the Credit Agreement for a statement of the terms
thereof. All terms used in this Agreement which are
defined in the Credit Agreement or in Article 9 of the
Uniform Commercial Code (the "Code") currently in effect
in the State of New York and which are not otherwise
defined herein shall have the same meanings herein as set
forth therein.
SECTION 2. Grant of Security Interest. As
collateral security for all of the Obligations (as
defined in Section 3 hereof), the Grantor hereby pledges
and assigns to the Agent, and grants to the Agent for the
benefit of the Lenders a continuing security interest in
the following personal property of the Grantor, wherever
located and whether now or hereafter existing and whether
now owned or hereafter acquired (the "Collateral"):
(a) all inventory of any kind, wherever
located and whether now or hereafter existing and whether
now owned or hereafter acquired (including, without
limitation, all types of goods, property and other
assets, raw, in process and finished, and all other
inventory, merchandise, goods and other tangible personal
property that are held for sale by the Grantor), all
materials used or consumed in the business of the
Grantor, goods returned to or repossessed by the Grantor,
and goods in which the Grantor has an interest in mass or
in joint or other interest or right of any kind
(including consigned goods or goods being processed), all
accessions thereto and products thereof and all packing
and shipping materials excluding, however, any such
inventory, merchandise, goods and other tangible personal
property described herein which was purchased or acquired
by the Grantor on a date that occurred on or before
August 20, 1994 (hereinafter collectively referred to as
the Inventory );
(b) the books and records of the Grantor
relating to the foregoing Collateral, including, without
limitation, all ledgers, records, computer programs,
software, printouts and other similar computer materials,
credit files, correspondence and advertising materials,
in each case indicating, summarizing or evidencing any of
the Collateral;
(c) all payments received by the Grantor
pursuant to the Business Revolving Charge Program
Agreement dated as of April 3, 1992 (the "GECC
Agreement") by and among Hechinger Company, Home Quarters
Warehouse, Inc. and General Electric Capital Corporation
("GECC"), the Credit Card Program Agreement dated as of
February 5, 1992 (the "Monogram Agreement") by and among
Hechinger Company, Home Quarters Warehouse, Inc. and
Monogram Credit Card Bank of Georgia ("Monogram") and all
other credit card servicing and similar agreements to
which the Debtor is a party; and
(d) all proceeds of any and all of the
foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not
the Agent is the loss payee thereof), and any indemnity,
warranty or guaranty payable by reason of loss or damage
to or otherwise with respect to any of the foregoing
Collateral,
in each case, howsoever the Grantor s interest therein
may arise or appear (whether by ownership, security
interest, claim or otherwise); provided that, nothing
hereunder constitutes or shall be deemed to constitute
the grant of a security interest in favor of the Agent
with respect to any of the Grantor's interest in any
contract right, any license agreement, any lease
pertaining to personal property, the collateral described
in Section 13.09 of the GECC Agreement, the collateral
described in Section 7.04 of the Monogram Agreement, and
the right to receive payments from either GECC or
Monogram pursuant to the GECC Agreement and the Monogram
Agreement (each such contract right, license agreement,
lease pertaining to personal property and collateral
being hereinafter referred to as "Excluded Property"), if
the granting of a security interest therein by the
Grantor to the Agent is prohibited by the terms and
provisions of the written agreement, document or
instrument creating, evidencing or granting a security
interest in such Excluded Property or rights related
thereto, and either (i) such agreement, document or
instrument was entered into prior to the date of this
Agreement, or (ii) such agreement, document or instrument
is entered into after the date hereof and the Grantor
delivers to the Agent a copy of such agreement, document
or instrument, provided, however, that (1) if and when
the prohibition which prevents the granting by the
Grantor to the Agent of a security interest in any
Excluded Property is removed or otherwise terminated, the
Agent will be deemed to have, and at all times to have
had, a security interest in such Excluded Property, and
(2) the Grantor shall use its reasonable efforts to
exclude from any written agreement, document or
instrument entered into on or after the date of this
Agreement creating, evidencing or granting a security
interest in any contract right, license, lease or
collateral, any prohibition against the granting by the
Grantor to the Agent of a security interest therein to
the extent that such exclusion or such efforts would not
result in such agreement, document or instrument
containing terms which are less favorable to the Grantor
than would be the case but for such exclusion or such
efforts or would result in a decision by the Persons
proposed to be parties to such agreement, document or
instrument not to enter into such agreement, document or
instrument. Notwithstanding anything set forth herein to
the contrary, the Agent will be deemed to have, and at
all times to have had, a security interest in the
proceeds of such Excluded Property.
