<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 4, 1996 Commission File Number 0-15542
-----------------------------
LAMONTS APPAREL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware #75-2076160
(State of Incorporation) (I.R.S. Employer Identification Number)
12413 Willows Road S.E., Kirkland, Washington 98034
(Address of Principal Executive Offices)
(206) 814-5700
(Registrant's Telephone Number, including Area Code)
3650 131st Avenue S.E., Bellevue, WA 98006
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
As of June 11, 1996, there were 17,900,053 shares of the Registrant's Common
Stock, par value $0.01 per share, outstanding.
Exhibit Index on Page 14
Page 1
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<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
FORM 10-Q
MAY 4, 1996
INDEX
Part I. Financial Information Page
----
Item 1 Consolidated Financial Statements
- Consolidated Balance Sheets - May 4, 1996 and
February 3, 1996 3
- Consolidated Statements of Operations and Accumulated
Deficit for the three months ended May 4, 1996 and
April 29, 1995 4
- Consolidated Statements of Cash Flows for the three months
ended May 4, 1996 and April 29, 1995 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information
Item 1 - Legal Proceedings 13
Item 3 - Defaults Upon Senior Securities 13
Item 6 - Exhibits and Reports on Form 8-K 14
2
<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 4, FEBRUARY 3,
1996 1996
--------- -----------
<S> <C> <C>
Current Assets:
Cash $2,083 $1,581
Receivables - net 2,256 2,458
Inventories 34,973 30,401
Prepaid expenses and other 1,751 2,076
Restricted cash 902 1,058
--------- -----------
Total current assets 41,965 37,574
Property and equipment - net of accumulated depreciation
and amortization $23,661 and $23,041, respectively 36,951 42,083
Leasehold interests 4,452 4,570
Excess of cost over net assets acquired - net 13,188 13,278
Deferred financing costs - net 2,532 2,713
Restricted cash 1,278 1,278
Other assets 892 865
--------- -----------
Total assets $101,258 $102,361
--------- -----------
--------- -----------
Liabilities not subject to settlement under
reorganization proceedings:
Current Liabilities:
Borrowings under DIP Facility $19,984 $20,334
Accounts payable 12,637 8,417
Accrued payroll and related costs 1,841 2,396
Accrued taxes 1,067 821
Accrued interest 221 207
Accrued store closure costs -- 3,254
Other accrued expenses 6,326 4,393
--------- -----------
Total current liabilities 42,076 39,822
Obligations under capital leases 2,808 --
Other 472 250
--------- -----------
Total liabilities not subject to settlement under
reorganization proceedings 45,356 40,072
--------- -----------
Liabilities subject to settlement under
reorganization proceedings 104,547 104,845
--------- -----------
Stockholders' Equity (Deficit):
Common stock, $0.01 par value, 40,000,000 shares
authorized, 17,899,549 shares issued and
outstanding 179 179
Additional paid-in capital 62,935 62,921
Minimum pension liability adjustment (250) (250)
Accumulated deficit (111,509) (105,406)
--------- -----------
Total stockholders' equity (deficit) (48,645) (42,556)
--------- -----------
Total liabilities and stockholders' equity
(deficit) $101,258 $102,361
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
MAY 4, APRIL 29,
1996 1995
--------- ---------
<S> <C> <C>
Revenues $37,922 $36,682
Cost of merchandise sold 24,348 24,717
--------- ---------
Gross profit 13,574 11,965
--------- ---------
Operating and administrative expenses 15,775 16,369
Depreciation and amortization 2,037 2,494
--------- --------
Operating costs 17,812 18,863
--------- --------
Loss from operations before other income
(expense) and reorganization expenses (4,238) (6,898)
Other income (expense):
Interest expense (contractual interest of
$3.4 million and $3.3 million in 1996 and
1995, respectively) (1,198) (1,099)
Other 3 26
--------- ---------
Loss from operations before reorganization
expenses (5,433) (7,971)
Reorganization expenses 670 600
--------- ---------
Net loss (6,103) (8,571)
Accumulated deficit, beginning of period (105,406) (80,531)
--------- ---------
Accumulated deficit, end of period ($111,509) ($89,102)
--------- ---------
--------- ---------
Net loss per common share ($0.34) ($0.48)
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
MAY 4, APRIL 29,
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss ($6,103) ($8,571)
Adjustments to reconcile net loss to net cash used in operating
activities before reorganization items:
Depreciation and amortization 2,037 2,494
Reorganization expenses 670 600
Increase in inventories (5,414) (5,483)
Decrease in prepaid expenses and other 95 1,385
Increase in accounts payable 4,220 8,458
Increase in accrued interest 14 10
Increase in accrued expenses 1,806 1,603
Other 48 (1,262)
-------- --------
Net cash used in operating activities before reorganization items (2,627) (766)
Operating cash flows used by reorganization items:
Payments for professional fees and other expenses related to the
Chapter 11 proceedings (596) (476)
-------- --------
Net cash used in operating activities (3,223) (1,242)
-------- --------
Cash flows from investing activities:
Capital expenditures (170) (385)
Proceeds from sale of land and building 4,459 --
Other 24 23
-------- ---------
Net cash provided by (used in) investing activities 4,313 (362)
-------- ---------
Cash flows from financing activities:
Post-petition borrowings under working capital facility 45,637 48,444
Post-petition payments under working capital facility (45,987) (52,217)
Principal payments on obligations under capital leases (221) (392)
Other (17) (15)
-------- --------
Net cash used in financing activities (588) (4,180)
-------- --------
Net increase (decrease) in cash 502 (5,784)
Cash, beginning of period 1,581 7,972
-------- --------
Cash, end of period $2,083 $2,188
-------- --------
-------- --------
Supplemental disclosures of cash flow information:
Cash paid for interest $1,184 $1,089
-------- --------
-------- --------
Supplemental disclosure of noncash investing and financing activities:
Capital lease relating to sale-leaseback of Alderwood store $2,835 --
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LAMONTS APPAREL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 4, 1996
NOTE 1 - PETITION FOR RELIEF UNDER CHAPTER 11
On January 6, 1995 (the "Petition Date"), Lamonts Apparel, Inc. (the
"Company") filed a voluntary petition for relief (the "Filing") under Chapter
11 ("Chapter 11") of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court (the "Court") for the Western
District of Washington at Seattle. In Chapter 11, the Company has continued
to manage its affairs and operate its business as a debtor-in-possession.
The Company and representatives of the committees that represent Lamonts'
unsecured trade creditors, bondholders and equityholders (the "Committees")
have reached an understanding regarding the material economic terms of a
consensual Plan of Reorganization designed to enable the Company to emerge
from Chapter 11 (the "Plan"). The Company and the Committees are discussing
the timing for the filing with the Court of the Plan and the Disclosure
Statement related thereto. In addition, the Company has received certain
non-binding proposals regarding potential new equity and/or debt investments
in the Company, which proposals are subject to customary conditions,
including, in certain cases, consummation of a plan of reorganization. The
Company and the representatives of the Committees are engaged in negotiations
regarding such proposals. After a consensual plan of reorganization is
completed, it will be sent, with a Disclosure Statement approved by the
Court, after notice and hearing, to members of all classes of impaired
creditors and equity security holders for acceptance or rejection. Following
acceptance or rejection of a plan of reorganization by creditors and equity
security holders, the Court, at a noticed hearing, will consider whether to
confirm a plan or reorganization.
Although the Company is authorized to operate its business as a debtor-in-
possession, it may not engage in transactions outside the ordinary course of
business without first complying with the notice and hearing provisions of the
Bankruptcy Code and obtaining Court approval.
As of the Petition Date, payment of pre-petition liabilities to unsecured
creditors, including trade creditors and noteholders, and pending litigation
against the Company are generally stayed while the Company continues its
business operations as a debtor-in-possession. In a Chapter 11
reorganization plan, the rights of the creditors may be significantly
altered. Creditors may receive substantially less than the full face amount
of claims. Certain creditors have filed claims with the Court substantially
in excess of amounts reflected in the Company's financial statements. The
Company continues to analyze and reconcile the claims filed by creditors with
the Company's financial records, but believes it has made appropriate
provision for all claims filed. However, no estimate of the amount of
adjustments, if any, from recorded amounts, to amounts to be realized by
creditors, is available at this time. These liabilities are included in the
balance sheet as "liabilities subject to settlement under reorganization
proceedings."
As a result of the Filing, the Company is currently in default under the
indentures governing the Company's 10-1/4% Subordinated Notes due November
1999 (the "10-1/4% Notes") and 13-1/2% Senior Subordinated Notes which were
due February 1995 (the "13-1/2% Notes"). As a result, all unpaid principal
of, and accrued pre-petition interest on, such debt became immediately due
and payable. The payment of such debt and accrued but unpaid interest
thereon is prohibited during the pendency of the Company's Chapter 11 case,
and these liabilities have been included in the balance sheet as "liabilities
subject to settlement under reorganization proceedings."
Pre-petition liabilities subject to settlement under reorganization proceedings
include the following (dollars in thousands):
<TABLE>
<CAPTION>
MAY 4, FEBRUARY 3,
1996 1996
-------- ----------
<S> <C> <C>
Accounts payable and accrued liabilities $23,424 $23,511
Capital lease obligations 12,126 12,321
10-1/4% Notes (including pre-petition accrued interest) related party 67,576 67,576
13-1/2% Notes (including pre-petition accrued interest) related party 838 838
Notes payable 583 599
-------- ----------
$104,547 $104,845
-------- ---------
-------- ---------
</TABLE>
The reductions in capital lease obligations consist of payments to landlords for
store locations in the ongoing business operations of the Company.
In accordance with the Bankruptcy Code, the Company can seek court approval
for the rejection of executory contracts, including real property leases.
Any such rejection may give rise to a prepetition unsecured claim for breach
of contract. In connection with the Company's Chapter 11 case, a review is
being undertaken of all the Company's obligations under its executory
contracts. As of May 4, 1996, the Company has rejected ten real property
leases and certain executory contracts and assumed five leases (with certain
conditions and limitations).
6
<PAGE>
As a result of the reorganization proceedings, the Company may sell or
otherwise realize assets and liquidate or settle liabilities for amounts
other than those reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts currently recorded in the
financial statements, including amounts recorded for the excess of cost over
net assets acquired. The accompanying financial statements do not include any
adjustments that might result from the outcome of these matters or
adjustments that might result should the Company be unable to continue as a
going concern. Generally if a debtor-in-possession is unable to emerge from
Chapter 11, such debtor-in-possession could be required to liquidate its
asssets.
Costs associated with the reorganization of the Company are charged to
expense as incurred. Under the requirements of the Chapter 11 filing, the
Company is required to pay certain expenses of the Committees. The amounts
charged to reorganization expense by the Company have consisted and will
continue to consist primarily of write-off of property and equipment,
professional fees, lease related costs and severance costs.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements present the consolidated financial
position and results of operations of the Company and its subsidiaries, of
which all are inactive. All significant intercompany transactions and
account balances have been eliminated in consolidation. The financial
statements included herein should be read in conjunction with the audited,
annual financial statements for the fiscal year ended February 3, 1996,
included in the Company's Annual Report on Form 10-K. The year-end condensed
balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The accompanying consolidated financial statements of the Company have been
prepared on a going concern basis of accounting, and, for the periods subsequent
to the Filing, in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, FINANCIAL REPORTING BY ENTITIES IN
REORGANIZATION UNDER THE BANKRUPTCY CODE. Recurring losses from operations and
the matters discussed herein related to the Filing raise substantial doubt about
the Company's ability to continue on a going concern. The ability of the
Company to continue as a going concern is dependent upon, among other things,
(i) the ability to comply with its debtor-in-possession financing agreement,
(ii) confirmation of a plan of reorganization under the Bankruptcy Code, (iii)
the ability to achieve profitable operations after such confirmation and (iv)
the ability to generate sufficient cash from operations to meet its obligations.
The financial statements presented herein reflect all adjustments that are, in
the opinion of management, necessary to present fairly the operating results for
the periods reported. Except as discussed in Note 1, all such adjustments are
normal and recurring in nature. The results of operations for the quarterly
periods are not necessarily indicative of results for the entire year.
OTHER
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("Statement No. 121"). Statement No. 121 requires that long-lived assets and
certain intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. If impairment has occurred, an impairment loss must be
recognized. Implementation of Statement No. 121 is required in the Company's
Fiscal Year ending February 1, 1997. Based on estimates by management as of
May 4, 1996, subject to the outcome of issues discussed in Note 1, the impact
of the adoption of this standard has not had a material impact on the
financial position, results of operations, or liquidity of the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statements for the
quarter ended April 29, 1995 in order to conform with the financial statements
for the quarter ended May 4, 1996.
NOTE 3 - LOAN AND SECURITY AGREEMENT
On February 17, 1995, the Company received approval from the Court for a Loan
and Security Agreement (the "DIP Facility") with Foothill Capital Corporation
("Foothill"). The DIP Facility provided for a borrowing capacity of up to
$32.0 million in revolving loans, including up to $15.0 million of letters of
credit, subject to borrowing base limitations based upon, among other things,
the value of inventory and certain real property. The DIP Facility provided
that interest will accrue at the rate of 3% per annum in excess of the
Reference Rate (as defined therein), payable monthly in arrears. The DIP
Facility also provided that in the event of a default in the payment of any
amount due thereunder, the
7
<PAGE>
interest rate on such defaulted amount would be 4.5% per annum in excess of
the Reference Rate, payable on demand. At May 4, 1996, the reference rate
was 8.25%.
The Company paid Foothill $80,000 upon the closing of the DIP Facility in
February 1995 and the additional closing fees totaling $240,000, all of which
had been paid as of March 31, 1996. Fees payable under the DIP Facility
consisted primarily of monthly payments equal to 1/2% of the average unused
borrowing capacity and quarterly payments equal to 1/4% of the borrowing
capacity for each quarterly renewal period.
The obligations of the Company under the DIP Facility were collateralized by,
among other things, inventory and certain real property. The DIP Facility
imposed limitations on the Company with respect to, among other things, (i)
the creation or incurrence of liens, (ii) consolidations, mergers and sales
of assets, (iii) the incurrence of guarantees or other contingent
obligations, (iv) capital expenditures in excess of specified levels, (v) the
creation or incurrence of any indebtedness for borrowed money or the payment
of principal of or interest on any prepetition indebtedness, (vi) the
prepayment of certain indebtedness and (vii) transactions with affiliates.
Additionally, the Company was required to maintain a minimum net worth of
$10.0 million (as defined in the DIP Facility to exclude, among other items,
reorganization expenses, certain liabilities incurred prior to the Company's
filing, reduction in goodwill, charges for store closure and non-cash
interest).
The DIP Facility had been extended from its initial maturity date of May 17,
1996 to the earlier of August 17, 1996 (with provisions for two additional
quarterly renewals) or the effective date of the Company's plan of
reorganization. However, on June 4, 1996, the Company entered into a loan
and security agreement with the First National Bank of Boston ("FNBB")
replacing the Company's debtor-in-possession financing agreement with
Foothill, after a hearing by the Court and the entering of an order approving
such financing. Although Foothill had taken no action to declare the Company
in default, as of the date on which the Foothill financing was terminated,
the Company was in violation of the net worth covenant in the Foothill
financing agreement.
Pursuant to the new loan and security agreement (the "FNBB Facility") with
FNBB, the Company is able to borrow up to $32 million in revolving loans
(including $3 million of letters of credit), subject to borrowing base
limitations based upon among other things, the value of inventory and certain
real property, during the pendency of the Company's Chapter 11 proceeding
until June 30, 1997 and, subject to FNBB's approval of a plan of
reorganization and other specified conditions, for a two year period
following the effective date of a plan of reorganization.
The FNBB Facility provides that interest will accrue at the rate of 1.5% per
annum in excess of the Base Rate (as defined therein), payable monthly in
arrears for base rate loans. For Eurodollar loans, the interest rate will be
the Eurodollar Rate (as defined therein) plus 2.75% (adjusted as provided
therein). The FNBB Facility also provides that in the event of a default in
the payment of any amount due thereunder, the interest rate on such default
shall be the greater of (i) 3.0% per annum in excess of the Base Rate and
(ii) the applicable rate on the loan, payable on demand. The Company paid
FNBB $97,500 upon the closing of the Facility on June 4, 1996. Fees payable
under the FNBB Facility consist primarily of monthly payments equal to 0.5%
(adjusted as provided therein) of the average unused borrowing capacity and
monthly payments equal to 0.125% of the borrowing capacity. There will be an
additional fee after the effective date of a plan of reorganization and the
satisfaction of certain conditions described in the FNBB Facility in the
amount of $560,000 which shall be payable as follows: (a) if the conditions
are satisfied prior to December 31, 1996, $336,000 shall be payable on the
date the conditions are satisfied and $224,000 shall be payable on December
31, 1996 (or, if earlier, the time of termination of the commitments), or (b)
if the conditions ae satisfied on or after December, 1996, $336,000 shall be
payable on the date the conditions are satisfied and $224,000 shall be
payable on December 31, 1997 (or, if earlier, the time of termination of the
commitments).
Borrowings under the FNBB Facility, together with cash flow from operations,
may be used by the Company to finance general working capital requirements,
including purchases of inventory and other expenditures permitted under the
FNBB Facility. The FNBB Facility is secured by inventory and substantially
all other assets and is an allowed administrative expense claim with super
priority over certain other administrative expenses in the Chapter 11 case.
The FNBB Facility imposes limitations on the Company with respect to, among
other things, (i) consolidations, mergers, and sales of assets, (ii) capital
expenditures in excess of specified levels and (iii) the prepayment of
certain indebtedness. Additionally, the Company must comply with certain
operating and financial covenants (as described therein).
NOTE 4 - LOSS PER COMMON SHARE
Net loss per common share has been computed by dividing net loss by the weighted
average number of common shares outstanding during the period. The common stock
equivalents, represented by stock options and warrants were not considered in
the calculation as they either have an exercise price greater than the
applicable market price, or the effect of assuming their exercise or conversion
would be anti-dilutive. The weighted average number of shares outstanding for
the quarters ended May 4, 1996 and April 29, 1995 were 17,899,549 and
17,887,775, respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various matters of litigation arising in the ordinary
course of business. In the opinion of management, the ultimate outcome of all
such matters should not have a material adverse effect on the financial position
of the Company, but, if decided adversely to the Company, could have a material
effect upon the Company's anticipated plan of reorganization and operating
results during the period in which the litigation is resolved. (See also Part
II, Item 1.)
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
Lamonts Apparel, Inc. (the "Company") retails brand-name apparel and accessories
for the entire family through its 42 full-line apparel stores. Lamonts
currently operates in malls and regional shopping centers located in the states
of Alaska, Idaho, Montana, Oregon, Utah and Washington.
On January 6, 1995 (the "Petition Date"), Lamonts Apparel, Inc. (the
"Company") filed a voluntary petition for relief (the "Filing") under Chapter
11 ("Chapter 11") of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court (the "Court") for the Western
District of Washington at Seattle. In Chapter 11, the Company has continued
to manage its affairs and operate its business as a debtor-in-possession.
The Company and representatives of the committees that represent Lamonts'
unsecured trade creditors, bondholders and equityholders (the "Committees")
have reached an understanding regarding material economic terms of a
consensual Plan of Reorganization designed to enable the Company to emerge
from Chapter 11 (the "Plan"). The Company and the Committees are discussing
the timing for the filing with the Court of the Plan and the Disclosure
Statement related thereto. In addition, the Company has received certain
non-binding proposals regarding potential new equity and/or debt investments
in the Company, which proposals are subject to customary conditions,
including, in certain cases, consummation of a plan of reorganization. The
Company and the representatives of the Committees are engaged in negotiations
regarding such proposals. After a consensual plan or reorganization is
completed, it will be sent, with a Disclosure Statement approved by the
Court, after notice and hearing, to members of all classes of impaired
creditors and equity security holders for acceptance or rejection. Following
acceptance or rejection of a plan of reorganization by creditors and equity
security holders, the Court, at a noticed hearing, will consider whether to
confirm a plan or reorganization.