SECTION 3. Security for Obligations. The
security interest created hereby in the Collateral
constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter
incurred (the "Obligations"):
(a) the prompt payment by the Grantor, as and
when due and payable, of all amounts from time to time
owing by it in respect of the Credit Agreement, the Notes
and the other Loan Documents, including, without
limitation, principal of and interest on the Loans
(including, without limitation, all interest that accrues
after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or
reorganization of the Grantor), Reimbursement
Obligations, Letter of Credit Exposure and repayment
obligations in respect of all Letters of Credit and all
interest thereon, all fees, commissions, expense
reimbursements, indemnifications and all other amounts
due or to become due under any Loan Document; and
(b) the due performance and observance by the
Grantor of all of its other obligations from time to time
existing in respect of the Credit Agreement and all other
Loan Documents.
SECTION 4. Representations and Warranties.
The Grantor represents and warrants as follows:
(a) There is no pending or threatened action,
suit, proceeding or claim before any court or other
Governmental Authority or any arbitrator, or any order,
judgment or award by any court or other Governmental
Authority or arbitrator, that may adversely affect the
grant by the Grantor, or the perfection, of the security
interest purported to be created hereby in the
Collateral, or the exercise by the Agent of any of its
rights or remedies hereunder.
(b) All taxes, assessments and other
governmental charges, excluding all immaterial franchise
taxes, imposed upon the Grantor or any property of the
Grantor (including, without limitation, all federal
income and social security taxes on employees' wages) and
which have become due and payable on or prior to the date
hereof have been paid, except to the extent contested in
good faith by proper proceedings which stay the
imposition of any penalty, fine and Lien resulting from
the non-payment thereof and with respect to which
adequate reserves in accordance with GAAP have been
established for the payment thereof.
(c) All Inventory now existing is, and all
Inventory hereafter existing will be, located at the
addresses specified therefor in Schedule I hereto. The
Grantor's chief place of business and chief executive
office is located at the address specified therefor in
Schedule I hereto. Set forth in Schedule II hereto is a
complete and correct list of each trade name used by the
Grantor. Set forth in Schedule III hereto is a complete
and correct list of each Depository Account and other
bank and securities account of the Grantor, together with
the address of such institution, the account number and
the type of account.
(d) The Grantor is and will be at all times
the sole and exclusive owner of the Collateral free and
clear of any Lien, except for Permitted Liens. No
effective financing statement or other instrument similar
in effect covering all or any part of the Collateral is
on file in any recording or filing office except such as
may have been filed in favor of the Agent relating to
this Agreement.
(e) The exercise by the Agent of any of its
rights and remedies hereunder will not contravene law or
any contractual restriction binding on or otherwise
affecting the Grantor or any of its properties and will
not result in or require the creation of any Lien upon or
with respect to any of its properties.
(f) No authorization or approval or other
action by, and no notice to or filing with, any
Governmental Authority or other regulatory body, or any
other Person, is required for (i) the grant by the
Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral or (ii)
the exercise by the Agent of any of its rights and
remedies hereunder, except for the filing under the
Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in
Schedule IV hereto.
(g) This Agreement creates valid security
interests in favor of the Agent in the Collateral, as
security for the Obligations. The Agent's having
possession of all instruments and cash constituting
Collateral from time to time and the filing of the
financing statements described in Schedule IV, result in
the perfection of such security interests. Upon such
filings, such security interests will be perfected, first
priority security interests, subject only to Permitted
Liens.
SECTION 5. Covenants as to the Collateral. So
long as any of the Obligations shall remain outstanding,
any Revolving Credit Commitment shall not have terminated
or any Letter of Credit shall remain outstanding, unless
the Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at
its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents
and take all further action that may be necessary or
desirable or that the Agent may request in order (i) to
perfect and protect the security interest purported to be
created hereby; (ii) to enable the Agent to exercise and
enforce its rights and remedies hereunder in respect of
the Collateral; or (iii) otherwise to effect the purposes
of this Agreement, including, without limitation: (A)
executing and filing such financing or continuation
statements, or amendments thereto, as may be necessary or
desirable or that the Agent may request in order to
perfect and preserve the security interest purported to
be created hereby and (B) furnishing to the Agent from
time to time statements and schedules further identifying
and describing the Collateral and such other reports in
connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
(b) Location of Inventory. The Grantor will
keep the Inventory (other than Inventory sold,
transferred or disposed of, in the ordinary course of
business in accordance with Section 5(e) hereof) at the
locations specified therefor in Section 4(c) hereof, or,
upon not less than 30 days' prior written notice to the
Agent accompanied by a new Schedule I hereto indicating
each new location of the Inventory, at such other
locations in the continental United States as the Grantor
may elect, provided that (i) all action has been taken to
grant the Agent a perfected, first priority security
interest in such Inventory and (ii) the Agent's rights in
such Inventory, including, without limitation, the
existence, perfection and priority of the security
interest created hereby in such Inventory are not
adversely affected.
(c) Taxes, Etc. The Grantor will pay promptly
when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and
supplies) against, the Inventory, except to the extent
the validity thereof is being contested in good faith by
proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves in
accordance with GAAP have been set aside for the payment
thereof.
(d) Insurance.
(i) The Grantor will, at its own expense,
maintain insurance (including, without limitation,
comprehensive general liability and hazard insurance)
with respect to the Inventory in such amounts, against
such risks, in such form and with such insurers as shall
be satisfactory to the Agent from time to time. Each
policy for liability insurance shall provide for all
losses to be paid on behalf of the Agent and the Grantor
as their respective interests may appear. Each policy
for property damage insurance shall provide for all
losses (A) to be paid directly to the Agent and
(B) except for losses of less than $1,000,000 per
occurrence and losses occurring during the continuance of
an Event of Default, to be adjusted with the Agent. Each
such policy shall in addition (A) name the Grantor and
the Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the
Agent) as their interests may appear, (B) contain the
agreement by the insurer that any loss thereunder shall
be payable to the Agent on its own account
notwithstanding any action, inaction or breach of
representation or warranty by the Grantor, (C) provide
that there shall be no recourse against the Agent for
payment of premiums or other amounts with respect
thereto, and (D) provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given
to the Agent by the insurer. The Grantor will, if so
requested by the Agent, deliver to the Agent original or
duplicate policies of such insurance and, as often as the
Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The
Grantor will also, at the request of the Agent, execute
and deliver instruments of assignment of such insurance
policies and cause the respective insurers to acknowledge
notice of such assignment.
(ii) Reimbursement under any liability
insurance maintained by the Grantor pursuant to this
Section 5(d) may be paid directly to the Person who shall
have incurred liability covered by such insurance. All
insurance payments in respect of Inventory shall be paid
to the Agent and applied as specified in Section 7(b)
hereof.
(e) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by
operation of law or otherwise), lease, exchange or
otherwise transfer or dispose of any of the Collateral
except to the extent permitted under Section 8.04(b) of
the Credit Agreement and subject to the obligation of the
Grantor to make prepayments pursuant to Section
2.04(b)(ii) of the Credit Agreement.
(ii) The Grantor will not create or suffer
to exist any Lien upon or with respect to any Collateral
except for Permitted Liens.
(f) Bank Accounts.
The Grantor agrees and covenants that all
cash and all proceeds of the Collateral, including,
without limitation, all remittances and proceeds of
credit card sales of the Grantor, shall be deposited
either in a Depository Account or in the Cash
Concentration Account in the ordinary course of business
of the Grantor consistent with past practice. The
Grantor shall instruct each Depository Bank to transfer
all collected funds to the Cash Concentration Account in
accordance with the terms of Section 7.13 of the Credit
Agreement. Except as otherwise permitted in Section 7.13
of the Credit Agreement, all deposits into the Cash
Concentration Account shall be transferred into the Agent
Account to be applied to the Obligations in accordance
with the terms of Section 7.13 of the Credit Agreement.