Although the Company is authorized to operate its business as a debtor-in-
possession, it may not engage in transactions outside the ordinary course of
business without first complying with the notice and hearing provisions of the
Bankruptcy Code and obtaining Court approval.
As of the Petition Date, payment of pre-petition liabilities to unsecured
creditors, including trade creditors and noteholders, and pending litigation
against the Company are generally stayed while the Company continues its
business operations as a debtor-in-possession. In a Chapter 11
reorganization plan, the rights of the creditors may be significantly
altered. Creditors may receive substantially less than the full face amount
of claims. Certain creditors have filed claims with the Court substantially
in excess of amounts reflected in the Company's financial statements. The
Company continues to analyze and reconcile the claims filed by creditors with
the Company's financial records, but believes it has made appropriate
provision for all claims filed. However, no estimate of the amount of
adjustments, if any, from recorded amounts, to amounts to be realized by
creditors, is available at this time.
As a result of the Filing, the Company is currently in default under the
indentures governing the Company's 10-1/4% Subordinated Notes due November
1999 (the "10-1/4% Notes") and 13-1/2% Senior Subordinated Notes which were
due February 1995 (the "13-1/2% Notes"). As a result, all unpaid principal of,
and accrued pre-petition interest on, such debt became immediately due and
payable. The payment of such debt and accrued but unpaid interest thereon is
prohibited during the pendency of the Company's Chapter 11 case.
Since February 3, 1996, the Company has closed one store, with the approval of
the Court. The store was closed due to poor performance. Management is
continually evaluating store locations and operations to determine whether to
close, downsize or relocate stores that do not meet performance objectives.
Management believes that Lamonts has made substantial progress in the period
since the Filing. The Company has closed unprofitable stores, eliminated
unprofitable merchandise lines, added a home decor line, replaced its shoe
licensee and reduced operating expenses. In addition, management implemented
new merchandising strategies designed to: (i) improve the quality of merchandise
offered while maintaining price points geared to the Company's customer base,
(ii) reduce cash operating expenses, and (iii) reduce inventory levels and
increase inventory turns to improve the Company's performance. The Company also
has initiated a policy to mark-down and clear out any unsold merchandise within
its respective season. As a result, the age and quality of inventory has been
improved significantly.
On June 4, 1996, the Company entered into FNBB Facility with FNBB replacing
the Company's debtor-in-possession financing agreement with Foothill after a
hearing by the Court and the entering of an order approving such financing.
Although Foothill had taken no action to declare the Company in default as of
the date on which the Foothill financing was terminated, the Company was in
violation of the net worth covenant in the Foothill financing agreement.
Pursuant to the FNBB Facility, the Company is able to borrow up to $32
million in revolving loans (including $3 million of letters of credit),
subject to borrowing to borrowing base limitations based upon, among other
things, the value of inventory and certain real property, during the pendency
of the Company's Chapter 11 proceeding until June 30, 1997 and, subject to
FNBB's approval of a plan of reorganization and other specified conditions,
for a two year period following the effective date of a plan of
reorganization.
9
<PAGE>
The FNBB Facility provides that interest will accrue at the rate of 1.5% per
annum in excess of the Base Rate (as defined therein), payable monthly in
arrears for base rate loans. For Eurodollar loans, the interest rate will be
the Eurodollar Rate (as defined therein) plus 2.75% (adjusted as provided
therein). The FNBB Facility also provides that in the event of a default in
the payment of any amount due thereunder, the interest rate on such default
shall be the greater of (i) 3.0% per annum in excess of the Base Rate and
(ii) the applicable rate on the loan, payable on demand. The Company paid
FNBB $97,500 upon the closing of the Facility on June 1, 1996. Fees payable
under the FNBB Facility consist primarily of monthly payments equal to 0.5%
(adjusted as provided therein) of the average unused borrowing capacity and
monthly payments equal to 0.125% of the borrowing capacity. There will be an
additional fee after the effective date of a plan of reorganization and the
satisfaction of certain conditions described in the FNBB Facility in the
amount of $560,000 which shall be payable as follows: (a) if the conditions
are satisfied prior to December 31, 1996, $336,000 shall be payable on the
date the conditions are satisfied and $224,000 shall be payable on December
31, 1996 (or, if earlier, the time of termination of the commitments), or (b)
if the conditions are satisfied on or after December, 1996, $336,000 shall be
payable on the date the conditions are satisfied and $224,000 shall be
payable on December 31, 1997 (or, if earlier, the time of termination of the
commitments).
Borrowings under the FNBB Facility, together with cash flow from operations,
may be used by the Company to finance general working capital requirements,
including purchases of inventory and other expenditures permitted under the
FNBB Facility. The FNBB Facility is secured by inventory and substantially
all other assets and is an allowed administrative expense claim with super
priority over other administrative expenses in the Chapter 11 case. The FNBB
Facility imposes limitations on the Company with respect to, among other
things, (i) consolidations, mergers, and sales of assets, (ii) capital
expenditures in excess of specified levels and (iii) the prepayment of
certain indebtedness. Additionally, the Company must comply with certain
operating and financial covenants (as described therein).
RESULTS OF OPERATIONS
The following discussion and analysis provides information with respect to the
results of operations for the Quarter ended May 4, 1996 ("1st Quarter 1996")
compared to the Quarter ended April 29, 1995 ("1st Quarter 1995").
REVENUES. Revenues of $37.9 million for the 1st Quarter 1996 increased 3.4%
on a total store basis from $36.7 million for the 1st Quarter 1995.
Comparable store revenues increased 4.8% for the 1st Quarter 1996 as compared
to the same period for the prior year. Management believes that revenues
have increased due to increased levels of inventory and overall improvement
in the quality of the merchandise offered in the stores compared to the 1st
Quarter 1995. In addition, the Company's new merchandising strategy has
resulted in quicker turnover of merchandise, and the strength of the home
decor department has resulted in increased sales.
GROSS PROFIT. Gross profit, as a percentage of revenues increased to 35.8%
during the 1st Quarter 1996 as compared to 32.6% during the 1st Quarter 1995.
The increase in gross profit results primarily from (i) policies implemented to
establish more competitive pricing strategies and (ii) management's purchasing
strategies, which have decreased the cost of merchandise sold.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses of
$15.8 million for the 1st Quarter 1996 decreased 4% from $16.4 million for the
1st Quarter 1995. The decrease of $0.6 million primarily relates to (i) a
reduction in operating costs attributable to closed stores operating in the 1st
Quarter 1995, accounting for approximately $0.4 million and (ii) lower payroll
costs of $0.7 million due to a reduction in employees, offset by an increase in
advertising expense of $0.6 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense of $2.0
million for the 1st Quarter 1996 decreased $0.5 million as compared to $2.5
million for the 1st Quarter 1995. The decrease primarily relates to assets
retired as a result of store closures and assets becoming fully depreciated or
amortized.
INTEREST EXPENSE. Interest expense of $1.2 million for the 1st Quarter 1996
increased $0.1 million from $1.1 million for the 1st Quarter 1995. The increase
is primarily due to increased borrowing levels under the Company's working
capital facility.
REORGANIZATION EXPENSES. Reorganization expenses of $0.7 million for the 1st
Quarter 1996 and $0.6 million for the 1st Quarter 1995 represent costs directly
related to the Company's Chapter 11 case and consist primarily of professional
fees and severance costs.
NET LOSS. The Company reported a net loss of $6.1 million for the 1st Quarter
1996 as compared to a net loss of $8.6 million for the 1st Quarter 1995. The
loss for the 1st Quarter 1996 decreased $2.5 million from the prior period
primarily due to (i) $1.6 million increase in gross profit, (ii) $0.6 million
decrease in operating and administrative expenses, and (iii) $0.5 million
decrease in depreciation and amortization expense.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The Company used $2.6 million of cash for operating activities before
reorganization items for the 1st Quarter 1996, an increase of $1.8 million as
compared to $0.8 million used in the 1st Quarter 1995. Increases in funds were
used primarily to pay down trade payables.
The Company received $4.3 million of cash in investing activities for the 1st
Quarter 1996 as compared to using $0.4 million for the 1st Quarter 1995. The
difference of $4.7 million results primarily from net sale proceeds of $4.5
million received in the sale-leaseback of the Company's Alderwood store during
the 1st Quarter 1996.
The $3.6 million decrease in cash used in financing activities is primarily due
to lower net payments under the Company's working capital facilities during the
1st Quarter 1996 as compared to the 1st Quarter 1995.
As of May 4, 1996, the Company had $2.1 million of cash and an additional $0.9
million of current restricted cash, representing the funding of payroll and
taxes in connection with the Filing.
CAPITAL RESOURCES
On February 17, 1995, the Company received approval from the Court for a Loan
and Security Agreement with Foothill. The DIP Facility provided for a
borrowing capacity of up to $32.0 million in revolving loans, including up to
$15.0 million of letters of credit ("borrowing capacity"), subject to
borrowing base limitations based upon, among other things, the value of
inventory and certain real property.
The DIP Facility had been extended from its initial maturity date of May 17,
1996 to the earlier of August 17, 1996 (with provisions for two additional
quarterly renewals) or the effective date of the Company's plan of
reorganization. However, on June 4, 1996, the Company entered into the FNBB
Facility with FNBB replacing the Company's debtor-in-possession financing
agreement with Foothill, after a hearing by the Court and the entering of an
order approving such financing. Although Foothill had taken no action to
declare the Company in default, as of the date on which the Foothill
financing was terminated, the Company was in violation of the net worth
covenant in the Foothill financing agreement.
Pursuant to the FNBB Facility with FNBB, the Company is able to borrow up to
$32 million in revolving loans (including $3 million of letters of credit),
subject to borrowing base limitations based upon, among other things, the
value of inventory and certain real property, during the pendency of the
Company's Chapter 11 proceeding until June 30, 1997 and, subject to FNBB's
approval of a plan of reorganization and other specified conditions, for a
two year period following the effective date of a plan of reorganization.
The FNBB Facility provides that interest will accrue at the rate of 1.5% per
annum in excess of the Base Rate (as defined therein), payable monthly in
arrears for base rate loans. For Eurodollar loans, the interest rate will be
the Eurodollar Rate (as defined therein) plus 2.75% (adjusted as provided
therein). The FNBB facility also provides that in the event of a default in
the payment of any amount due thereunder, the interest rate on such default
shall be the greater of (i) 3.0% per annum in excess of the Base Rate and
(ii) the applicable rate on the loan, payable on demand. The Company paid
FNBB $97,500 upon the closing of the Facility on June 4, 1996. Fees payable
under the FNBB Facility consist primarily of monthly payments equal to 0.5%
(adjusted as provided therein) of the average unused borrowing capacity and
monthly payments equal to 0.125% of the borrowing capacity. There will be
an additional fee after the effective date of a plan of
11
<PAGE>
reorganization and the satisfaction of certain conditions described in the
FNBB Facility in the amount of $560,000 which shall be payable as follows:
(a) if the conditions are satisfied prior to December 31, 1996 $336,000 shall
be payable on the date the conditions are satisfied and $224,000 shall be
payable on December 31, 1996 (or, if earlier, the time of termination of the
commitments), or (b) if the conditions are satisfied on or after December
1996, $336,000 shall be payable on the date the conditions are satisfied and
$224,000 shall be payable on December 31, 1997 (or, if earlier, the time of
termination of the commitments).
Borrowings under the FNBB Facility, together with cash flow from operations,
may be used by the Company to finance general working capital requirements,
including purchases of inventory and other expenditures permitted under the
FNBB Facility. The FNBB Facility is secured by inventory and substantially
all other assets and is an allowed administrative expense claim with super
priority over other administrative expenses in the Chapter 11 case. The FNBB
Facility imposes limitations on the Company with respect to, among other
things, (i) consolidations, mergers, and sales of assets, (ii) capital
expenditures in excess of specified levels and (iii) the prepayment of
certain indebtedness. Additionally, the Company must comply with certain
operating and financial covenants (as described therein).
As of June 11, 1996, the Company had $22.6 million of borrowings outstanding
under the FNBB Facility with additional borrowing capacity thereunder of $6.6
million.
The Company's primary cash requirement is the procurement of inventory which
is currently funded through (i) borrowings under the FNBB Facility (ii) trade
credit and (iii) cash generated from operations. Like other apparel
retailers, the Company is dependent upon its ability to obtain trade credit,
which is generally extended by its vendors and a small number of factoring
institutions that continually monitor the Company's credit lines. If the
Company is able to obtain its expected trade credit terms, the Company
believes that borrowings under the FNBB Facility and cash generated from
operations will provide the cash necessary to fund the Company's cash
requirements.
OTHER
The Company has never declared or paid cash dividends on its Common Stock or any
other equity security, and does not anticipate paying cash dividends on the
Common Stock, or any other equity security, in the foreseeable future. Any
future determination as to the payment of dividends will depend upon certain
debt instrument limitations, future earnings, results of operations, capital
requirements and the financial condition of the Company. The ability of the
Company to pay dividends is restricted under the terms of the FNBB facility.
Such restrictions prohibit the payment of dividends for the foreseeable
future. In addition, the Bankruptcy Code prohibits the Company's payment of
cash dividends (during the pendency of the Company's Chapter 11 case).
SEASONALITY
The Company's revenues are seasonal, with the Christmas season (included in the
Quarter ending the Saturday closest to January 31) being its strongest period.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No material change has occurred in the litigation described in "Item 3 -
Legal Proceedings" on pages 7 through 9 of the Company's Annual Report on
Form 10-K for the Year ended February 3, 1996, which is incorporated herein
by reference.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
As a result of the Filing, the Company is currently in default under the
indentures governing the 10-1/4% Notes ($67.6 million in principal and
prepetition accrued interest as of May 4, 1996) and 13-1/2% Notes ($0.8 million
in principal and prepetition accrued interest as of May 4, 1996) (see Note 1 of
the Notes to the Consolidated Financial Statements contained elsewhere in this
document).
Although Foothill had taken no action to declare the Company in default as of
the date on which the Foothill financing was terminated, the Company was in
violation of the net worth covenant of the Foothill financing agreement.
13
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
10.1 - Loan and Security Agreement dated June 4, 1996
between First National Bank of Boston and Lamonts
Apparel, Inc.
27.1 - Financial Data Schedule.
(b) Reports filed on Form 8-K:
None
14
<PAGE>
SIGNATURE
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, thereunto duly authorized.
Registrant: LAMONTS APPAREL, INC.