(g) Inspection and Reporting. The Grantor
shall permit the Agent or any Lender, or any agents or
representatives thereof or such professionals or other
Persons as the Agent may designate (i) to examine and
inspect the books and records of the Grantor and take
copies and extracts therefrom, (ii) to conduct physical
Inventory appraisals and/or counts and/or valuations, and
(iii) to be present at the Grantor's place of business to
receive copies of all communications and remittances
relating to the Collateral, provided that in the absence
of a continuing Event of Default, all such actions
described in clauses (i) through (iii) above shall be
conducted at measurable times, during normal business
hours and upon prior notice. In addition, the Grantor
shall forward copies of any notices or communications
received or made by the Grantor with respect to the
Collateral, all in such manner as the Agent may
reasonably require.
SECTION 6. Additional Provisions Concerning
the Collateral.
(a) The Grantor hereby authorizes the Agent to
file, without the signature of the Grantor where
permitted by law, one or more financing or continuation
statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints
the Agent the Grantor's attorney-in-fact and proxy, with
full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to
time in the Agent's discretion, to take any action and to
execute any instrument which the Agent may deem necessary
or advisable to accomplish the purposes of this
Agreement, including, without limitation, (i) to obtain
and adjust insurance required to be paid to the Agent
pursuant to Section 5(d) hereof, (ii) upon the occurrence
of an Event of Default to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in
respect of any Collateral, (iii) upon the occurrence of
an Event of Default to receive, endorse, and collect any
drafts or other instruments, documents and chattel paper
in connection with clause (i) or (ii) above, and (iv)
upon the occurrence of an Event of Default to file any
claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the
rights of the Agent with respect to any Collateral.
(c) For the purpose of enabling the Agent to
exercise rights and remedies hereunder, the Grantor
hereby grants to the Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Grantor)
to use, assign, license or sublicense any of the
trademarks, service marks, trade names, business names,
trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature
(collectively, the "Trademarks") now owned or hereafter
acquired by the Grantor, wherever the same may be
located, including in such license reasonable access to
all media in which any of the licensed items may be
recorded or stored and to all computer programs used for
the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to
the provisions of the Credit Agreement that limits the
right of the Grantor to dispose of its property and
Section 5(e) hereof, so long as no Event of Default shall
have occurred and be continuing, the Grantor may exploit,
use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the
Trademarks in the ordinary course of the business of the
Grantor. In furtherance of the foregoing, unless an
Event of Default shall have occurred and be continuing
the Agent shall from time to time, upon the request of
the Grantor, execute and deliver any instruments,
certificates or other documents, in the form so
requested, which the Grantor shall have certified are
appropriate (in its judgment) to allow it to take any
action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any
Trademarks). Further, upon the payment in full of all of
the Obligations and cancellation or termination of the
Revolving Credit Commitments and Letters of Credit, the
Agent (subject to Section 10(e) hereof) shall transfer to
the Grantor all of the Agent's right, title and interest
in and to the Trademarks, all without recourse,
representation or warranty whatsoever. The exercise of
rights and remedies hereunder by the Agent shall not
terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Grantor in
accordance with the second sentence of this clause (c).
The Grantor hereby releases the Agent from any claims,
causes of action and demands at any time arising out of
or with respect to any actions taken or omitted to be
taken by the Agent under the powers of attorney granted
herein other than actions taken or omitted to be taken
through the Agent's gross negligence or willful
misconduct.
(d) If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform,
or cause performance of, such agreement or obligation, in
the name of the Grantor or the Agent, and the expenses of
the Agent incurred in connection therewith shall be
payable by the Grantor pursuant to Section 8 hereof.
(e) The powers conferred on the Agent
hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall
have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any
Event of Default shall have occurred and be continuing:
(a) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all of
the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the
affected Collateral), and also may (i) require the
Grantor to, and the Grantor hereby agrees that it will at
its expense and upon request of the Agent forthwith,
assemble all or part of the Collateral as directed by the
Agent and make it available to the Agent at a place or
places to be designated by the Agent which is reasonably
convenient to both parties and (ii) without notice except
as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale,
at any of the Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or
prices and upon such other terms as the Agent may deem
commercially reasonable. The Grantor agrees that, to the
extent notice of sale shall be required by law, at least
10 days' notice to the Grantor of the time and place of
any public sale or the time after which any private sale
is to be made shall constitute reasonable notification.
The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale
from time to time by announcement at the time and place
fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. The Grantor hereby waives any claims against
the Agent and the Lenders arising by reason of the fact
that the price at which the Collateral may have been sold
at a private sale was less than the price which might
have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Agent
accepts the first offer received and does not offer the
Collateral to more than one offeree and waives all rights
which the Grantor may have to require that all or any
part of the Collateral be marshalled upon any sale
(public or private) thereof. In addition to the
foregoing, (i) upon written notice from the Agent, the
Grantor shall cease any use of the Trademarks or any mark
similar thereto for any purpose described in such notice
so long as any of the Collateral remains unsold; and (ii)
the Agent may, at any time and from time to time, upon 10
days' prior notice to the Grantor, license, whether
general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Trademarks,
throughout the world for such term or terms, on such
conditions, and in such manner, as the Agent shall in its
sole discretion determine.
(b) Any cash held by the Agent as Collateral
and all proceeds received by the Agent in respect of any
sale or collection from, or other realization upon, all
or any part the Collateral may, in the discretion of the
Agent, be held by the Agent as collateral for, and/or
then or at any time thereafter applied in whole or in
part by the Agent against, all or any part of the
Obligations as follows:
(i) first, to the payment of the costs
and expenses of such sale, collection or other
realization, including the out-of-pocket costs and
expenses of the Agent and the reasonable fees, costs,
expenses and other client charges of counsel employed in
connection therewith, to the payment of all advances made
by the Agent for the account of the Grantor hereunder and
to the payment of all costs and expenses incurred by the
Agent in connection with the administration and
enforcement of this Agreement;
(ii) second, at the option of the Agent,
to the payment or other satisfaction of any Liens and
other encumbrances upon any of the Collateral;
(iii) third, to the payment of all
other Obligations then due and payable as provided in
Section 2.08(c) of the Credit Agreement;
(iv) fourth, to the payment of any other
amounts required by applicable law (including, without
limitation, Section 9-504(1)(c) of the Code or any
successor or similar, applicable statutory provision);
and
(v) fifth, to the Grantor or to
whomsoever shall be lawfully entitled to receive the same
or as a court of competent jurisdiction shall direct.
(c) In the event that the proceeds of any such
sale, collection or realization are insufficient to pay
all amounts to which the Agent is legally entitled, the
Grantor shall be liable for the deficiency, together with
interest thereon at the highest rate specified in the
Credit Agreement for interest on overdue principal
thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and
the reasonable fees, costs, expenses and other client
charges of any attorneys employed by the Agent to collect
such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold
the Agent harmless from and against any and all claims,
damages, losses, liabilities, obligations, penalties,
costs or expenses (including, without limitation, legal
fees, costs, expenses and other client charges) to the
extent that they arise out of or otherwise result from
this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or
liabilities resulting solely and directly from the
Agent's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the
Agent (i) the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and other
client charges of counsel for the Agent and of any
experts and agents (including, without limitation, any
Person which may act as agent of the Agent), which the
Agent may incur in connection with (A) the preparation,
negotiation, execution, delivery, recordation,
administration, amendment, waiver or other modification
or termination of this Agreement, or (B) the custody,
preservation, use or operation of, the Collateral and
(ii) the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and other
client charges of counsel for the Agent and of any
experts and agents (including, without limitation, any
Person which may act as agent of the Agent), which the
Agent may incur in connection with (A) the sale of,
collection from, or other realization upon, any
Collateral, (B) the exercise or enforcement of any of the
rights of the Agent hereunder, or (C) the failure by the
Grantor to perform or observe any of the provisions
hereof.
SECTION 9. Notices, Etc.