------------------------
Date: June 11, 1996 By:/s/ Debbie Brownfield
------------------------
Debbie Brownfield
Senior Vice President - Finance
Chief Financial Officer
15
<PAGE>
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DEBTOR IN POSSESSION AND
EXIT FINANCING
LOAN AGREEMENT
BY AND AMONG
LAMONTS APPAREL, INC.,
THE FIRST NATIONAL BANK OF BOSTON,
CERTAIN OTHER LENDING INSTITUTIONS,
AND
THE FIRST NATIONAL BANK OF BOSTON, AS AGENT
DATED AS OF JUNE 4, 1996
-----------------------------------------------------------------
<PAGE>
Section 1. DEFINITIONS AND RULES OF INTERPRETATION . . . . . . . . . . . .1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . . . .25
Section 2. DEBTOR IN POSSESSION AND EXIT FACILITIES. . . . . . . . . . . .25
Section 2.1 Commitment to Lend DIP Loans. . . . . . . . . . . . . . . .25
Section 2.2 Repayment of DIP Loans. . . . . . . . . . . . . . . . . . .26
Section 2.3 Conversion of DIP Loans into Exit Loans; Commitment to
Lend Exit Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Section 2.4. Repayment of Exit Loans. . . . . . . . . . . . . . . . . .27
Section 2.5. Reduction of Commitments . . . . . . . . . . . . . . . . .29
Section 3. CERTAIN COMMON PROVISIONS . . . . . . . . . . . . . . . . . . .29
Section 3.1. Request for Loan Advances. . . . . . . . . . . . . . . . .29
Section 3.2. Other Methods of Funding; Authorized Advances. . . . . . .30
Section 3.3. Promissory Notes . . . . . . . . . . . . . . . . . . . . .31
Section 3.4. Interest . . . . . . . . . . . . . . . . . . . . . . . . .31
Section 3.5. Conversion Options for Base Rate and Eurodollar loans. . .32
Section 3.5.1. Conversion to Different Type of Loan . . . . . . . .32
Section 3.5.2. Continuation of Type of Revolving Credit Loan. . . .33
Section 3.5.3. Eurodollar Rate Loans. . . . . . . . . . . . . . . .33
Section 3.6. Settlements; Failure to Make Funds Available . . . . . . .33
Section 3.7. Lock Box Account and Application of Funds. . . . . . . . .34
Section 3.8. Fees and Expenses. . . . . . . . . . . . . . . . . . . . .36
Section 3.9. Seafirst Concentration Account . . . . . . . . . . . . . .37
Section 4. LETTER OF CREDIT FACILITY . . . . . . . . . . . . . . . . . . .38
Section 4.1. Letter of Credit Commitment. . . . . . . . . . . . . . . .38
Section 4.1.1. This Agreement to Govern . . . . . . . . . . . . . .38
Section 4.1.2. Terms and Duration of Letters of Credit. . . . . . .39
Section 4.1.3. Reimbursement Obligations of Banks . . . . . . . . .39
Section 4.1.4. Participations of Banks. . . . . . . . . . . . . . .39
Section 4.2. Reimbursement Obligations of the Borrower. . . . . . . . .40
Section 4.3. Letter of Credit Payments. . . . . . . . . . . . . . . . .41
Section 4.4. Obligations Absolute . . . . . . . . . . . . . . . . . . .41
Section 4.5. Reliance by Issuer . . . . . . . . . . . . . . . . . . . .42
Section 4.6. Letter of Credit Fees. . . . . . . . . . . . . . . . . . .42
Section 5. CERTAIN GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . .43
Section 5.1. Capital Adequacy . . . . . . . . . . . . . . . . . . . . .43
Section 5.2. Inability to Determinate Eurodollar Rate . . . . . . . . .43
Section 5.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . .44
Section 5.4. Additional Costs, etc. . . . . . . . . . . . . . . . . . .44
Section 5.5. Certificate. . . . . . . . . . . . . . . . . . . . . . . .45
Section 5.6. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . .45
Section 6. FEES AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . .46
Section 6.1. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Section 6.2. Payments; No Offset; Computations. . . . . . . . . . . . .47
Section 7. PRIORITY AND LIENS. . . . . . . . . . . . . . . . . . . . . . .48
Section 7.1. Super-Priority Claims and Collateral Security. . . . . . .48
Section 7.2. Collateral Security Perfection . . . . . . . . . . . . . .48
<PAGE>
-2-
Section 7.3. No Discharge; Survival of Claims . . . . . . . . . . . . .49
Section 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .49
Section 9. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . .53
Section 9.1. To Initial DIP Loans and Issuance of Letters of Credit . .53
Section 9.1.1. Loan Documents . . . . . . . . . . . . . . . . . . .53
Section 9.1.2. Certified Copies of Charter Documents. . . . . . . .54
Section 9.1.3. Corporate Action . . . . . . . . . . . . . . . . . .54
Section 9.1.4. Incumbency Certificate . . . . . . . . . . . . . . .54
Section 9.1.5. Perfection Certificate and UCC Search Results. . . .54
Section 9.1.6. Financing Order. . . . . . . . . . . . . . . . . . .54
Section 9.1.7. Certificates of Insurance. . . . . . . . . . . . . .55
Section 9.1.8. Agency Account Agreements. . . . . . . . . . . . . .55
Section 9.1.9. Borrowing Base Report. . . . . . . . . . . . . . . .55
Section 9.1.10. Opinion of Counsel. . . . . . . . . . . . . . . . .55
Section 9.1.11. Payment of Fees . . . . . . . . . . . . . . . . . .55
Section 9.1.12. Payoff Letter . . . . . . . . . . . . . . . . . . .56
Section 9.1.13. Disbursement Instructions . . . . . . . . . . . . .56
Section 9.1.14. Projections and Other Information; Quality of
Assets and Inventory . . . . . . . . . . . . . . . . . . . . . . . .56
Section 9.1.15. No Material Adverse Change. . . . . . . . . . . . .56
Section 9.1.16. Capital Raising Event . . . . . . . . . . . . . . .57
Section 9.1.17. Subordinated Debt Arrangements. . . . . . . . . . .57
Section 9.1.18. Store Credit Card Program . . . . . . . . . . . . .57
Section 9.1.19. Inventory Distribution Center . . . . . . . . . . .57
Section 9.2. To the Occurrence of the Exit Facility Date. . . . . . . .57
Section 9.2.1. Loan Documents . . . . . . . . . . . . . . . . . . .57
Section 9.2.2. Certified Copies of Charter Documents. . . . . . . .58
Section 9.2.3. Corporate Action . . . . . . . . . . . . . . . . . .58
Section 9.2.4. Incumbency Certificate . . . . . . . . . . . . . . .58
Section 9.2.5. Validity of Liens. . . . . . . . . . . . . . . . . .58
Section 9.2.6. Perfection Certificates and UCC Search Results . . .58
Section 9.2.7. Reorganization Plan and Confirmation Order . . . . .58
Section 9.2.8. Survey and Taxes . . . . . . . . . . . . . . . . . .59
Section 9.2.9. Title Insurance. . . . . . . . . . . . . . . . . . .59
Section 9.2.10. Consents for Mortgage; Landlord Lien Waivers;
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Section 9.2.11. Certificates of Insurance . . . . . . . . . . . . .60
Section 9.2.12. Borrowing Base Report . . . . . . . . . . . . . . .60
Section 9.2.13. Opinion of Counsel. . . . . . . . . . . . . . . . .60
Section 9.2.14. Payment of Fees . . . . . . . . . . . . . . . . . .61
Section 9.2.15. Available Cash and Borrowing Capacity; Agency
Account Agreements . . . . . . . . . . . . . . . . . . . . . . . . .61
Section 9.2.16. Post-Confirmation Capital Structure and
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Section 9.2.17. Capital Raising Event . . . . . . . . . . . . . . .61
Section 9.2.18. Exit to Occur Concurrent with DIP Maturity Date . .61
Section 9.2.19. Conversion of Subordinated Debt . . . . . . . . . .62
<PAGE>
-3-
Section 9.3. To Each Loan and Issuance, Extension or Renewal of Letters
of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Section 10. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .64
Section 10.1. Affirmative Covenants . . . . . . . . . . . . . . . . . .64
Section 10.2. Negative Covenants. . . . . . . . . . . . . . . . . . . .70
Section 10.3. Financial Covenants . . . . . . . . . . . . . . . . . . .75
Section 10.4. Application of Financial Covenants. . . . . . . . . . . .78
Section 11. EVENTS OF DEFAULT; ACCELERATION; ETC . . . . . . . . . . . . .79
Section 11.1. Events of Default; Acceleration . . . . . . . . . . . . .79
Section 11.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . .88
Section 11.3. Relief from Stay. . . . . . . . . . . . . . . . . . . . .88
Section 11.4. Distribution of Collateral Proceeds . . . . . . . . . . .89
Section 12. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Section 13. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . .91
Section 13.1. Authorization . . . . . . . . . . . . . . . . . . . . . .91
Section 13.2. Employees and Agents. . . . . . . . . . . . . . . . . . .91
Section 13.3. No Liability. . . . . . . . . . . . . . . . . . . . . . .91
Section 13.4. No Representations. . . . . . . . . . . . . . . . . . . .92
Section 13.5. Payments. . . . . . . . . . . . . . . . . . . . . . . . .92
Section 13.6. Holders of Notes. . . . . . . . . . . . . . . . . . . . .94
Section 13.7. Indemnity . . . . . . . . . . . . . . . . . . . . . . . .94
Section 13.8. Agent as Lender . . . . . . . . . . . . . . . . . . . . .95
Section 13.9. Resignation . . . . . . . . . . . . . . . . . . . . . . .95
Section 13.10. Notification of Defaults and Events of Default . . . . .95
Section 13.11. Duties in the Case of Enforcement. . . . . . . . . . . .95
Section 14. ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . .96
Section 14.1. Conditions to Assignment by Banks . . . . . . . . . . . .96
Section 14.2. Certain Representations and Warranties; Limitations;
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96
Section 14.3. Register. . . . . . . . . . . . . . . . . . . . . . . . .97
Section 14.4. New Notes . . . . . . . . . . . . . . . . . . . . . . . .97
Section 14.5. Participations. . . . . . . . . . . . . . . . . . . . . .98
Section 14.6. Disclosure. . . . . . . . . . . . . . . . . . . . . . . .98
Section 14.7. Assignee or Participant Affiliated with the Borrower. . .99
Section 14.8. Miscellaneous Assignment Provisions . . . . . . . . . . .99
Section 14.9. Assignment by Borrower. . . . . . . . . . . . . . . . . .99
Section 15. AGENT AND BANKS AS PARTIES IN INTEREST . . . . . . . . . . . .100
Section 16. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . .100
Section 16.1. Costs and Expenses. . . . . . . . . . . . . . . . . . . .100
Section 16.2. Indemnification . . . . . . . . . . . . . . . . . . . . .100
Section 16.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . .101
Section 16.4. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . .101
<PAGE>
DEBTOR IN POSSESSION AND EXIT FINANCING
LOAN AGREEMENT
This DEBTOR IN POSSESSION AND EXIT FINANCING LOAN AGREEMENT (this
"Agreement") is made as of June 4, 1996, by and among LAMONTS APPAREL, INC., a
Delaware corporation (the "Borrower"), a debtor and debtor in possession having
its principal place of business and chief executive office at 12413 Willows Road
N.E., Kirkland, Washington 98034, THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, the other lending institutions (if any) listed on SCHEDULE
1 attached hereto and THE FIRST NATIONAL BANK OF BOSTON as agent for itself and
such other lending institutions.
WHEREAS, on January 6, 1995 (the "Filing Date"), the Borrower filed a
petition under chapter 11 of title 11 of the United States Code in the United
States Bankruptcy Court for the Western District of Washington at Seattle; and
WHEREAS, the Borrower has continued to operate its business pursuant to
Section 1107 and 1108 of the Bankruptcy Code; and
WHEREAS, the Borrower has requested that the Banks provide the Borrower
with a $32,000,000 revolving credit facility with a $3,000,000 sublimit for
letters of credit to provide working capital for the Borrower, to finance
purchases of inventory, to refinance the Foothill DIP Facility (as hereinafter
defined) and for other general corporate purposes; and
WHEREAS, subject to the terms and conditions set forth herein, the Banks
have agreed to provide such facility;
NOW, THEREFORE, in consideration of these premises and of the mutual
undertakings set forth herein, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. DEFINITIONS. The following terms shall have the meanings set
forth in this Section 1 or elsewhere in the provisions of this Agreement
referred to below:
ACCELERATION: See Section 11.3 hereof.
ADJUSTMENT DATE: The first day of the month immediately following the
month in which there occurs the receipt by the Banks and the Agent of the
Borrower's audited Financials for the previous fiscal year pursuant to Section
10.1(a)(i) hereof, commencing with the Adjustment Date pertaining to the fiscal
year ending February 1, 1997 and each fiscal year thereafter; PROVIDED that in
no event shall an Adjustment Date occur prior to the Exit Facility Date.
<PAGE>
-2-
AFFILIATE: Any Person that would be considered to be an affiliate of the
Borrower (or of another relevant Person) under Rule 144(a) of the Rules and
Regulations of the Securities and Exchange Commission, as in effect on the
Effective Date, if the Borrower (or such other relevant Person) were issuing
securities.
AGENCY ACCOUNT AGREEMENTS: See Section 3.7 hereof.
AGENT: The First National Bank of Boston in its capacity as agent for the
Banks.
AGENT'S HEAD OFFICE: The office of the Agent located at 100 Federal
Street, Boston, Massachusetts 02110.
AGENT'S SPECIAL COUNSEL: Bingham, Dana & Gould LLP or such other counsel
as may be approved by the Agent.
AGREED ADMINISTRATIVE EXPENSE PRIORITIES: (a) Amounts payable pursuant to
28 U.S.C. Section 1930(a)(6), and (b) the Escrow Amount but only to the extent
allowed by the Bankruptcy Court.
AGREEMENT: See the preamble, which term shall include this Agreement as
amended, modified, supplemented or restated and in effect from time to time.
APPLICABLE RATE: See Section 3.4(c) hereof.
APPLICABLE PRICING: As applicable, the Base Rate Margin, the Eurodollar
Rate Margin, the Letter of Credit Rate, or the Exit Commitment Fee Rate, as the
case may be.
ASSIGNMENT AND ACCEPTANCE: See Section 14.1 hereof.
ASSEMBLY (OR ATD): Assembly Transportation Distribution Systems, Inc., a
Washington corporation (and its successors as operator of the distribution
center of the Borrower in Kent, Washington, or any similar facility from time to
time of the Borrower).
BANKS: FNBB and the other lending institutions listed on SCHEDULE 1
attached hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 14 hereof.
BANKRUPTCY CODE: Title 11, United States Code, 11 U.S.C. Sections 101 ET
SEQ.
BANKRUPTCY COURT: The United States Bankruptcy Court for the Western
District of Washington at Seattle or such other court having jurisdiction over
the Case.
<PAGE>
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BASE RATE: The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office as its "base rate" and (b) one-half of
one percent (1/2%) above the Federal Funds Effective Rate.
BASE RATE LOANS: DIP Loans or Exit Loans bearing interest calculated by
reference to the Base Rate.
BASE RATE MARGIN: (a) At all times prior to the Exit Facility Date, the
Base Rate Margin shall be one and one-half percent (1.5%) per annum.
(b) From the Exit Facility Date to the first Adjustment Date, the Base
Rate Margin shall be one and one-half percent (1.5%) per annum. On the first
Adjustment Date and on each subsequent Adjustment Date, by reference to the
Borrower's and its Subsidiaries' audited Financials, the Borrower's and its
Subsidiaries' (i) Consolidated EBITDA for the period of the relevant fiscal year
then most recently ended shall be calculated, and the lowest Base Rate Margin
corresponding to the results of such test on the table set forth below shall be
determined, (ii) Debt Service Coverage Ratio for the period of the relevant
fiscal year then most recently ended shall be calculated, and the lowest Base
Rate Margin corresponding to the result of such test on the table set forth
below shall be determined, (iii) Leverage Ratio determined as of the last day of
the relevant fiscal year then most recently ended shall be calculated, and the
lowest Base Rate Margin corresponding to the result of such test on the table
set forth below shall be determined. The three resulting Base Rate Margins so
indicated by applying such three tests separately shall be compared, and the
highest resulting Base Rate Margin of such three results shall then be the
applicable Base Rate Margin (until the next such adjustment):
- --------------------------------------------------------------------------------
Consolidated Debt Service Leverage Base Rate Margin
EBITDA Coverage Ratio Ratio (per annum)
- --------------------------------------------------------------------------------
Tier 1 Greater than Greater than Less than or 0.50%
or equal to or equal to 2.00 equal to 1.25
$13,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 2 Greater than Greater than Less than or 1.00%
or equal to or equal to 1.75 equal to 1.75
$11,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 3 Greater than Greater than Less than or 1.50%
or equal to or equal to 1.50 equal to 2.50
$9,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 4 Less than Less than 1.50 Greater than 1.75%
$9,000,000 to 1.00 2.50 to 1.00
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, (i) if the Borrower and its Subsidiaries
fail to deliver any audited Financials for the previous fiscal year when
required by Section 10.1(a)(i) hereof, then for the period commencing on the
last date on which such audited Financials were to have been delivered
continuing to the next Adjustment Date, the Base Rate Margin shall be the margin
set forth in Tier 4 in the table above, and (ii) all adjustments to the Base
Rate Margin shall take
<PAGE>
-4-
effect immediately with respect to all Base Rate Loans on the applicable
Adjustment Date.
BOOK VALUE: With respect to inventory, the valuation thereof at the lower
of cost (using the retail last-in, first-out ("LIFO") method) or net realizable
value, determined in accordance with GAAP.
BORROWER: See the preamble.
BORROWING BASE: At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Banks and the Agent pursuant to Section 10.1(a)(iv), which is
equal to:
(a) At any time prior to the Exit Facility Date:
(i) 70% (during the period from the Effective Date through
December 31, 1996) or 65% (thereafter) of the result of (A) Eligible
Inventory at such time MINUS (B) the Inventory Shrink Reserve; PLUS
(ii) the lesser of (x) $1,910,000 or (y) 60% of the appraised "as
is" market value of the Borrower's leasehold estate in the Kitsap
Store.
(b) At any time on or after the Exit Facility Date, so long as no
Capital Raising Event shall have occurred:
(i) 70% (during the period from the Exit Facility Date through
December 31, 1996) or 65% (thereafter) of the result of (A) Eligible
Inventory at such time MINUS (B) the Inventory Shrink Reserve; PLUS
(ii) the lesser of (x) $1,910,000 or (y) 60% of the appraised "as
is" market value of the Borrower's leasehold estate in the Kitsap
Store, so long as a first-priority leasehold mortgage (with respect to
the leasehold) and a fee simple mortgage (with respect to owned real
estate interests) satisfactory in form and substance to the Agent with
respect to the Kitsap Store in favor of the Agent for the benefit of
the Banks shall have been duly recorded, all necessary or advisable
consents of the landlord with respect thereto shall have been
obtained, satisfactory mortgagee title insurance shall have been
issued to the Agent with respect thereto, and all other steps
necessary or advisable to perfect a first-priority security interest
in favor of the Agent in the Borrower's interest in the Kitsap Store
shall have been taken; MINUS
(iii) the aggregate amount of any Landlord Lien Reserves with
respect to all Specified Leases at such time.
<PAGE>
-5-
(c) At any time on or after the Exit Facility Date, but only from and
after the occurrence of a Capital Raising Event:
(i) 65% of the result of (A) Eligible Inventory at such time,
MINUS (B) the Inventory Shrink Reserve; MINUS
(ii) the aggregate amount of any Landlord Lien Reserves with
respect to all Specified Leases at such time.
PROVIDED, however, that the Agent shall be entitled to make reasonable
adjustments from time to time to the Borrowing Base formula and components
thereof, including without limitation any applicable advance rate, on the basis
of inventory liquidation analyses, commercial finance examinations, collateral
audits or (as applicable) appraisals of the Kitsap Store conducted at any time
or from time to time in accordance with the terms of this Agreement; and
PROVIDED, FURTHER, that the Agent shall be entitled to make reasonable
adjustments from time to time to the amount relating to the Kitsap Store as
referred to in clauses (a)(ii) and (b)(ii) of the Borrowing Base to reflect
diminutions or loss of value in respect of casualty losses, damage,
condemnation, or destruction with respect to the Kitsap Store. The value of the
Kitsap Store shall also be excluded from the Borrowing Base in the circumstances
described in Section 10.2(f) hereof.
BORROWING BASE REPORT: A borrowing base report signed and certified by the
chief financial officer or assistant treasurer of the Borrower and in
substantially the form of EXHIBIT A hereto.
BUSINESS DAY: Any day on which banks in Boston, Massachusetts, are open
for the transaction of banking business and, in the case of Eurodollar Rate
Loans, also a day which is a Eurodollar Business Day.
CAPITAL ASSETS: Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); PROVIDED, that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with GAAP.
CAPITAL EXPENDITURES: With respect to any period, amounts paid or, without
duplication, Indebtedness incurred by the Borrower or any of its Subsidiaries in
connection with the purchase or lease by the Borrower or any of its Subsidiaries
during such period of Capital Assets that would be required to be capitalized
and shown on the balance sheet of such Person in accordance with GAAP.
CAPITALIZED LEASES: Leases of real or personal property under which rental
payment obligations are required to be capitalized on a balance sheet of the
lessee thereof in accordance with GAAP.
<PAGE>
-6-
CAPITAL RAISING EVENT: An investment in the Borrower in the form of (a)
Indebtedness (or preferred stock) expressly subordinated and made junior to the
Obligations hereunder, with terms, and issued pursuant to documents and
instruments, including without limitation a written subordination agreement, in
each case, in form and substance satisfactory to and approved by the Banks and
the Agent, or (b) common stock, in each case other than (i) the Subordinated
Debt and (ii) any common stock issued by the Borrower solely in respect of the
conversion of pre-petition debt or pre-petition equity to equity pursuant to the
terms of the Reorganization Plan.
CASE: The Borrower's reorganization case No. 95-00100 under chapter 11 of
the Bankruptcy Code pending in the Bankruptcy Court.
CASH COLLATERALIZED LETTERS OF CREDIT: An amount equal to the Maximum
Drawing Amount of Letters of Credit issued hereunder with respect to which cash
collateral in an amount equal to not less than 105% of the Maximum Drawing
Amount thereof has been pledged to the Agent pursuant to the requirements of
this Agreement to secure the Borrower's Reimbursement Obligations with respect
thereto.
CHARTER DOCUMENTS: In respect of any entity, the certificate or articles
of incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
COLLATERAL: All of the property, rights and assets of the Borrower or the
Guarantors, wherever located, whether now or hereafter acquired or arising, real
or personal, tangible or intangible, owned, licensed, leased (to the extent of
the Borrower's or the Guarantors' leasehold interests or licensee's interests
therein), or consigned (to the extent of the Borrower's or the Guarantors'
interests therein), including, without limitation, all accounts, inventory,
equipment, instruments, documents, chattel paper, securities, and deposit
accounts as well as customer lists, trademarks and all other general
intangibles, and any and all products and proceeds thereof, excluding (a) all of
the Borrower's rights under Sections 544, 545, 547, 548, 549 and 550 of the
Bankruptcy Code and (b) the Escrow Account, but in any event including without
limitation the Borrower's residual interest (if any) in the Escrow Account.
COMMITMENT PERCENTAGE: With respect to each Bank, the percentage set forth
on SCHEDULE 1 attached hereto as such Bank's percentage of the aggregate DIP
Commitments of all of the Banks or the aggregate Exit Commitments of all of the
Banks, as applicable.
COMPLIANCE CERTIFICATE: See Section 10.1(a)(iii) hereof.
CONFIRMATION ORDER: See Section 9.2.7 hereof.
<PAGE>
-7-
CONSENT: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
CONSOLIDATED EBITDA: For any period, the result of (a) Consolidated Net
Income (or Deficit) of the Borrower and its Subsidiaries PLUS (b) the sum of (i)
interest expense, (ii) income tax expense, (iii) depreciation and amortization
charges, (iv) other non-cash charges and non-cash reserves taken and (v)
extraordinary charges or expenses associated with the Case and the Borrower's
reorganization thereunder, MINUS (c) extraordinary gains or extraordinary
income, in each case determined in accordance with GAAP, and in the case of
items (b) and (c) to the extent included in the calculation of Consolidated Net
Income (or Deficit) and in any event without duplication.
CONSOLIDATED NET INCOME (OR DEFICIT): The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, but before adjustments for accounting of
inventory on a LIFO basis, determined in accordance with GAAP.
CONSOLIDATED TANGIBLE NET WORTH: On any date of determination, the excess
of Consolidated Total Assets over Consolidated Total Liabilities, and less the
total book value of all assets of the Borrower and its Subsidiaries properly
classified as intangible assets under GAAP, including such items as goodwill,
the purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing.
CONSOLIDATED TOTAL ASSETS: On any date of determination, all assets of the
Borrower and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
CONSOLIDATED TOTAL INTEREST EXPENSE: For any period, the aggregate amount
of all interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of Capitalized
Leases and including commitment fees, agency fees, facility fees, balance
deficiency fees, letter of credit fees and similar fees or expenses in
connection with the borrowing of money, but excluding interest accrued with
respect to the Subordinated Debt to the extent such interest is not required to
be paid in cash until the scheduled final maturity date of the Subordinated Debt
(but in any event, including such deferred interest upon such scheduled final
maturity date or when otherwise paid or required to be paid) and excluding
attorneys fees and similar transaction expenses.
<PAGE>
-8-
CONSOLIDATED TOTAL LIABILITIES: All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP, and,
without duplication, all Indebtedness of the Borrower and its Subsidiaries,
including without limitation, all letters of credit, whether or not so
classified.
CONVERSION REQUEST: A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan pursuant to Section 3.5
hereof.
DEBT SERVICE COVERAGE RATIO: For any fiscal period, the ratio of (i)
Operating Cash Flow of the Borrower and its Subsidiaries for such period to (ii)
Total Debt Service of the Borrower and its Subsidiaries for such period.
DEFAULT: An event or act which, with the giving of notice and/or the lapse
of time, would become an Event of Default.
DELINQUENT BANK: See Section 13.5(e) hereof.
DIP COMMITMENT: With respect to each Bank, the amount of such Bank's
commitment to make DIP Loans to, and to participate in the issuance, extension
and renewal of Letters of Credit for the account of, the Borrower up to such
Bank's Commitment Percentage of an aggregate amount not to exceed the lesser of
(a) $32,000,000, and (b) the amount approved in the Financing Order, as such
amount may be reduced from time to time or terminated hereunder.
DIP LOANS: Any loans made or to be made to the Borrower pursuant to
Section 2.1 hereof.
DIP MATURITY DATE: The date on which the DIP Commitment expires, which
shall be the earliest of (a) June 30, 1997, and (b) the effective date of a
Reorganization Plan that has been confirmed by the Confirmation Order of the
Bankruptcy Court, and (c) twenty (20) days after the entry of the Confirmation
Order by the Bankruptcy Court, if the Reorganization Plan shall not have become
effective prior to such date.
DIP NOTES: See Section 3.3(a) hereof.
DIRECT COLLECTION LETTER: See Section 3.7 hereof.
DISCLOSURE STATEMENT: The Disclosure Statement pursuant to Section 1125 of
the Bankruptcy Code filed or to be filed pursuant to the Reorganization Plan.
DOLLARS OR $: Dollars in the lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE: As to any Bank, the office of such Bank located
within the United States of America that will be making or maintaining Base Rate
Loans.
<PAGE>
-9-
DRAWDOWN DATE: In respect of any Loan, the date on which such Loan is made
or to be made to the Borrower, and the date on which any Loan is converted or
continued in accordance with Section 3.5.
EFFECTIVE DATE: The first date on which the conditions set forth in
Sections 9.1 and 9.3 hereof have been satisfied.
ELIGIBLE ASSIGNEE: Any of (a) a commercial bank organized under the laws
of the United States, or any State thereof or the District of Columbia, and
having total assets in excess of $1,000,000,000; (b) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with GAAP; (c) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having total assets in excess of
$1,000,000,000, or the central bank of any country which is a member of the
OECD, PROVIDED, in each case, that such bank is acting through a branch or
agency located in the country in which it is organized or another country which
is also a member of the OECD; (d) a commercial finance company or other
financial institution organized under the laws of any State of the United States
or the District of Columbia and having a net worth, in accordance with GAAP, of
at least $500,000,000; and (e) if, but only if, an Event of Default has occurred
and is continuing, any other bank, insurance company, commercial finance company
or other financial institution or other Person approved by the Agent, such
approval not to be unreasonably withheld.
ELIGIBLE INVENTORY: An amount, equal to the Book Value and determined by
the Agent in its reasonable discretion consistent with its usual business
practices and policies, of first quality finished goods inventory owned and held
for sale by the Borrower, PROVIDED that Eligible Inventory shall not include any
inventory (i) held on consignment or not otherwise owned by the Borrower or of a
type no longer sold by the Borrower, (ii) which has been returned by a customer
unless it is of first quality, not obsolete and not subject to any Lien or legal
encumbrance (or purported ownership interest of any Person, other than of the
Borrower) pursuant to the Store Credit Card Program or any other credit card
program, (iii) which is subject to any Lien or legal encumbrance, or purported
ownership interest of any Person other than of the Borrower (other than Liens in
favor of the Agent for the benefit of the Banks and landlords Liens), (iv) which
is not in the possession of the Borrower (except as provided in clause (v) of
this definition with respect to inventory in the possession of Assembly or the
Borrower's "inventory consolidators" and other applicable Persons referred to in
clause (v)) unless the Agent has received and holds a waiver from the party in
possession of such inventory in form and substance satisfactory to the Agent,
(v) which is in the possession of Assembly, or the applicable "inventory
consolidators" for the Borrower and other applicable Persons in possession of
inventory of the Borrower in a similar capacity, unless,
<PAGE>
-10-
from and after the Exit Facility Date, the Agent has received and holds a waiver
from such relevant Person in form and substance satisfactory to the Agent, (vi)
which is not located within the United States of America, (vii) in which the
Agent does not have a first priority perfected security interest (subject, from
and after the Exit Facility Date, only to landlords Liens, if any, to the extent
such Liens may be entitled to priority by the operation of Law), (viii) which
has been shipped to a customer of the Borrower regardless of whether such
shipment is on a consignment basis, (ix) which is not located at a Permitted
Inventory Location, (x) which is damaged, or (xi) which the Agent in its
reasonable discretion deems obsolete or not marketable or otherwise does not
consider Eligible Inventory.
ENVIRONMENTAL LAWS: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Federal Oil Pollution Act, the Toxic
Substances Control Act, in each case as amended, and all rules, regulations,
judgments, decrees, orders and licenses arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended,
and all rules, regulations, judgments, decrees, and orders arising thereunder.
ERISA AFFILIATE: Any Person which is treated as a single employer with the
Borrower under Section 414 of the IRC.
ESCROW ACCOUNT: The continuing escrow account presently maintained with
Seafirst by the Borrower for the sole purpose of setting aside funds, on a
monthly basis, for the payment of professional fees and expenses incurred by the
Borrower and each of the official creditors' committees and the equity committee
in connection with the Case upon, and solely to the extent of, the allowance of
such fees and expenses by the Bankruptcy Court, PROVIDED that no funds may be so
deposited therein during the continuance of an Event of Default.
ESCROW AMOUNT: At any time of determination, the amount of cash then
standing to the credit of the Escrow Account.
EURODOLLAR RATE MARGIN: (a) At all times prior to the Exit Facility Date,
the Eurodollar Rate Margin shall be two and three-quarters percent (2.75%) per
annum.
(b) From the Exit Facility Date to the first Adjustment Date, the
Eurodollar Rate Margin shall be two and three-quarters percent (2.75%) per
annum. On the first Adjustment Date and on each subsequent Adjustment Date, by
reference to the Borrowers' and its Subsidiaries' audited Financials, the
Borrower's and its Subsidiaries' (i) Consolidated EBITDA for the period of the
relevant fiscal year then most recently ended shall be calculated, and the
lowest Eurodollar Rate Margin corresponding to the results of such test on the
table set
<PAGE>
-11-
forth below shall be determined, (ii) Debt Service Coverage Ratio for the period
of the relevant fiscal year then most recently ended shall be calculated, and
the lowest Eurodollar Rate Margin corresponding to the result of such test on
the table set forth below shall be determined, (iii) Leverage Ratio determined
as of the last day of the relevant fiscal year then most recently ended shall be
calculated, and the lowest Eurodollar Rate Margin corresponding to the result of
such test on the table set forth below shall be determined. The three resulting
Eurodollar Rate Margins so indicated by applying such three tests separately
shall be compared, and the highest resulting Eurodollar Rate Margin of such
three results shall then be the applicable Eurodollar Rate Margin (until the
next such adjustment):
- --------------------------------------------------------------------------------
Eurodollar
Consolidated Debt Service Leverage Rate Margin
EBITDA Coverage Ratio Ratio (per annum)
- --------------------------------------------------------------------------------
Tier 1 Greater than Greater than Less than or 1.75%
or equal to or equal to 2.00 equal to 1.25
$13,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 2 Greater than Greater than Less than or 2.25%
or equal to or equal to 1.75 equal to 1.75
$11,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 3 Greater than Greater than Less than or 2.75%
or equal to or equal to 1.50 equal to 2.50
$9,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 4 Less than Less than 1.50 Greater than 3.00%
$9,000,000 to 1.00 2.50 to 1.00
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, (i) if the Borrower and its Subsidiaries
fail to deliver any audited Financials for the prior fiscal year as and when
required by Section 10.1(a)(i) hereof, then for the period commencing on the
last date on which such audited Financials were to have been delivered
continuing to the next Adjustment Date, the Eurodollar Rate Margin shall be
the margin set forth in Tier 4 in the table above, and (ii) all adjustments
to the Eurodollar Rate Margin as to any particular Eurodollar Rate Loan shall
take effect on the Drawdown Date (including the date of conversion to or
continuation as such) of each such Eurodollar Rate Loan occurring on or after
the applicable Adjustment Date.
EUROCURRENCY RESERVE RATE: For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurocurrency Reserve Rate.
<PAGE>
-12-
EURODOLLAR BUSINESS DAY: Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other Dollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
EURODOLLAR LENDING OFFICE: As to any Bank, the office of such Bank located
within the United States of America that will be making or maintaining
Eurodollar Rate Loans.
EURODOLLAR RATE: For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest per annum equal to (i) the rate at which FNBB's
Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of FNBB to which
such Interest Period applies, divided by (ii) a number equal to 1.00 minus the
Eurocurrency Reserve Rate.
EURODOLLAR RATE LOANS: Loans bearing interest calculated by reference to
the Eurodollar Rate.
EVENT OF DEFAULT: Any of the events listed in Section 11 hereof.
EXIT COMMITMENT: With respect to each Bank, the amount of such Bank's
commitment to make Exit Loans to, and to participate in the issuance, extension
and renewal of Letters of Credit for the account of, the Borrower up to such
Bank's Commitment Percentage of an aggregate amount not to exceed the lesser of
(a) if and to the extent the DIP Commitment shall have been reduced or
terminated at any time prior to the Exit Facility Date by the Borrower or the
Banks pursuant to the terms of this Agreement, the DIP Commitment in effect
immediately prior to the Exit Facility Date and (b) $32,000,000; as such amount
may be reduced from time to time or terminated hereunder.
EXIT COMMITMENT FEE RATE: From the Exit Facility Date to the first
Adjustment Date, the Exit Commitment Fee Rate shall be one half of one percent
(0.50%) per annum. On the first Adjustment Date and on each subsequent
Adjustment Date, by reference to the Borrowers' and its Subsidiaries' audited
Financials, the Borrower's and its Subsidiaries' (i) Consolidated EBITDA for the
period of the relevant fiscal year then most recently ended shall be calculated,
and the lowest Exit Commitment Fee Rate corresponding to the results of such
test on the table set forth below shall be determined, (ii) Debt Service
Coverage Ratio for the period of the relevant fiscal year then most recently
ended shall be calculated, and the lowest Exit Commitment Fee Rate corresponding
to the result of such test on the table set forth below shall be determined,
(iii) Leverage Ratio determined as of the last day of the relevant fiscal year
then most recently ended shall be calculated, and
<PAGE>
-13-
the lowest Exit Commitment Fee Rate corresponding to the result of such test on
the table set forth below shall be determined. The three resulting Exit
Commitment Fee Rates so indicated by applying such three tests separately shall
be compared, and the highest resulting Exit Commitment Fee Rate of such three
results shall then be the applicable Exit Commitment Fee Rate (until the next
such adjustment):
- --------------------------------------------------------------------------------
Exit Commitment
Consolidated Debt Service Leverage Fee Rate
EBITDA Coverage Ratio Ratio (per annum)
- --------------------------------------------------------------------------------
Tier 1 Greater than Greater than Less than or 0.375%
or equal to or equal to 2.00 equal to 1.25
$13,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 2 Greater than Greater than Less than or 0.375%
or equal to or equal to 1.75 equal to 1.75
$11,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 3 Greater than Greater than Less than or 0.50%
or equal to or equal to 1.50 equal to 2.50
$9,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 4 Less than Less than 1.50 Greater than 0.50%
$9,000,000 to 1.00 2.50 to 1.00
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, (i) if the Borrower and its Subsidiaries
fail to deliver any audited Financials for the prior fiscal year as and when
required by Section 10.1(a)(i) hereof, then for the period commencing on the
last date on which such audited Financials were to have been delivered
continuing to the next Adjustment Date, the Exit Commitment Fee Rate shall be
the rate set forth in Tier 4 in the table above, and (ii) all adjustments to the
Exit Commitment Fee Rate shall take effect immediately on the applicable
Adjustment Date.
EXIT FACILITY DATE: The date on which all of the conditions precedent
under Sections 9.2 and 9.3 hereof are satisfied.
EXIT LOANS: Any loan converted into an Exit Loan pursuant to Section
2.3(a) hereof and any loan made or to be made to the Borrower pursuant to
Section 2.3(b) hereof.
EXIT MATURITY DATE: The date on which each Bank's Exit Commitment expires,
which shall be the second anniversary of the Exit Facility Date.
EXIT NOTES: See Section 3.3(b) hereof.
EXTENDED PERIOD: See Section 11.1 hereof.
FEE LETTER: The letter agreement with respect to certain fees dated as of
a date on or before the Effective Date by and between the Borrower and the
Agent.
FEDERAL FUNDS EFFECTIVE RATE: For any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
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members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
funds brokers of recognized standing selected by the Agent.
FILING DATE: See the preamble.
FINANCIALS: In respect of any period, the consolidated and consolidating
balance sheet(s) of any Person and its Subsidiaries as at the end of such
period, and the related consolidated and consolidating statement of income and
consolidated statement of cash flow for such period, each setting forth in
comparative form the figures for the previous comparable fiscal period, all in
reasonable detail and prepared in accordance with GAAP; subject, in the case of
such balance sheets and statements delivered at the end of fiscal periods other
than such Person's fiscal year, to year-end audit adjustments.
FINANCING ORDER: See Section 9.1.6 hereof.
FNBB: The First National Bank of Boston, a national banking association,
in its individual capacity.
FOOTHILL: Foothill Capital Corporation, a California corporation.
FOOTHILL DIP FACILITY: The Loan and Security Agreement by and between the
Borrower and Foothill dated on or about February 17, 1995.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (a)
generally, as in effect from time to time, and (b) except as otherwise expressly
provided in this Agreement, for purposes of (i) determining compliance by the
Borrower with the financial covenants set forth herein and (ii) the computation
of the financial performance tests used in the determination of the Applicable
Pricing hereunder, such principles, as in effect for the fiscal year therein
reported in the most recent Financials submitted by the Borrower to the Agent
prior to execution of this Agreement.
GUARANTEED PENSION PLAN: See Section 11.1(b)(xvi) hereof.
GUARANTOR: Any Person that has guarantied to the Banks and the Agent the
payment and performance of the Obligations. The Banks and the Agent acknowledge
that as of the Effective Date there are no Guarantors.
GUARANTY: With respect to any Guarantor, the guaranty made by such
Guarantor of payment and performance of the Obligations in favor of the Banks
and the Agent, which must be satisfactory in form and substance to the Banks and
the Agent.
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INDEBTEDNESS: In respect of any Person, all obligations, contingent and
otherwise, that in accordance with GAAP should be classified as liabilities,
including, without limitation, (a) all debt obligations, (b) all liabilities
secured by Liens, (c) all guarantees, recourse agreements, and similar
undertakings, (d) all liabilities in respect of bankers' acceptances or letters
of credit, and (e) all obligations to purchase, redeem, retire, defease or
otherwise make any payment (including mandatory dividends or distributions) in
respect of any capital stock or any warrants, rights, or options to acquire
capital stock.
INTEREST PAYMENT DATE. (a) As to each Base Rate Loan, (i) the first
Business Day of each calendar month with respect to interest accrued during the
previous calendar month, including without limitation, the calendar month which
includes the Drawdown Date thereof, (ii) the DIP Maturity Date, unless the Exit
Facility Date shall have occurred, and (iii), the Exit Maturity Date, if the
Exit Facility Date shall have occurred, and (b) as to any Eurodollar Rate Loan,
(i) the last day of the Interest Period with respect thereto, (ii) the DIP
Maturity Date, unless the Exit Facility Date shall have occurred, and (iii) the
Exit Maturity Date, if the Exit Facility Date shall have occurred.
INTEREST PERIOD. With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request
(i) for any Base Rate Loan, ending on the last day of each calendar month and
(ii) for any Eurodollar Rate Loan, 1, 2 or 3 months; and (b) thereafter, each
period commencing on the last day of the next preceding Interest Period
applicable to such Loan and ending on the last day of one of the periods set
forth above, as selected by the Borrower in a Conversion Request; PROVIDED that
all of the foregoing provisions relating to Interest Periods are subject to the
following:
(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(B if the Borrower shall fail to give notice as provided in Section
3.5.1, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;
(C) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar 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 Eurodollar
Business Day of a calendar month; and
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(D) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond (x) the DIP Maturity Date, if the Exit
Facility Date shall not have occurred, shall end on the DIP Maturity Date,
and (y) the Exit Maturity Date, if the Exit Facility Date shall have
occurred, shall end on the Exit Maturity Date.
INVENTORY SHRINK RESERVE: At any time, an amount equal to the product of
(a) the Book Value of the Borrower's inventory multiplied by (b) the Inventory
Shrink Reserve Percentage then in effect.
INVENTORY SHRINK RESERVE PERCENTAGE: At the time of reference thereto, a
percentage reasonably determined by the Agent from time to time based on
commercial finance examinations of the Borrower and its inventory, with regard
to the Borrower's historical experience with respect to losses of inventory due
to shoplifting, employee theft, inventory errors, and other "shrinkage" events.
The parties acknowledge and agree that as of the Effective Date, the Inventory
Shrink Reserve Percentage is 2.6%.
IRC: The Internal Revenue Code of 1986.
KITSAP STORE: The Borrower's department store located in the Kitsap Mall,
10315 Silverdale Way Northwest, Silverdale, Washington.
LANDLORD LIEN RESERVE: At any time of reference, with respect to each
Specified Lease, an amount reasonably determined by the Agent as a reserve
against inventory located on the leasehold created by such Specified Lease with
respect to which the landlord thereof may have a common law or statutory
landlord's Lien for unpaid rental obligations senior in priority to the Liens
thereon in favor of the Agent for the benefit of the Banks.
LANDLORD WAIVER: A waiver from the lessor or sublessor of property leased
by the Borrower as lessee in substantially the form attached hereto as EXHIBIT B
and in any event in form and substance satisfactory to the Agent in all
respects.
LAW OR LAWS: Statue(s), law(s), ordinance(s), regulation(s), order(s),
writ(s), injunction(s) or decree(s) of any political or governmental body or
Tribunal (federal, state, county, municipal, foreign or domestic, or otherwise)
having competent jurisdiction, including, without limitation, Environmental
Laws.
LETTER OF CREDIT: See Section 4.1 hereof.
LETTER OF CREDIT APPLICATION: See Section 4.1 hereof.
LETTER OF CREDIT FEE: See Section 4.6 hereof.
LETTER OF CREDIT PARTICIPATION: See Section 4.1.3 hereof.
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LETTER OF CREDIT RATE: (a) At all times prior to the Exit Facility Date,
the Letter of Credit Rate shall be one and three-quarters percent (1.75%) per
annum.
(b) From the Exit Facility Date to the first Adjustment Date, the Letter
of Credit Rate shall be one and three-quarters percent (1.75%) per annum. On
the first Adjustment Date and on each subsequent Adjustment Date, by reference
to the Borrowers' and its Subsidiaries' audited Financials, the Borrower's and
its Subsidiaries' (i) Consolidated EBITDA for the period of the relevant fiscal
year then most recently ended shall be calculated, and the lowest Letter of
Credit Rate corresponding to the results of such test on the table set forth
below shall be determined, (ii) Debt Service Coverage Ratio for the period of
the relevant fiscal year then most recently ended shall be calculated, and the
lowest Letter of Credit Rate corresponding to the result of such test on the
table set forth below shall be determined, (iii) Leverage Ratio determined as of
the last day of the relevant fiscal year then most recently ended shall be
calculated, and the lowest Letter of Credit Rate corresponding to the result of
such test on the table set forth below shall be determined. The three resulting
Letter of Credit Rates so indicated by applying such three tests separately
shall be compared, and the highest resulting Letter of Credit Rate of such three
results shall then be the applicable Letter of Credit Rate (until the next such
adjustment):
- --------------------------------------------------------------------------------
Consolidated Debt Service Leverage Letter of Credit
EBITDA Coverage Ratio Ratio Rate (per annum)
- --------------------------------------------------------------------------------
Tier 1 Greater than Greater than Less than or 1.25%
or equal to or equal to 2.00 equal to 1.25
$13,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 2 Greater than Greater than Less than or 1.50%
or equal to or equal to 1.75 equal to 1.75
$11,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 3 Greater than Greater than Less than or 1.75%
or equal to or equal to 1.50 equal to 2.50
$9,000,000 to 1.00 to 1.00
- --------------------------------------------------------------------------------
Tier 4 Less than Less than 1.50 Greater than 2.00%
$9,000,000 to 1.00 2.50 to 1.00
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, (i) if the Borrower and its Subsidiaries
fail to deliver any audited Financials for the prior fiscal year as and when
required by Section 10.1(a)(i) hereof, then for the period commencing on the
last date on which such audited Financials were to have been delivered
continuing to the next Adjustment Date, the Letter of Credit Rate shall be the
rate set forth in Tier 4 in the table above, and (ii) all adjustments to the
Letter of Credit Rate shall take effect with respect to each particular Letter
of Credit immediately on the applicable Adjustment Date.
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LEVERAGE RATIO: On any date of determination, the ratio of (i)
Consolidated Total Liabilities of the Borrower and its Subsidiaries to (ii)
Consolidated Tangible Net Worth of the Borrower and its Subsidiaries.
LIENS: Any lien, encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any Person.
LIFO: See the definition of Book Value.
LOANS: Collectively, the DIP Loans and the Exit Loans.
LOAN DOCUMENTS: This Agreement, the Notes, the Subordination and
Intercreditor Agreement (if any), the Fee Letter, the Letter of Credit
Applications (if any), and the applicable Security Documents, in each case as
amended, modified, supplemented or restated and in effect from time to time.
LOAN REQUEST: See Section 3.1 hereof.
LOCK BOX ACCOUNT: See Section 3.7 hereof.
LOCK BOX AGREEMENT: The Lock Box Agreement, in form and substance
satisfactory to the Agent, between the Borrower and the Agent.
MAJORITY BANKS. As of any date, the Banks holding at least 51% of the
outstanding principal amount of the Notes on such date; and if no such principal
is outstanding, (a) prior to the Exit Facility Date, the Banks whose aggregate
DIP Commitments constitute at least 51% of the Total DIP Commitment and (b) from
and after the Exit Facility Date, the Banks whose aggregate Exit Commitments
constitute at least 51% of the Total Exit Commitment.
MATERIALLY ADVERSE EFFECT: Any materially adverse effect (resulting from
any single event or any combination of multiple events) on, or change in, the
financial condition, business operations, properties, or prospects of the
Borrower and the Guarantors, individually or taken together, or with respect to
the value of the Collateral, or material impairment (resulting from any single
event or any combination of multiple events) of the ability of the Borrower or
any of the Guarantors to perform its obligations hereunder or under any of the
other Loan Documents, or material impairment (resulting from any single event or
any combination of multiple events) of the legality, validity, or enforceability
of any Loan Document or the perfection or priority of any Lien under any of the
Loan Documents.
MAXIMUM DRAWING AMOUNT: The maximum aggregate amount from time to time
that the beneficiaries may draw under all outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
MAXIMUM RATE: See Section 3.4(c) hereof.
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MORTGAGE: The mortgage (or deed of trust, as applicable) dated as of a
date on or prior to the Exit Facility Date, from the Borrower to the Agent with
respect to the fee and leasehold interests of the Borrower in the Real Estate
pertaining to the Kitsap Store and in form and substance satisfactory to the
Banks and the Agent.
NOTES: Collectively, the DIP Notes and the Exit Notes.
OBLIGATIONS: All indebtedness, obligations and liabilities of the Borrower
and the Guarantors to the Agent and the Banks, existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Agreement or any other Loan Document or in respect of any of
the Loans or Letters of Credit or the Notes or other instruments at any time
evidencing any thereof.
OECD: See the definition of Eligible Assignee.
OPERATING ACCOUNT: The Borrower's operating account (No. 503-20493) with
FNBB.
OPERATING CASH FLOW: For any period, an amount equal (without duplication)
to (i) Consolidated EBITDA of the Borrower and its Subsidiaries for such period,
MINUS (ii) cash payments for all income taxes paid by the Borrower and its
Subsidiaries during such period, MINUS (iii) cash payments during such period on
account of Capital Expenditures by the Borrower and its Subsidiaries.
ORDER: The Financing Order.
OSHA: The Occupational Safety and Health Act, as amended, and all rules,
regulations, judgments, decrees and orders arising thereunder.
PBGC: The Pension Benefit Guaranty Corporation, and any successor entity
or entities bearing similar responsibilities.
PERFECTION CERTIFICATE: The Perfection Certificate relating to the
Security Agreement, executed and delivered by the Borrower, to be in form and
substance satisfactory to the Banks and the Agent.
PERMITTED INVENTORY LOCATION(S): The retail stores and distribution
centers of the Borrower located in the United States of America and listed on
SCHEDULE 8(p) hereto, and any future retail stores of the Borrower located in
the United States of America, in each case so long as from and after the Exit
Facility Date appropriate Uniform Commercial Code financing statements or other
applicable documents showing the Borrower as debtor and the Agent as secured
party shall have been filed in the proper filing offices in a manner and form
sufficient to perfect the Agent's first priority security interest in the
inventory and other assets of the Borrower located at such store or other
facility.
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PERMITTED LIENS: See Section 10.2(c) hereof.
PERMITTED PRIOR LIENS: Valid, perfected and otherwise unavoidable Liens
existing as of the Effective Date and listed and described in reasonable detail
on SCHEDULE 10.2(C) attached hereto, and, only from and after the Exit Facility
Date, landlord Liens (if any) to the extent such Liens are entitled to priority
by the operation of Law over the Liens of the Agent and the Banks under the
Security Documents.
PERSON: Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
PTO: See Section 9.1.5 hereof.
RATIFICATION CERTIFICATE: A certificate to be dated the Exit Facility Date
in form and substance satisfactory to the Banks and the Agent pursuant to which
the Borrower and each of the Guarantors, if any, shall ratify all of the
Obligations and the Liens securing the Obligations.
REAL ESTATE: All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of the Guarantors.
REGISTER: See Section 14.3 hereof.
REIMBURSEMENT OBLIGATION: The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in Section 4.2 hereof.
REMY: Remy Capital Partners III, L.P., a Delaware limited partnership.
REORGANIZATION PLAN: A plan or plans of reorganization in the Case.
REQUIREMENT OF LAW: In respect of any Person, any law, treaty, rule,
regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such Person or affecting
any of its property.
SEAFIRST: See Section 3.9 hereof.
SEAFIRST ACCOUNT: See Section 3.9 hereof.
SECURITY AGREEMENT: The security agreement dated as of a date on or prior
to the Exit Facility Date between the Borrower and the Agent, in form and
substance satisfactory to the Banks and the Agent.
SECURITY DOCUMENTS: The Security Agreement, the Perfection Certificate,
the Guaranties, if any, the Mortgage, the Lock Box Agreement, the Trademark
Agreement, the Agency Account Agreements, the Ratification Certificate and all
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other security agreements, pledge agreements, collateral assignment agreements,
mortgages, deeds of trust, assignments, or other instruments or documents, in
form and substance satisfactory to the Agent and the Banks, which shall grant to
the Agent, for the benefit of the Agent and the Banks, credit support for the
Obligations or Liens upon any of the Collateral.
SETTLEMENT: The making of, or receiving of payments, in immediately
available funds, among the Banks and the Agent, to the extent necessary to cause
each Bank's actual share of the outstanding amount of Loans (after giving effect
to any Loan Request) to be equal to each Bank's Commitment Percentage of the
outstanding amount of Loans (after giving effect to any Loan Request), where,
prior to such event or action, the actual share is not so equal.
SETTLEMENT AMOUNT: See Section 3.6(a) hereof.
SETTLEMENT DATE: (a) The Drawdown Date relating to any Loan Request, (b)
Friday of each week, or if Friday is not a Business Day, the Business Day
immediately following such Friday, (c) the Business Day immediately following
the Agent becoming aware of the existence of an Event of Default, (d) any
Business Day on which the aggregate amount of Loans outstanding from FNBB and
the Agent PLUS FNBB's Commitment Percentage of the sum of the Maximum Drawing
Amount and any Unpaid Reimbursement Obligations is equal to or greater than
FNBB's Commitment Percentage of (i) prior to the Exit Facility Date, the Total
DIP Commitment or (ii) on or after the Exit Facility Date, the Total Exit
Commitment, or (e) the Business Day immediately following any Business Day on
which the amount of Loans outstanding increases or decreases by more than
$2,000,000 as compared to the previous Settlement Date.
SETTLING BANK. See Section 3.6(a) hereof.
SPECIAL LEASE OBLIGATIONS. See Section 10.2 hereof.
SPECIFIED LEASE: Each lease by the Borrower as Lessee of real property at
which Eligible Inventory is held and as to which the Agent has not from time to
time received evidence, in form and substance satisfactory to the Agent, that
based upon then existing law, the landlord of such property would not have or be
entitled to claim a lien on inventory superior to the security interest granted
to the Agent under the Security Agreements, securing obligations past due or
securing future obligations; PROVIDED that no lease for which the Agent shall
have received a Landlord Waiver shall be a Specified Lease.
STORE CREDIT CARD PROGRAM: The Borrower's existing private label credit
card program, evidenced by and implemented pursuant to the Store Credit Card
Program Documents, and/or any other private label credit card program for
purchases of merchandise in the Borrower's stores by its customers, on terms
substantially similar to the Store Credit Card Program in effect on the
Effective Date or on terms more favorable to the Banks and the Borrower, in each
case as shall be approved by the Agent; it being understood that the Store
Credit Card
<PAGE>
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Program may not, in any event, consist of a so-called receivables
"securitization" or similar receivables purchase facility.
STORE CREDIT CARD PROGRAM DOCUMENTS: The Credit Card Plan Agreement dated
as of June 20, 1988, between the Borrower and National City Bank, Columbus,
Ohio, a national banking association (formerly known as BancOhio National Bank)
("National City"), as amended by amendments dated September 28, 1992, August 23,
1993, March 30, 1994, and November 2, 1994, in the respective forms thereof
delivered to the Agent prior to the Effective Date, evidencing and relating to
the Store Credit Card Program, and, to the extent each is approved by the Agent,
any amendments, modifications, and successor or substitute documents with
respect thereto, evidencing or relating to the Store Credit Card Program as in
effect from time to time.
SUBORDINATED DEBT: Indebtedness of the Borrower to Remy pursuant to the
Subordinated Debt Documents in a maximum principal amount not to exceed
$5,000,000 that is expressly subordinated and made junior to the payment and
performance in full of the Obligations and evidenced as such by the
Subordination and Intercreditor Agreement and by an order of the Bankruptcy
Court in form and substance satisfactory to the Agent incorporating by reference
the terms of the Subordination and Intercreditor Agreement.
SUBORDINATED DEBT DOCUMENTS: The Debtor in Possession Credit Agreement by
and between the Borrower and Remy, the "Note" issued pursuant thereto, and all
documents and instruments executed and delivered in connection therewith, in
each case in the form thereof delivered to and approved in writing by the Agent,
as initially executed, whether on or after the Effective Date.
SUBORDINATION AND INTERCREDITOR AGREEMENt. The Subordination and
Intercreditor Agreement by and among the Borrower, Remy and the Agent and in
form and substance satisfactory to the Agent, relating to the Subordinated Debt
Documents.
SUBSIDIARY: In respect of any Person, any business entity of which such
Person at any time owns or controls directly or indirectly more than fifty
percent (50%) of the outstanding shares of stock or similar equity interests
having voting power, regardless of whether such right to vote depends upon the
occurrence of a contingency.
SUPER-PRIORITY CLAIM: A claim against the Borrower or its estate in the
Case which is an administrative expense claim having priority over (a) any and
all allowed administrative expenses and (b) unsecured claims now existing or
hereafter arising including, without limitation, administrative expenses of the
kind specified in Section 503(b), 506(c) or 507(b) of the Bankruptcy Code.
TOTAL DEBT SERVICE: For any period, an amount equal to the result (without
duplication) of (i) Consolidated Total Interest Expense and any other
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cash financing fees for such period, but excluding in any event the fees payable
pursuant to Section 6.1(a) hereof (whether such fees under Section 6.1(a) are
capitalized or expensed), and excluding in any event the facility fee to be paid
at the closing under (and as provided in) the Subordinated Debt Documents
(whether such facility fee is capitalized or expensed), PLUS (ii) the sum of all
payments with respect to principal on Indebtedness that became due and payable
or are due to become due and payable during such period pursuant to any
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party relating to the borrowing of money or the obtaining of credit or in
respect of Capitalized Leases, PROVIDED that demand obligations shall be deemed
to be due and payable during every fiscal period during which such obligations
are outstanding.
TOTAL DIP COMMITMENT: The sum of the DIP Commitments of the Banks, as in
effect from time to time.
TOTAL EXIT COMMITMENT: The sum of the Exit Commitments of the Banks, as in
effect from time to time.
TOTAL OUTSTANDINGS: At any time of determination, the sum of (a) the
aggregate principal amount of Loans outstanding, PLUS (b) the Maximum Drawing
Amount of all Letters of Credit, PLUS (c) all Unpaid Reimbursement Obligations.
TRADEMARK AGREEMENT: The Trademark Collateral Assignment and Security
Agreement dated as of a date on or prior to the Exit Facility Date made by the
Borrower in favor of the Agent and in form and substance satisfactory to the
Banks and the Agent.
TRIBUNAL: Any agency, board, business, commission, court, department,
instrumentality or tribunal of any political or government authority having
competent legislative or judicial jurisdiction.
TYPE: As to any DIP Loan or Exit Loan, its nature as a Base Rate Loan or a
Eurodollar Rate Loan.
UCC: See Section 9.1.5 hereof.
UNIFORM CUSTOMS: The Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 or any
successor thereto.
UNPAID REIMBURSEMENT OBLIGATION: Any Reimbursement Obligation for which
the Borrower has not reimbursed the Agent and the Banks on the date specified
in, and in accordance with, Section 4.2 hereof.
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Section 1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting
entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by GAAP, which terms
are defined in the Uniform Commercial Code as in effect in Massachusetts,
have the meanings assigned to them therein.
(h) Reference to a particular "Section" refers to that section of
this Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
Section 2. DEBTOR IN POSSESSION AND EXIT FACILITIES.
Section 2.1. COMMITMENT TO LEND DIP LOANS. Upon the terms and subject to
the conditions of this Agreement, each of the Banks severally agrees to lend to
the Borrower such sums that the Borrower may request from time to time up to a
maximum aggregate amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Bank's DIP Commitment MINUS such Bank's
Commitment Percentage of the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations, from the date hereof until but not including the DIP
Maturity Date, PROVIDED that (a) the aggregate principal amount of all DIP Loans
outstanding (after giving effect to all amounts requested) shall not exceed any
specific amount approved by the Bankruptcy Court to be borrowed solely for DIP
Loans in the Financing Order, (b) the Total Outstandings (after giving effect to
all amounts requested) shall not exceed the lesser of (i) the Total DIP
Commitment, and (ii) the amount approved to be borrowed by way of DIP Loans and
Letters of Credit in the Financing Order, and (c) the Total Outstandings (after
giving effect to all amounts required) MINUS
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Cash Collateralized Letters of Credit shall not exceed the Borrowing Base then
in effect. Except as otherwise provided herein, the DIP Loans shall be made PRO
RATA in accordance with each Bank's Commitment Percentage.
Section 2.2 REPAYMENTS OF DIP LOANS.
(a) The Borrower hereby agrees to pay each Bank on the DIP Maturity
Date, unless the Exit Facility Date occurs on such date and the DIP Loans
outstanding on such date are converted into Exit Loans as provided in
Section 2.3 hereof, the entire unpaid principal of and interest on such
Bank's DIP Note. If the Exit Facility Date does not occur on the DIP
Maturity Date, all other Obligations evidenced by the DIP Notes shall, if
not sooner paid, become and be absolutely due and payable by the Borrower
on the DIP Maturity Date.
(b) The Borrower may elect to prepay the outstanding principal of all
or any part of any DIP Loan, without premium or penalty, PROVIDED that any
full or partial prepayment of the outstanding amount of any Eurodollar Rate
Loan pursuant to this Section 2.2(b) made on any day other than the last
day of the Interest Period relating thereto shall subject the Borrower to
the indemnification provisions of Section 5.6 hereof. Except as otherwise
provided in Section 3.7, the Borrower shall give the Agent written,
telegraphic or telephonic notice no later than (i) 10:00 a.m. Boston time
on the date of such prepayment of Base Rate Loans and (ii) 12:00 noon
Boston time three (3) Eurodollar Business Days prior to the date of such
prepayment of Eurodollar Rate Loans, in either case specifying the proposed
date of prepayment and the principal amount to be prepaid. Each such
partial prepayment of the DIP Loans shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and
then to the principal of Eurodollar Rate Loans. Subject to the conditions
of Section 2.1 hereof, amounts so prepaid may be reborrowed.
(c) If at any time the DIP Loans outstanding shall exceed any
specific amount approved to be borrowed solely by way of DIP Loans in the
Financing Order, the Borrower shall immediately pay the amount of such
excess to the Agent for PRO RATA application to the DIP Loans in accordance
with each Bank's Commitment Percentage. If at any time the Total
Outstandings shall exceed the lesser of (i) the Total DIP Commitment, and
(ii) the amount approved to be borrowed by way of DIP Loans and Letters of
Credit in the Financing Order, the Borrower shall immediately pay the
amount of such excess to the Agent for PRO RATA application to the DIP
Loans in accordance with each Bank's Commitment Percentage or, if no DIP
Loans are then outstanding, to be held by the Agent as cash collateral to
secure payment of all Reimbursement Obligations up to the amount of 105% of
the Maximum Drawing Amount. If at any time the Total Outstandings MINUS
Cash Collateralized Letters of Credit shall exceed the Borrowing Base then
in effect, the Borrower shall immediately pay the amount of such excess to
the Agent for PRO RATA
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application to the DIP Loans in accordance with each Bank's Commitment
Percentage or, if no DIP Loans are then outstanding, to be held by the
Agent as cash collateral to secure payment of all Reimbursement Obligations
up to the amount of 105% of the Maximum Drawing Amount.
(d) Prior to the Exit Facility Date, during a period of thirty (30)
consecutive days during the period beginning on December 15, 1996 and
ending on January 31, 1997, the Borrower shall be required to make such
prepayments in respect of the DIP Loans and to take such other actions as
shall be necessary to cause the aggregate amount of the Total Outstandings
not to exceed $21,500,000 on each day of such applicable period of thirty
(30) consecutive days.
Section 2.3. CONVERSION OF DIP LOANS INTO EXIT LOANS; COMMITMENT TO LEND
EXIT LOANS.
(a) Upon the satisfaction of the conditions precedent set forth in
Sections 9.2 and 9.3 hereof, the DIP Loans outstanding on the Exit Facility
Date shall automatically convert into Exit Loans hereunder.
(b) Upon the terms and subject to the conditions of this Agreement,
each of the Banks severally agrees to lend to the Borrower such sums that
the Borrower may request up to a maximum aggregate amount outstanding
(after giving effect to all amounts requested) at any one time equal to
such Bank's Exit Commitment MINUS such Bank's Commitment Percentage of the
sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations,
from the Exit Facility Date until but not including the Exit Maturity Date,
PROVIDED that (i) the Total Outstandings (after giving effect to all
amounts requested) shall not exceed the Total Exit Commitment and (ii) the
Total Outstandings (after giving effect to all amounts requested) MINUS
Cash Collateralized Letters of Credit shall not exceed the Borrowing Base
then in effect. Except as otherwise provided herein, the Exit Loans shall
be made PRO RATA in accordance with each Bank's Commitment Percentage.
Section 2.4. REPAYMENT OF EXIT LOANS.
(a) The Borrower hereby agrees to pay each Bank on the Exit Maturity
Date the entire unpaid principal of and interest on such Bank's Exit Note.
All other Obligations evidenced by the Exit Notes shall, if not sooner
paid, become and be absolutely due and payable by the Borrower on the Exit
Maturity Date.
(b) The Borrower may elect to prepay the outstanding principal of all
or any part of any Exit Loan, without premium or penalty, PROVIDED that any
full or partial prepayment of the outstanding amount of any Eurodollar Rate
Loan pursuant to this Section 2.4(b) made on any day other than the last
day of the Interest Period with respect thereto shall subject the
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Borrower to the indemnification provisions of Section 5.6 hereof. Except
as otherwise provided in Section 3.7, the Borrower shall give the Agent
written telegraphic or telephonic notice no later than (i) 10:00 a.m.
Boston time on the date of such prepayment of Base Rate Loans and (ii)
12:00 noon Boston time three (3) Eurodollar Business Days prior to the date
of such prepayment of Eurodollar Rate Loans, in either case specifying the
proposed date of prepayment and the principal amount to be prepaid. Each
such partial prepayment of the Exit Loan shall be applied, in the absence
of instruction by the Borrower, first to the principal of Base Rate Loans
and then to the principal of Eurodollar Rate Loans. Subject to the
conditions of Section 2.3(b) hereof, amounts so prepaid may be reborrowed.
(c) If at any time the Total Outstandings shall exceed the Total Exit
Commitment then in effect, the Borrower shall immediately pay the amount of
such excess to the Agent for PRO RATA application to the Exit Loans in
accordance with each Bank's Commitment Percentage or, if no Exit Loans are
then outstanding, to be held by the Agent as cash collateral to secure
payment of all Reimbursement Obligations up to the amount of 105% of the
Maximum Drawing Amount. If at any time the Total Outstandings MINUS Cash
Collateralized Letters of Credit shall exceed the Borrowing Base then in
effect, the Borrower shall immediately pay the amount of such excess to the
Agent for PRO RATA application to the Exit Loans in accordance with each
Bank's Commitment Percentage or, if no Exit Loans are then outstanding, to
be held by the Agent as cash collateral to secure payment of all
Reimbursement Obligations up to the amount of 105% of the Maximum Drawing
Amount.
(d) From and after the Exit Facility Date, during a period of thirty
(30) consecutive days during the period beginning on December 15, 1996 and
ending on January 31, 1997, the Borrower shall be required to make such
prepayments in respect of the Exit Loans and to take such other actions as
shall be necessary to cause the aggregate amount of the Total Outstandings
not to exceed (i) if a Capital Raising Event shall not have occurred,
$21,500,000 or (ii) if a Capital Raising Event shall have occurred,
$11,500,000, in each case on each day of such applicable period of thirty
(30) consecutive days.
(e) From and after the Exit Facility Date, during a period of thirty
(30) consecutive days during each of the period beginning on December 15,
1997 and ending on January 15, 1998 and the period beginning on December
15, 1998 and ending on January 15, 1999, the Borrower shall be required to
make such prepayments in respect of the Exit Loans and to take such other
actions as shall be necessary to cause the aggregate amount of the Total
Outstandings not to exceed (i) if a Capital Raising Event shall not have
occurred, $21,500,000 or (ii) if a Capital Raising Event shall have
occurred, $9,000,000, in each case on each day of such applicable period of
thirty (30) consecutive days.
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Section 2.5. REDUCTION OF COMMITMENTS. The Borrower may elect to reduce
the Total DIP Commitment or the Total Exit Commitment, as applicable, by a
minimum principal amount of $1,000,000 or a greater integral multiple of
$1,000,000 or to terminate the Total DIP Commitment or the Total Exit
Commitment, as applicable, upon written notice to the Agent given by 10:00 a.m.
Boston time at least two (2) Business Days prior to the date of such reduction
or termination. The Borrower shall not be entitled to reinstate the Total DIP
Commitment or the Total Exit Commitment, as applicable, following any such
reduction or termination.
Section 3. CERTAIN COMMON PROVISIONS.
Section 3.1. REQUEST FOR LOAN ADVANCES. Except as otherwise provided in
Section 3.2 hereof, the Borrower shall notify the Agent in writing or
telephonically (each such notice, a "Loan Request"), not later than (a) 3:00
p.m. Boston time on the day of the Drawdown Date (which date must be a Business
Day) of any Base Rate Loan being requested and (b) 12:00 noon Boston time three
(3) Eurodollar Business Days prior to the proposed Drawdown Date of any
Eurodollar Rate Loan. Each such Loan Request shall specify (i) the principal
amount of the Loan requested (which shall be, in the case of any Eurodollar Rate
Loan, in a minimum aggregate amount of $1,000,000 or an integral multiple
thereof), (ii) the proposed Drawdown Date of such Loan, (iii) the Interest
Period for such Loan and (iv) the Type of such Loan. No Loan may be made as a
Eurodollar Rate Loan during the continuance of a Default or Event of Default.
Promptly upon receipt of any such notice, the Agent shall notify each of the
Banks thereof. Subject to the foregoing and except as otherwise provided in
Section 3.2 hereof, so long as the DIP Commitments or the Exit Commitments, as
applicable, are then in effect and the applicable conditions set forth in
Section 9 hereof have been met, each of the Banks will make available to the
Agent no later than 4:00 p.m. Boston time on the Drawdown Date, at the Agent's
Head Office, in immediately available funds, its PRO RATA share, based upon
such Bank's Commitment Percentage, of the amount requested. Except as otherwise
provided in Section 3.2 hereof, upon receipt from each Bank of such amount, the
Agent will make available to the Borrower the aggregate amount of such Loan by
transferring such amount to the Operating Account not later than the close of
business on such Drawdown Date. The Borrower shall be deemed to make and to
have made automatic Loan Requests for Base Rate Loans from time to time at the
appropriate times, and in the appropriate amounts, necessary to credit
sufficient funds to the Operating Account for direct application to the payment
when due of any and all interest, fees and expenses payable hereunder.
Section 3.2. OTHER METHODS OF FUNDING; AUTHORIZED ADVANCES.
Notwithstanding the notice requirement set forth in Section 3.1 hereof, but
otherwise in accordance with the terms and conditions of this Agreement,
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(a) each of the Banks agrees to make DIP Loans or, as the case may
be, Exit Loans (from and after the Exit Facility Date) to the Borrower
sufficient to pay any Unpaid Reimbursement Obligations on the date on which
such Reimbursement Obligations become Unpaid Reimbursement Obligations;
(b) the Agent may, in its sole discretion and without conferring with
the Banks, make DIP Loans or, as the case may be, Exit Loans (from and
after the Exit Facility Date) to the Borrower hereunder (i) by causing
funds to be credited to the Operating Account to cover checks or other
items or charges which the Borrower has drawn or made against such account
or (ii) in amounts as otherwise requested by the Borrower as set forth in
Section 3.1; and
(c) the Agent may, in its sole discretion and without conferring with
the Banks, make DIP Loans or, as the case may be, Exit Loans (from and
after the Exit Facility Date) by causing funds in the appropriate
sufficient amounts to be credited to the Operating Account for direct
application to the payment when due of any and all interest, fees and
expenses payable hereunder.
The Borrower hereby requests and authorizes the Agent to make from time to
time such Loans (A) by means of paying such Unpaid Reimbursement Obligations,
(B) by advancing funds that are credited to the Operating Account sufficient to
cover checks and other items or charges then presented to the Operating Account,
or otherwise funding the Operating Account, and (C) by advancing funds that are
credited to the Operating Account sufficient to cover any and all interest, fees
and expenses payable hereunder, and hereby authorizes and requests the Agent to
debit the Operating Account in an amount equal to any such interest, fees and
expenses. The Borrower acknowledges and agrees that the making of such Loans
shall, in each case, be subject in all respects to provisions of this Agreement
including, without limitation, the limitations set forth in Sections 2.1 and 2.3
hereof and the requirements that the applicable conditions in Section 9 hereof
be satisfied. All actions taken by the Agent pursuant to the provisions of this
Section 3.2 shall be conclusive and binding on the Borrower, absent manifest
error. Loans made pursuant to this Section 3.2 shall be Base Rate Loans until
converted in accordance with the provisions of this Agreement, and prior to a
Settlement, interest on Loans made pursuant to this Section 3.2 shall be for the
account of the Agent.
Section 3.3. PROMISSORY NOTES.
(a) The obligation of the Borrower to repay to the Banks the
principal of the DIP Loans and interest accrued thereon shall be evidenced
by separate promissory notes dated the Effective Date (the "DIP Notes"),
completed with the appropriate insertions and in the form attached hereto
as EXHIBIT C. One DIP Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's DIP
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Commitment or, if less, the outstanding amount of all DIP Loans made by
such Bank, plus interest accrued thereon, as set forth below.
(b) The obligation of the Borrower to repay to the Banks the
principal of the Exit Loans and interest accrued thereon shall be evidenced
by separate promissory notes dated the Exit Facility Date (the "Exit
Notes"), completed with the appropriate insertions and in the form attached
hereto as EXHIBIT D. One Exit Note shall be payable to the order of each
Bank in a principal amount equal to such Bank's Exit Commitment or, if
less, the outstanding amount of all Exit Loans made by such Bank, plus
interest accrued thereon, as set forth below.
Section 3.4. INTEREST.
(a) So long as no Event of Default has occurred and is continuing,
the Borrower shall pay interest on the Loans as follows: (i) the Base Rate
Loans shall bear interest for the period commencing with the respective
Drawdown Dates thereof and ending on the last day of the Interest Period
with respect thereto at the rate per annum which is equal to the sum of (A)
the Base Rate PLUS (B) the Base Rate Margin as in effect from time to time,
(ii) each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum which is equal
to the sum of (A) the Eurodollar Rate determined for such Interest Period
PLUS (B) the Eurodollar Rate Margin as in effect from time to time, and
(iii) the Borrower promises to pay interest on each Loan in arrears on each
Interest Payment Date with respect thereto.
(b) While an Event of Default is continuing amounts payable under any
of the Loan Documents shall bear interest (compounded monthly and payable
on demand in respect of overdue amounts) at a rate per annum which is equal
to the greater of (i) the sum of (A) the Base Rate PLUS (B) three percent
(3%) and (ii) the applicable rate of interest otherwise applicable to the
principal of any Loans included in such overdue amounts, until such amount
is paid in full (after as well as before judgment) or until such Event of
Default has been cured or waived in writing in accordance with Section 16.4
hereof.
(c) Notwithstanding any other provision of this Agreement, no Loan
shall bear interest at a rate per annum (the "Applicable Rate") greater
than the Maximum Rate permitted by applicable Law as the same exists from
day to day during the term hereof (the "Maximum Rate"). If at any time the
Applicable Rate shall exceed the Maximum Rate, thereby causing the interest
on the Loans to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest on
the Loans below the Maximum Rate until the aggregate
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amount of interest accrued on the Loans equals the aggregate amount of
interest which would have accrued on the Loans if the Applicable Rate had
at all times been in effect.
Section 3.5. CONVERSION OPTIONS FOR BASE RATE AND EURODOLLAR LOANS.
Section 3.5.1. CONVERSION TO DIFFERENT TYPE OF LOAN. The Borrower may
elect from time to time to convert any outstanding Base Rate Loan or
Eurodollar Rate Loan to a Loan of another Type, PROVIDED that (a) with
respect to any such conversion of a Eurodollar Rate Loan to a Base Rate
Loan, the Borrower shall give the Bank written notice of such election no
later than 12:00 Noon Boston time on the proposed date of such conversion;
(b) with respect to any such conversion of a Base Rate Loan to a Eurodollar
Rate Loan, the Borrower shall give the Bank written notice of such election
no later than 12:00 Noon Boston time three (3) Eurodollar Business Days
prior to the proposed date of such conversion; (c) with respect to any such
conversion of a Eurodollar Rate Loan into a Loan of another Type, such
conversion shall only be made on the last day of the Interest Period with
respect thereto; and (d) no Loan may be made as, or converted into, a
Eurodollar Rate Loan during the continuance of a Default or Event of
Default. On the date on which such conversion is being made each Bank
shall take such action as is necessary to fund such Loans through its
Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Loans of any Type may be converted into
a Loan of another Type as provided herein, PROVIDED that any partial
conversion into a Eurodollar Rate Loan shall be in a minimum aggregate
amount of $1,000,000 or an integral multiple thereof. Each Conversion
Request relating to the conversion of a Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.
Section 3.5.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any
Loan of any Type may be continued as a Loan of the same Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in Section 3.5.1; PROVIDED
that no Eurodollar Rate Loan may be continued as such when any Default or
Event of Default has occurred and is continuing, but shall be converted
automatically to a Base Rate Loan on the last day of the first Interest
Period relating thereto ending during the continuance of any Default or
Event of Default of which officers of the Agent active upon the Borrower's
account have actual knowledge. In the event that the Borrower fails to
provide any such notice with respect to the continuation of any Eurodollar
Rate Loan, such Eurodollar Rate Loan shall be automatically converted to a
Base Rate Loan on the last day of the applicable Interest Period relating
thereto. The Agent shall notify the Banks when any such automatic
conversion contemplated by this Section 3.5 is scheduled to occur.
Section 3.5.3. EURODOLLAR RATE LOANS. Any conversion to or from
Eurodollar Rate Loans shall be in such amounts and shall be made
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pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of all Eurodollar Rate Loans having the same
Interest Period shall not be less than $1,000,000 or a larger integral
multiple thereof. No more than four (4) Eurodollar Rate Loans having
different Interest Periods shall be outstanding at any time.
Section 3.6. SETTLEMENTS; FAILURE TO MAKE FUNDS AVAILABLE.
(a) On each Settlement Date, the Agent shall, not later than 1:00
p.m. Boston time, give telephonic or facsimile notice (i) to the Banks and
the Borrower of the respective outstanding amount of Loans made by the
Agent on behalf of the Banks from the immediately preceding Settlement Date
through the close of business on the prior day, (ii) to the Banks of the
unfunded amount, if any, of each Loan requested pursuant to Sections 2.1 or
2.3 hereof as of such date, and (iii) to the Banks of the amount (a
"Settlement Amount") that each Bank (the "Settling Bank") shall pay to
effect a Settlement of any Loan. A statement of the Agent submitted to the
Banks and the Borrower or to the Banks with respect to any amounts owing
under this Section 3.6 shall be PRIMA FACIE evidence of the amount due and
owing. Each Settling Bank shall, not later than 3:00 p.m. Boston time on
such Settlement Date, effect a wire transfer of immediately available funds
to the Agent in the amount of the Settlement Amount. All funds advanced by
any Bank as a Settling Bank pursuant to this Section 3.6 shall for all
purposes be treated as a Loan made by such Settling Bank to the Borrower
and all funds received by any Bank pursuant to this Section 3.6 shall for
all purposes be treated as a repayment of amounts owed with respect to
Loans made by such Bank.
(b) The Agent may, unless notified to the contrary by any Bank prior
to a Settlement Date, assume that such Bank has made or will make available
to the Agent on such Settlement Date the amount of such Bank's Settlement
Amount, and the Agent may (but it shall not be required to), in reliance
upon such assumption, make available to the Borrower a corresponding
appropriate amount of a requested Loan. If any Bank makes available to the
Agent such amount on a date after such Settlement Date, such Bank shall pay
to the Agent on demand an amount equal to the product of (i) the average
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by such
Agent during each day included in such period, TIMES (ii) the amount of
such Settlement Amount, TIMES (iii) a fraction, the numerator of which is
the number of days that elapse from and including such Settlement Date to
the date on which the amount of such Settlement Amount shall become
immediately available to such Agent, and the denominator of which is 365.
A statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be PRIMA FACIE evidence of the amount due
and owing to the Agent by such Bank. If such Bank's Settlement Amount is
not made
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available to the Agent by such Bank within three (3) Business Days
following such Settlement Date, such Bank shall be deemed to be a
Delinquent Bank and the provisions of Section 13.5(e) hereof shall apply
thereto.
(c) The failure or refusal of any Bank to make available to the Agent
at the aforesaid time and place on any Settlement Date the amount of its
Settlement Amount (i) shall not relieve any other Bank from its several
obligations hereunder to make available to the Agent the amount of such
other Bank's Settlement Amount and (ii) shall not impose upon such other
Bank any liability with respect to such failure or refusal or otherwise
increase the DIP Commitment or the Exit Commitment, as the case may be, of
such other Banks.
Section 3.7. LOCK BOX ACCOUNT AND APPLICATION OF FUNDS.
(a) The Borrower will, subject to Section 3.9 hereof, (i) on or prior to
the Effective Date, establish (and will at all times thereafter maintain) a
depository lock box and concentration account (the "Lock Box Account") with the
Agent and under the control of the Agent, as contemplated by this Agreement by
and the terms of the Lock Box Agreement, and (ii) except as otherwise provided
in Section 3.9 hereof, and except for those certain types of payments described
on SCHEDULE 3.7A hereto, at all times direct its account debtors and obligors on
instruments or its other obligors with respect to any of the Collateral,
including payments with respect to the Store Credit Card Program, in each case
pursuant to a notification letter (a "Direct Collection Letter") in form and
substance satisfactory to the Agent, to make all payments on or with respect to
any of the Collateral or otherwise due or to become due to the Borrower (and,
except as otherwise provided below in this Section 3.7 with respect to cash
allowed to be held in the Borrower's stores overnight and funds properly held in
payroll accounts (whether for payroll or for applicable withholding tax) or
sales tax trust accounts, the Borrower will at all times otherwise cause all
cash proceeds of Collateral and other funds it may hold or receive from time to
time to be deposited and transferred) directly to the Lock Box Account or into
one or more of the deposit accounts maintained with the institutions listed on
SCHEDULE 3.7 attached hereto (other than accounts thereon described as payroll
accounts or sales tax trust accounts), for each of which deposit accounts there
shall be in full force and effect (other than for such payroll accounts and such
sales tax trust accounts) an agency account agreement in form and substance
satisfactory to the Agent (collectively, the "Agent Account Agreements")
pursuant to which all collected funds in each such deposit account (other than
amounts not to exceed $500,000 with respect to all such accounts in the
aggregate which may be retained therein on an overnight basis as of the end of
each day, except that such amount shall be zero during the continuance of an
Event of Default occurring upon the stated maturity of the Obligations or in
respect of which there is an Acceleration in effect) shall be transferred to
the Lock Box Account on a daily basis. If, notwithstanding the issuance of such
Direct Collection
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Letters or any prior instructions, the Borrower receives any cash proceeds of
any of the Collateral, whether in the form of money, checks or otherwise, such
Person will hold such cash proceeds in trust for the benefit of the Agent and
the Banks and deposit such cash proceeds promptly into any deposit account for
which an Agency Account Agreement is in effect or promptly turn over such cash
proceeds (other than, in any such event, an amount of cash not to exceed
$500,000 with respect to all stores in the aggregate as of the end of each day
which may be retained in the Borrower's stores on an overnight basis) to the
Agent in the identical form received by the deposit of the same to the Lock Box
Account. During the period from February 1 to October 31 of each year, the
aggregate of cash proceeds which may be retained in deposit accounts and stores
as of the end of each day may not exceed a total sum of $800,000.
(b) Prior to the occurrence of an Event of Default, the Agent shall, on
the date of receipt by the Agent of any and all cash proceeds from account
debtors or obligors or pursuant to the Agency Account Agreements, or (as the
case may be) from the Borrower (or from Seafirst pursuant to Section 3.9) so
deposited in the Lock Box Account and on a provisional basis until final receipt
of good collected funds, apply all such cash proceeds which were deposited to
the Lock Box Account in the form of money, checks or like items as follows:
(i) FIRST, to all amounts due and payable under this Agreement
other than the outstanding principal amount of the DIP Loans or Exit
Loans, as applicable, and other than Unpaid Reimbursement Obligations;
(ii) SECOND, to the unpaid principal amount of all DIP Loans or
Exit Loans, as applicable, consisting of Base Rate Loans and all
Unpaid Reimbursement Obligations;
(iii) THIRD, to the unpaid principal amount of all DIP Loans or
Exit Loans, as applicable, consisting of Eurodollar Rate Loans (with
the provisions of Section 5.6 hereof applicable thereto), or at the
Borrower's option, to provide cash collateral in an amount equal to
105% of the principal amount of all outstanding Eurodollar Rate Loans
(to be applied thereto at the end of the applicable Interest Period);
(iv) FOURTH, the Agent shall cause any excess to be credited to
the Operating Account.
(c) Following the occurrence and during the continuance of an Event of
Default, such cash proceeds shall be distributed for application as provided in
Section 11.4 hereof. All prepayments of the Loans and Unpaid Reimbursement
Obligations pursuant to this Section 3.7 shall be allocated among the Banks
holding the same, in proportion, as nearly as practicable, to the respective
unpaid principal amount thereof outstanding, with adjustments to the extent
practicable to equalize any prior payments not in proportion; PROVIDED that,
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prior to any Settlement Date, all prepayments of the Loans and Unpaid
Reimbursement Obligations shall be applied, in accordance with this Section 3.7,
first to outstanding Loans and Unpaid Reimbursement Obligations of the Agent,
and then to other outstanding Loans and Unpaid Reimbursement Obligations ratably
in accordance with the outstanding amounts thereof. Section 11.4 shall apply in
the case of an Event of Default. For purposes of the foregoing provisions of
this Section 3.7, the Agent shall not be deemed to have received any such cash
proceeds on any day unless received by the Agent before 3:00 p.m. Boston time on
such day. The Borrower and each of the Guarantors further acknowledges and
agrees that any such provisional credit by the Agent shall be subject to
reversal, and hereby agrees to indemnify the Agent with respect thereto, if
final collection in good collected funds of the related item is not received by
the Agent in accordance with the Agent's customary procedures and practices for
collecting provisional items.
Section 3.8. FEES AND EXPENSES. The Borrower agrees to pay to the Agent
for the Agent's account any and all fees, costs and expenses which the Agent
incurs in connection with the opening and maintenance of the Lock Box Account
and the Operating Account and the deposit for collection by the Agent of any
check or other item of payment. The Borrower agrees to indemnify the Agent and
to hold the Agent harmless from and against any loss, cost or expense sustained
or incurred by the Agent on account of any claims arising in connection with the
Agent's operation of the Lock Box Account or the Operating Account or in respect
of the Lock Box Agreement.
Section 3.9. SEAFIRST CONCENTRATION ACCOUNT. Notwithstanding the
provisions of Section 3.7 hereof, during the period beginning on the Effective
Date and ending on that date which is thirty (30) days after the Exit Facility
Date, the Borrower may maintain in place its existing concentration account
arrangements with Bank of America, N.W. N.A., d/b/a Seafirst Bank ("Seafirst"),
pursuant to which all payments on or with respect to any of the Collateral and
all other funds held or received (other than funds properly held in payroll
accounts (whether for payroll or for applicable withholding tax) or sales tax
trust accounts, and other than amounts not to exceed $500,000 in cash with
respect to all stores in the aggregate as of the end of each day which may be
retained in the Borrower's stores on an overnight basis) shall be paid or
transferred daily into the deposit accounts maintained with the depository
institutions listed on SCHEDULE 3.9 attached hereto. The Borrower hereby
covenants and agrees that (i) it shall cause each such depository institution to
transfer all collected funds in such deposit accounts (except for amounts not to
exceed $500,000 with respect to all such accounts in the aggregate which may be
retained therein on an overnight basis as of the end of each day, except that
such amount shall be zero during the continuance of an Event of Default
occurring upon the stated maturity of the Obligations or in respect of which
there is an Acceleration in effect) to the Borrower's concentration account with
Seafirst (the "Seafirst Account") on a daily or almost daily basis, (ii) it
shall at all times maintain in full force and effect an Agency Account Agreement
with
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Seafirst in favor of the Agent with respect to the Seafirst Account under which
all collected funds therein are transferred to the Lock Box Account on a daily
basis, for application to the Obligations in the order (and pursuant to the
procedure) set forth in Section 3.7, and (iii) the Seafirst Account shall be
closed no later than the date which is thirty (30) days after the Exit Facility
Date and all payments on or with respect to any of the Collateral and such other
funds shall thereafter be made in accordance with the provisions of Section 3.7.
The Borrower acknowledges and agrees that the amounts of cash otherwise
permitted to be retained in stores overnight and amounts otherwise permitted to
be retained in deposit accounts overnight pursuant to Sections 3.7 and 3.9
hereof, respectively, shall be without duplication, and shall not in any event
exceed $500,000 in aggregate amounts otherwise permitted to be held overnight in
stores and $500,000 in aggregate amounts otherwise permitted to be held
overnight in deposit accounts, respectively, whether pursuant to Section 3.7 or
Section 3.9 or both. During the period from February 1 to October 31 of each
year, the aggregate of cash proceeds which may be retained in deposit accounts
and stores as of the end of each day may not exceed a total sum of $800,000.
Section 4. LETTER OF CREDIT FACILITY.
Section 4.1. LETTER OF CREDIT COMMITMENT. Subject to the terms and
conditions hereof and the execution and delivery by the Borrower of a letter of
credit application on the Agent's customary form (a "Letter of Credit
Application"), the Agent on behalf of the Banks and in reliance upon the
agreement of the Banks set forth in Section 4.1.4 hereof and upon the
representations and warranties of the Borrower contained herein, agrees, in its
individual capacity, to issue, extend and renew from time to time from the date
hereof until but not including the DIP Maturity Date, or, if the Exit Facility
Date occurs, the Exit Maturity Date, for the account of the Borrower, standby
and documentary letters of credit (each such letter of credit issued hereunder,
a "Letter of Credit"), in such form as may be requested by the Borrower and
agreed to by the Agent; PROVIDED, HOWEVER, that (a) at all times prior to the
Exit Facility Date, after giving effect to such request, (i) the sum of the
Maximum Drawing Amount and any Unpaid Reimbursement Obligations shall not exceed
the lesser of (A) $3,000,000 or (B) any specific amount approved by the
Bankruptcy Court solely for Letters of Credit in the Financing Order, (ii) the
Total Outstandings shall not exceed the lesser of (A) the Total DIP Commitment
or (B) the amount approved to be borrowed by way of DIP Loans and Letters of
Credit in the Financing Order and (iii) the Total Outstandings MINUS the Cash
Collateralized Letters of Credit shall not exceed the Borrowing Base then in
effect, and (b) at all times from and after the Exit Facility Date, after giving
effect to such request, (i) the sum of the Maximum Drawing Amount and any Unpaid
Reimbursement Obligations shall not exceed $3,000,000, (ii) the Total
Outstandings shall not exceed the Total Exit Commitment, and (iii) the Total
Outstandings MINUS the Cash Collateralized Letters of Credit shall not exceed
the Borrowing Base then in effect. Upon the satisfaction of the conditions
precedent set forth in Sections 9.2 and 9.3 hereof, the Letters of Credit (if
any)
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outstanding on the Exit Facility Date shall automatically convert into Letters
of Credit deemed to be issued under the credit facility that is provided herein
to be available from and after the Exit Facility Date. On the Effective Date
the Agent may issue certain Letters of Credit to support or secure letters of
credit issued pursuant to the Foothill DIP Facility for the account of the
Borrower, PROVIDED that the Borrower demonstrates to the satisfaction of the
Agent that the reimbursement obligation with respect to each such letter of
credit was previously fully secured by a prior perfected and unavoidable
security interest in collateral provided to the issuer of such letter of credit
by the Borrower.
Section 4.1.1. THIS AGREEMENT TO GOVERN. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Agreement, then the provisions of
this Agreement shall, to the extent of any such inconsistency, govern.
Section 4.1.2. TERMS AND DURATION OF LETTERS OF CREDIT. Each Letter
of Credit issued, extended or renewed hereunder shall, among other things,
(a) provide for the payment of sight drafts for honor thereunder when
presented in accordance with the terms thereof and when accompanied by the
documents described therein and (b) have an expiry date no later than the
DIP Maturity Date or, if the Exit Facility Date shall have occurred, the
Exit Maturity Date. No later than the date which is thirty (30) days prior
to the Exit Maturity Date, and with respect to each (if any) Letter of
Credit issued on or after the commencement of such thirty (30) day period,
the Borrower shall secure the Reimbursement Obligations with respect to all
Letters of Credit then outstanding by (i) providing to the Agent cash
collateral in an amount equal to 105% of the Maximum Drawing Amount of all
such Letters of Credit or (ii) providing to the Agent "back to back"
letters of credit, in an amount equal to 105% of such Maximum Drawing
Amount, which shall in each case be in form and substance and issued by a
bank satisfactory to the Agent in its sole and absolute discretion. Such
cash collateral may from time to time be released by the Agent, and the
amount of such "back to back" letters of credit may from time to time be
reduced with the agreement of the Agent, in each case in its reasonable
discretion, to an amount equal to 105% of the Maximum Drawing Amount of the
Letters of Credit secured thereby in the event that the Maximum Drawing
Amount of such Letters of Credit secured thereby is reduced, PROVIDED that
no Event of Default exists after giving effect to any such release of cash
collateral or such reduction. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
Section 4.1.3. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank
severally agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Bank's Commitment
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Percentage, to reimburse the Agent on demand for the amount of each draft
paid by the Agent under each Letter of Credit to the extent that such
amount is not reimbursed by the Borrower pursuant to Section 4.2 hereof
(such agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
Section 4.1.4. PARTICIPATIONS OF BANKS. Each such payment made by a
Bank pursuant to Section 4.1.3 hereof shall be treated as the purchase by
such Bank of a participating interest in the Borrower's Reimbursement
Obligations under Section 4.2 hereof in an amount equal to such payment.
Each Bank shall share in accordance with its participating interest in any
interest which accrues pursuant to Section 4.2 hereof.
Section 4.2. REIMBURSEMENT OBLIGATIONS OF THE BORROWER. In order to induce
the Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby absolutely and unconditionally agrees
to reimburse or pay to the Agent, for the account of the Agent or (as the case
may be) the Banks, with respect to each Letter of Credit issued, extended or
renewed by the Agent hereunder,
(a) except as otherwise expressly provided in Sections 4.2(b) through
(e), on each date that any draft presented under such Letter of Credit is
honored by the Agent, or the Agent otherwise makes a payment with respect
thereto, (i) the amount paid by the Agent under or with respect to such
Letter of Credit, and (ii) the amount of any taxes, fees, charges or other
costs and expenses whatsoever incurred by the Agent or any Bank in
connection with any payment made by the Agent under, or with respect to,
such Letter of Credit,
(b) prior to the Exit Facility Date, upon reduction of the Total DIP
Commitment (but not the termination of such commitment) to an amount less
than the Maximum Drawing Amount, an amount equal to such difference, which
amount shall be held by the Agent for the benefit of the Agent and the
Banks as cash collateral for all Reimbursement Obligations,
(c) from and after the Exit Facility Date, upon reduction of the
Total Exit Commitment (but not the termination of such commitment) to an
amount less than the Maximum Drawing Amount, an amount equal to 105% of
such difference, which amount shall be held by the Agent for the benefit of
the Agent and the Banks as cash collateral for all Reimbursement
Obligations,
(d) prior to the Exit Facility Date, upon the termination of the
Total DIP Commitment, or upon the acceleration of the Reimbursement
Obligations with respect to all Letters of Credit in accordance with
Section 11 hereof, an amount equal to 105% of the Maximum Drawing Amount,
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which amount shall be held by the Agent for the benefit of the Agent and
the Banks as cash collateral for all Reimbursement Obligations, and
(e) from and after the Exit Facility Date upon the termination of the
Total Exit Commitment, or upon acceleration of the Reimbursement
Obligations with respect to all Letter of Credit in accordance with Section
11 hereof, an amount equal to 105% of the Maximum Drawing Amount, which
amount shall be held by the Agent for the benefit of the Agent and the
Banks as cash collateral for all Reimbursement Obligations.
Unless funded by a Loan pursuant to Section 3.2 hereof, each such payment
shall be made to the Agent at the Agent's Head Office in immediately available
funds. Interest on any and all amounts remaining unpaid by the Borrower under
this Section 4.2 and not required to be funded by a Loan pursuant to Section 3.2
hereof at any time from the date such amounts become due and payable (whether as
stated in this Section 4.2, by acceleration or otherwise) until payment in full
(whether before or after judgment) shall be payable to the Agent on demand at
the rate specified in the second sentence of Section 3.4(b) hereof for interest
during the continuance of an Event of Default.
Section 4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the Agent as
provided in Section 4.2 hereof on or before the date that such draft is paid or
other payment is made by the Agent, the Agent may at any time thereafter notify
the Banks of the amount of any such Unpaid Reimbursement Obligation. No later
than 3:00 p.m. Boston time on the Business Day next following the receipt of
such notice, each Bank shall make available to the Agent, at the Agent's Head
Office, in immediately available funds, such Bank's Commitment Percentage of
such Unpaid Reimbursement Obligation, together with an amount equal to the
product of (a) the average, computed for the period referred to in clause (c)
below, of the weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times (b) the
amount equal to such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, times (c) a fraction, the numerator of which is the number of days
that elapse from and including the date the Agent paid the draft presented for
honor or otherwise made payment to the date on which such Bank's Commitment
Percentage of such Unpaid Reimbursement obligation shall become immediately
available to the Agent, and the denominator of which is 360. The responsibility
of the Agent to the Borrower and the Banks shall be only to determine that the
documents (including each draft) delivered under each Letter of Credit in
connection with such presentment shall be in conformity in all material respects
with such Letter of Credit.
Section 4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 4 shall be absolute and unconditional under any and all circumstances
and
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irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Reimbursement Obligations shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or other party
to which any Letter of Credit may be transferred or any claims or defenses
whatsoever of the Borrower against the beneficiary of any Letter of Credit or
any such transferee. Neither the Agent nor any Bank shall be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit. The Borrower agrees that any action taken or omitted by the Agent under
or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith, shall be binding upon the Borrower and shall
not result in any liability on the part of the Agent or any Bank to the
Borrower.
Section 4.5. RELIANCE BY ISSUER. To the extent not inconsistent with
Section 4.4 hereof, the Agent shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
person or entity and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of the Majority Banks
(or, where required, all of the Banks) as it reasonably deems appropriate or it
shall first be indemnified to its reasonable satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Majority Banks (or, where required, all of the
Banks), and such request and any action taken or failure to act pursuant thereto
shall be binding upon the Banks and all future holders of the Notes or of a
Letter of Credit Participation.
Section 4.6. LETTER OF CREDIT FEES. The Borrower shall pay a fee to the
Agent, for the accounts of the Banks in accordance with their respective
Commitment Percentages, in respect of each Letter of Credit (in each case, a
"Letter of Credit Fee") in an amount per annum equal to the Letter of Credit
Rate applied to the Maximum Drawing Amount of each Letter of Credit. Such
Letter of Credit Fees shall be payable pursuant hereto periodically until each
such Letter of Credit shall have been returned to the Agent or shall have
expired in accordance with
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its terms, and shall be payable quarterly in arrears (except that, upon written
notice from the Agent to the Borrower, such Letter of Credit Fees shall be
payable monthly in arrears) on the first Business Day of each calendar quarter
(or month, as the case may be) for the calendar quarter (or month, as the case
may be) then ended based on the average daily Maximum Drawing Amount during such
quarter (or month, as the case may be) of the outstanding Letters of Credit, and
also on the DIP Maturity Date if the Exit Facility Date has not occurred, and on
the Exit Maturity Date if the Exit Facility Date shall have occurred. In
addition, the Borrower shall, at such time or times as such charges are
customarily made by the Agent, pay fees to the Agent for its own account in
respect of each Letter of Credit in an amount equal to the Agent's customary
fees for issuance, negotiation, settlement, amendment and processing of Letters
of Credit.
Section 5. CERTAIN GENERAL PROVISIONS.
Section 5.1. CAPITAL ADEQUACY. If after the date hereof any Bank or the
Agent determines that (a) the adoption of or any change in any banking law,
rule, regulation or guideline or the administration thereof (whether or not
having the force of law), or (b) compliance by such Bank or the Agent or its
parent bank holding company with any guideline, request or directive (whether or
not having the force of law), has the effect of reducing the return on such
Bank's or the Agent's or such holding company's capital as a consequence of such
Bank's DIP Commitment, Exit Commitment, the Loans or any Letters of Credit to a
level below that which such Bank or the Agent or such holding company could have
achieved but for such adoption, change or compliance by any amount deemed by
such Bank or (as the case may be) the Agent to be material, such Bank or (as the
case may be) the Agent may notify the Borrower thereof. The Borrower agrees to
pay such Bank or the Agent the amount of the Borrower's allocable share of the
amount of such reduction in the return on capital as and when such allocable
share of the amount of such reduction is determined, upon presentation by such
Bank or (as the case may be) the Agent of a statement in the amount and setting
forth such Bank's or (as the case may be) the Agent's calculation thereof, which
statement shall be deemed true and correct absent manifest error. Each of the
Banks and the Agent agrees to allocate shares of such reduction among the
Borrower and its other customers similarly situated on a fair and non-
discriminatory basis.
Section 5.2. INABILITY TO DETERMINATE EURODOLLAR RATE. In the event, prior
to the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (a) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be
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deemed a request for a Base Rate Loan, (b) each Eurodollar Rate Loan will
automatically, on the last day of the then-current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Banks.
Section 5.3. ILLEGALITY. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or any interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or to convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Bank's Loans then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period as
may be required by law. The Borrower hereby agrees promptly to pay the Agent
for the account of such Bank, upon demand by such Bank, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in making
any conversion in accordance with this Section 5.3, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder.
Section 5.4. ADDITIONAL COSTS, ETC. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) subject to any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, the Letters of Credit, such Bank's DIP
Commitment or Exit Commitment or the Loans (other than taxes based upon or
measured by the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar
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requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or Loans by, or Letters of Credit
issued by, or commitments of an office of the Agent or any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, the Letters of Credit, any Bank's commitment to make Loans
hereunder, or any class of loans, letters of credit or commitments of which
any of the Loans or such Bank's DIP Commitment or Exit Commitment forms a
part,
and the result of any of the foregoing is:
(i) to increase the cost to any Bank or the Agent of making, funding,
issuing, renewing, extending or maintaining any of the Loans or Letters of
Credit or such Bank's DIP Commitment or Exit Commitment, or to reduce the
amount of principal, interest, or other amounts payable to such Bank or the
Agent hereunder on account of such Loans or Letters of Credit or such DIP
Commitment or Exit Commitment, as the case may be; or
(ii) to require the Bank or the Agent to make any payment or to
forego any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon ten (10) days written
notice by such Bank or (as the case may be) the Agent at any time and from time
to time requesting such additional amounts and as often as the occasion therefor
may arise, pay to such Bank or the Agent such additional amounts as will be
sufficient to compensate such Bank or the Agent for such additional cost,
reduction, payment or foregone interest or other sum.
Section 5.5. CERTIFICATE. A certificate setting forth any additional
amounts payable pursuant to Sections 5.1 or 5.4 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and owing.
Section 5.6. INDEMNITY. The Borrower hereby agrees to indemnify each Bank
and to hold each Bank harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Bank may sustain or incur as a
consequence of (a) default by the Borrower in payment of the principal amount of
or any interest on any Eurodollar Rate Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Bank to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans, (b) default by the Borrower in making a borrowing or
conversion after the Borrower has given (or is deemed to have given) a Loan
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Request or a Conversion Request relating thereto in accordance with Sections 3.1
or 3.5.1 hereof respectively, or (c) the making of any payment on a Eurodollar
Rate Loan or the making of any conversion of any such Eurodollar Rate Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by such Bank to
lenders of funds obtained by it in order to make or maintain any such Loans.
Section 6. FEES AND PAYMENTS.
Section 6.1. FEES. The Borrower hereby agrees to pay the following fees
and expenses:
(a) to the Agent for its own account certain facility fees in the
amounts and at the times set forth in the Fee Letter;
(b) to the Agent for the ratable accounts of the Banks in accordance
with their daily unused DIP Commitments, taking the Settlement mechanism
into account, in arrears, on the first Business Day of each month from and
after the Effective Date for the preceding month (or portion thereof) and
upon the DIP Maturity Date or any other date upon which the Total DIP
Commitment irrevocably ceases to be in effect, a commitment fee (with
respect to the period commencing on the Effective Date) calculated at a
rate per annum which is equal to one-half of one percent (1/2%) of the
average daily difference by which the Total DIP Commitment amount exceeds
the Total Outstandings during the preceding month or portion thereof;
(c) to the Agent for the ratable accounts of the Banks in accordance
with their daily unused Exit Commitments, taking the Settlement mechanism
into account, in arrears, on the first Business Day of each month from and
after the Exit Facility Date for the preceding month (or portion thereof)
and upon the Exit Maturity Date or any other date upon which the Total Exit
Commitment irrevocably ceases to be in effect, a commitment fee (with
respect to the period commencing on the Exit Facility Date) at a rate per
annum equal to the Exit Commitment Fee Rate of the average daily difference
by which the Total Exit Commitment amount exceeds the Total Outstandings
during the previous month or portion thereof;
(d) to the Agent for the PRO RATA accounts of the Banks in accordance
with their Commitment Percentages a prepayment fee (in order to compensate
the Banks for the early termination of the financing relationship
hereunder, since the compensation otherwise payable to the Banks under this
Agreement has been agreed to on the contemplated basis of a long term,
rather than short term, financing relationship) in the amount of $250,000
in the event that a Reorganization Plan shall have become effective and, in
connection therewith, for any reason, the Borrower shall have entered into
working capital financing arrangements
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with financial institutions other than the Agent and the Banks, which such
prepayment fee shall be payable concurrently with the "effective date" of
such Reorganization Plan; and
(e) to the Agent for the Agent's own account a monthly administrative
fee payable monthly in advance on the Effective Date in the amount of
$17,500 and thereafter on the first Business Day of each month in the
amount of $2,500.
The provisions of Section 6.1(a) and (d) shall, to the extent applicable,
survive payment in full of the Loans and all other Obligations hereunder and the
termination in full of the Total DIP Commitment and the Total Exit Commitment.
Section 6.2. PAYMENTS; NO OFFSET; COMPUTATIONS. All payments to be made by
the Borrower or any of the Guarantors hereunder or under any of the other Loan
Documents shall be made in Dollars in immediately available funds to the Agent
for the respective accounts of the Agent and the Banks at the Agent's Head
Office without setoff or counterclaim and free and clear of and without
deduction for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any jurisdiction or any political subdivision
thereof or taxing or other authority therein unless the Borrower or such
Guarantor is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower or such Guarantor with respect to
any amount payable by it hereunder or under any of the other Loan Documents, the
Borrower or such Guarantor will pay to the Agent, for the account of the Banks
or (as the case may be) the Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks or the Agent to receive the
same net amount which the Banks or the Agent would have received on such due
date had no such obligation been imposed upon the Borrower or such Guarantor.
The Agent shall be entitled to charge the Operating Account, the Lock Box
Account or any account of the Borrower or the Guarantors with the Agent for any
sum due and payable by the Borrower or the Guarantors to the Agent or the Banks
hereunder or under any of the other Loan Documents. If any payment hereunder is
required to be made on a day which is not a Business Day, it shall be paid on
the immediately succeeding Business Day, with interest and any applicable fees
adjusted accordingly. All computations of interest or of the commitment fees or
Letter of Credit Fee payable hereunder shall be made on the basis of actual days
elapsed or to elapse and on a 360-day year. All payments of the commitment
fees, the Letter of Credit Fee, the facility fees, the prepayment fee and all
other fees payable hereunder shall be non-refundable.
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Section 7. PRIORITY AND LIENS.
Section 7.1. SUPER-PRIORITY CLAIMS AND COLLATERAL SECURITY.
(a) The Borrower hereby represents, warrants and covenants that, upon
entry of the Financing Order until, but not including, the Exit Facility
Date, (i) the Obligations shall at all times constitute a Super-Priority
Claim having priority, pursuant to Section 364(c)(1) of the Bankruptcy
Code, subject only to the Agreed Administrative Expense Priorities, and
except that such super-priority shall not apply to the proceeds of causes
of action under Sections 544, 545, 547, 548, 549, and 550 of the Bankruptcy
Code, (ii) pursuant to Section 364(c)(2) of the Bankruptcy Code and the
Security Documents, the Obligations shall at all times be secured by a
first priority perfected Lien upon the Collateral, SUBJECT, HOWEVER, to (A)
Permitted Prior Liens and (B) the Agreed Administrative Expense Priorities,
and (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code and the
Security Documents, the Obligations shall at all times also be secured by a
perfected Lien upon all other Collateral, subject only to Permitted Prior
Liens. So long as no Default or Event of Default shall have occurred and
be continuing, and except as provided in the definition of Escrow Account
in Section 1 hereof, the Borrower shall be permitted to pay, as and when
the same become due and payable, administrative expenses of the kind
specified in 11 U.S.C. Section 503(b) incurred in the ordinary course of
business of the Borrower and compensation and reimbursement expenses
allowed and payable under 11 U.S.C. Section 330 and 11 U.S.C. Section 331.
(b) At all times from and after the Exit Facility Date, all
Obligations shall be secured by a first priority perfected Lien upon the
Collateral, subject only, however, to the Permitted Prior Liens, and
provided that the Obligations shall not be secured by a Lien upon certain
trust funds to be held by the Borrower in its fiduciary capacity as
disbursing agent as provided in the Reorganization Plan.
Section 7.2. COLLATERAL SECURITY PERFECTION.
The Borrower agrees to take (or cause to be taken) from time to time all
action that the Agent or any Bank may reasonably request as a matter of
nonbankruptcy law to perfect and protect the Agent's and the Banks' Liens upon
the Collateral and for such Liens to obtain the priority therefor contemplated
hereby, including, without limitation, executing and delivering (and filing)
such financing statements, providing such notices and assents of third parties,
the recording of the Mortgage, obtaining such governmental approvals and
providing such other instruments and documents in recordable form as the Agent
or any Bank may reasonably request.
Section 7.3. NO DISCHARGE; SURVIVAL OF CLAIMS.
The Borrower agrees that (a) the Obligations shall not be discharged by the
entry of an order confirming a Reorganization Plan (and the Borrower pursuant to
Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge),
(b) the Super-Priority
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Claim granted to the Agent and Banks pursuant to the Financing Order, the Liens
granted to the Agent and Banks pursuant to the Financing Order, and the Security
Documents shall not be affected in any manner by the entry of an order
confirming a Reorganization Plan and (c) the Borrower shall not propose or
support any Reorganization Plan that is not conditioned upon the payment in full
in cash, on or prior to the DIP Maturity Date, or if the Exit Facility Date
occurs and the DIP Loans hereunder convert to the Exit Loans as provided in
Section 2.3 hereof, the Exit Maturity Date, of all of the Obligations and which
does not provide, with respect to Letters of Credit, the delivery by such date
to the Agent of all Letters of Credit for cancellation or the replacement of all
Letters of Credit by such date, and, with respect to Obligations arising
pursuant to Sections 16.1 and 16.2 hereof after such date, or the DIP Maturity
Date or Exit Maturity Date, as applicable, and thereafter for the payment in
full of such Obligations in cash when due and payable.
Section 8. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the Banks on the date
hereof, on the Exit Facility Date, on the date of any Loan Request, on the date
of each Letter of Credit Application, on each Drawdown Date and on the date on
which each Letter of Credit is issued, extended or renewed that:
(a) The Borrower and each of its Subsidiaries is duly organized,
validly existing, and in good standing under the laws of its jurisdiction
of incorporation and is duly qualified and in good standing in every other
jurisdiction where the failure to be so qualified would have a Materially
Adverse Effect, and the execution, delivery and performance by each of the
Borrower and its Subsidiaries of each of the Loan Documents to which it is
a party (i) are within its corporate authority, (ii) upon entry of the
Financing Order will have been duly authorized, and (iii) do not conflict
with or contravene its Charter Documents.
(b) Upon entry of the Financing Order and the execution and delivery
of the Loan Documents by the respective parties thereto, each Loan Document
shall constitute the legal, valid and binding obligation of the Borrower
and each of its Subsidiaries party thereto, enforceable in accordance with
its terms.
(c) No Affiliate of the Borrower or its Subsidiaries is a debtor in
the Case or a debtor in any other bankruptcy, insolvency, liquidation,
reorganization, dissolution of similar case or proceeding.
(d) Each of the Borrower and its Subsidiaries has good and marketable
title to all its material properties, subject only to Permitted Liens, and
possesses assets, including intellectual properties, franchises and
Consents, adequate for the conduct of its business as now conducted,
without known material conflict with any rights of others. Each of the
Borrower and its Subsidiaries maintains insurance from financially
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responsible insurers, copies of the policies for which have previously been
delivered to the Agent and the Banks, covering such risks and in such
amounts and with such deductibles as are customary in the Borrower's and
its Subsidiaries' businesses and are adequate, and the Borrower and its
Subsidiaries have caused all insurers with respect to such insurance to
name the Agent as loss payee and additional insured under all such
insurance, with the Agent to receive from the insurers at least thirty (30)
days prior written notice of cancellation of any insurance.
(e) The Borrower's fiscal year and the fiscal year of each of its
Subsidiaries is the 12 month period ending on the Saturday closest to
January 31 of each year. Each of the fiscal quarters of such fiscal year
consists of a period of thirteen (13) fiscal weeks, divided into three (3)
fiscal months of 4, 5, and 4 fiscal weeks, respectively (in that order).
The Borrower has provided to the Agent and the Banks its audited
consolidated Financials as at February 3, 1996, and for the fiscal year
then ended, and its unaudited monthly Financials as at the end of and for
each fiscal month thereafter through April 6, 1996. Such Financials fairly
present in all material respects the position of the Borrower as at such
dates and for such periods in accordance with GAAP consistently applied
(except that unaudited Financials are subject to year-end audit adjustments
and the provision of footnotes). The Borrower has also provided to the
Agent and the Banks its annual and monthly forecasts of the operations of
the Borrower and such other financial projections as the Agent and the
Banks have reasonably requested, in each case for the period from February
4, 1996 through January 29, 2000, and such forecasts and projection have
been prepared in good faith based upon assumptions believed to be
reasonable by the Borrower on the date hereof. No information that has
been provided by the Borrower to the Agent or any Bank contains any
material misstatement of fact or omits to state a material fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which made.
(f) (i) Prior to the occurrence of the Exit Facility Date, since the
end of the fiscal periods covered by the Financials dated February 3, 1996,
there has occurred no condition or event which would have a Materially
Adverse Effect, and (ii) from and after the Exit Facility Date, since the
delivery of the Financials reflecting the Reorganization Plan approved by
the Agent in connection with the Exit Facility Date, there has occurred no
condition or event which would have a Materially Adverse Effect, other than
those expressly contemplated by such Reorganization Plan;
(g) There are no legal or other proceedings or investigations pending
or threatened against the Borrower or any of its Subsidiaries before any
court, tribunal or regulatory authority which has not been resolved or
fully reserved for under the Reorganization Plan, if the Exit
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Facility Date shall have occurred or which would, if adversely determined,
alone or together, have a Materially Adverse Effect.
(h) The Borrower (i) has from and after the Exit Facility Date paid
all taxes relating to the period prior to the commencement of the Case
(except as shall be deferred pursuant to the terms of the Reorganization
Plan) and (ii) has paid all taxes relating to the period subsequent to the
commencement of the Case, in each case as are due and payable (except those
being contested in good faith by appropriate proceedings and for which
adequate reserves have been taken) and has funded all employee payrolls
(including all required withholdings) as and when required.
(i) Except for entry of the Financing Order, or (with respect to the
Exit Facility Date) the Confirmation Order, the execution, delivery,
performance of its obligations, and exercise of its rights under the Loan
Documents by the Borrower, including borrowing under this Agreement and the
obtaining of Letters of Credit (i) do not require any Consents which have
not been obtained; and (ii) are not and will not be in conflict with or
prohibited or prevented by (A) any Requirement of Law, or (B) any Charter
Document, corporate minute or resolution, or any provision of any
post-petition instrument, post-petition agreement or assumed executory
contract, or with (with respect to all periods from and after the Exit
Facility Date) any other instrument, agreement, or contract, in each case
binding on it or affecting the property of the Borrower.
(j) The Borrower and each of its Subsidiaries is not in violation of
(i) any Charter Document, corporate minute or resolution, (ii) any
post-petition instrument, post-petition agreement or assumed executory
contract, or with (with respect to all periods from and after the Exit
Facility Date) any other instrument, agreement, or contract, in each case
binding on it or affecting its property, in any such case in a manner which
could have a Materially Adverse Effect or (iii) any Requirement of Law, in
a manner which could have a Materially Adverse Effect, including, without
limitation, all applicable federal and state tax laws, ERISA, OSHA and
Environmental Laws. Neither the Borrower nor any of its Subsidiaries is in
violation of any collective bargaining agreement to which such Person is a
party in a manner which could have a Materially Adverse Effect.
(k) With respect to all periods prior to the Exit Facility Date, upon
execution and delivery of this Agreement and the other Loan Documents to be
executed on the Effective Date and the entry of the Financing Order, the
Agent and the Banks shall have first-priority perfected Liens in the
Collateral, subject only to (i) Permitted Prior Liens and (ii) Agreed
Administrative Expense Priorities, with no financing statements, mortgages
or similar filings on record anywhere which conflict with such
first-priority Liens.
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(l) With respect to all periods from and after the Exit Facility
Date, upon execution and delivery of this Agreement and the other Loan
Documents requested hereby, and upon the recording in the appropriate
recording offices of the applicable financing statements and the Mortgage
being executed by the Borrower and delivered to the Agent and the Banks and
appropriately recorded in connection herewith, the Agent and the Banks
shall have first priority perfected Liens in the Collateral, subject only
to Permitted Prior Liens, with no financing statements, mortgages or
similar filings on record anywhere which conflict with such first-priority
Liens.
(m) There are no Liens on any assets of any of the Borrower or its
Subsidiaries other than Permitted Liens, and there is no Indebtedness of
the Borrower or its Subsidiaries other than Indebtedness permitted by this
Agreement.
(n) Except as set forth on SCHEDULE 8(n) attached hereto, which such
Schedule may be updated from time to time in accordance with the provisions
of Section 10.1(k) hereof, the Borrower has no Subsidiaries and is not a
party to any partnership or joint venture. As of the Effective Date, no
Subsidiary of the Borrower has any assets.
(o) SCHEDULES 3.7 and 3.9 attached hereto set forth the account
numbers and locations of all bank accounts and investment accounts of the
Borrower and its Subsidiaries and accurately designate which such accounts
are payroll accounts and sales tax trust accounts and which are depository
accounts.
(p) SCHEDULE 8(p) attached hereto sets forth all retail stores,
distribution centers and all other locations at which assets, including
inventory, of the Borrower and its Subsidiaries are located. The assets of
the Borrower and its Subsidiaries are in the amounts and of the quality
previously represented by the Borrower to the Agent.
(q) SCHEDULE 8(q) attached hereto sets forth all patents, trademarks,
tradenames, service marks, registered copyrights, material Consents,
franchises, and applications for the foregoing of the Borrower and its
Subsidiaries, or which the Borrower or its Subsidiaries has the right to
use.
(r) The proceeds of the Loans shall be used solely to refinance the
Foothill DIP Facility, for working capital and general corporate purposes.
The Borrower will obtain Letters of Credit solely for general corporate
purposes and to support or replace letters of credit previously issued or
guarantied by Foothill under the Foothill DIP Facility. No portion of any
Loan is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of purchasing or carrying any "margin security"
or
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"margin stock" as such terms are used in Regulation U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
(s) On and after the Exit Facility Date, there are no pre-petition or
administrative claims or Liens with respect to the Borrower or any of its
assets other than those discharged on or before the consummation of the
Reorganization Plan or those expressly contemplated by the Reorganization
Plan to survive the consummation thereof.
(t) On and after the Effective Date, the Financing Order has been
entered, has not been reversed, modified, amended or stayed, and remains in
full force and effect.
(u) On and after the Exit Facility Date, the Reorganization Plan has
become effective and has been consummated in