(a) All notices, requests, demands,
directions and other communications ( Notices ) provided
for hereunder shall be in writing and shall be mailed (by
certified mail, postage prepaid and return receipt
requested), telecopied, or delivered by recognized
overnight courier to the Agent or the Grantor at their
respective addresses set forth in the Credit Agreement or
as to any such Person, at such other address as shall be
designated by such Person in a written notice to such
other Person complying as to delivery with the terms of
this Section 9. All such Notices shall be effective (i)
if mailed, three days after being deposited in the mails,
(ii) if telecopied, when sent, confirmation received and
(ii) if delivered, upon delivery with a receipt
therefore.
(b) The Agent may rely, and shall be
fully protected in relying, on any notice purportedly
made by or on behalf of the Grantor and the Agent shall
have no duty to verify the identity or authority of any
Person giving such notice. The preceding sentence shall
apply to all notices whether or not made in a manner
authorized or required by this Agreement.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this
Agreement shall be effective unless it is in writing and
signed by the Grantor and the Agent, and no waiver of any
provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective
unless it is in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Agent to
exercise, and no delay in exercising, any right hereunder
or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights
and remedies of the Agent provided herein and in the
other Loan Documents are cumulative and are in addition
to, and not exclusive of, any rights or remedies provided
by law. The rights of the Agent under any Loan Document
against any party thereto are not conditional or
contingent on any attempt by the Agent to exercise any of
its rights under any other Loan Document against such
party or against any other Person.
(c) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating
the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
(d) This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain
in full force and effect until the later of (A) the
payment in full or release of the Obligations, (B) the
termination of all of the Revolving Credit Commitments,
or (C) the termination and cancellation of all of the
Letters of Credit, and (ii) be binding on the Grantor and
its successors and assigns and shall inure, together with
all rights and remedies of the Agent hereunder, to the
benefit of the Agent and its respective permitted
successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately
preceding sentence and subject to Sections 10.13 and
11.07 of the Credit Agreement, the Agent may assign or
otherwise transfer its rights under this Agreement and
any other Loan Document, to any other Person and such
other Person shall thereupon become vested with all of
the benefits in respect thereof granted to the Agent
herein or otherwise. None of the rights or obligations
of the Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the
Agent, and any such assignment or transfer shall be null
and void.
(e) Upon the satisfaction in full of the
Obligations, the termination of each Letter of Credit and
of each Revolving Credit Commitment, (i) this Agreement
and the security interests created hereby shall terminate
and all rights to the Collateral shall revert to the
Grantor and (ii) the Agent will, upon the Grantor's
request and at the Grantor's expense, (A) return to the
Grantor such of the Collateral as shall not have been
sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to
evidence such termination, all without any
representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by and
construed in accordance with the law of the State of New
York, except as required by mandatory provisions of law
and except to the extent that the validity and perfection
or the perfection and the effect of perfection or non-
perfection of the security interest created hereby, or
remedies hereunder, in respect of any particular
Collateral are governed by the law of a jurisdiction
other than the State of New York.
(g) Any legal action or proceeding with
respect to this Agreement or any document related thereto
may be brought in the courts of the State of New York or
in the United States District Court for the Southern
District of New York and, by execution and delivery of
this Agreement, the Grantor hereby accepts for itself and
in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid
courts. The Grantor hereby irrevocably waives any
objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum
non conveniens, which it may now or hereafter have to the
bringing of any such action or proceeding in such
respective jurisdictions and consents to the granting of
such legal or equitable relief as is deemed appropriate
by the court.
(h) The Grantor irrevocably consents to the
service of process of any of the aforesaid courts in any
such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid,
to such Grantor at its address provided herein, such
service to become effective 30 days after such mailing.
(i) Nothing contained herein shall affect the
right of the Agent to serve process in any other manner
permitted by law or commence legal proceedings or
otherwise proceed against the Grantor or any of the
Grantor's property in any other jurisdiction.
(j) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE
OF THIS AGREEMENT) THE AGENT WAIVES ANY RIGHT IT MAY HAVE
TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT
OR OTHER ACTION OF THE PARTIES HERETO.
IN WITNESS WHEREOF, the Grantor has caused this
Agreement to be executed and delivered by its officer
thereunto duly authorized as of the date first above
written.
[GRANTOR]
By:
Name:
Title:
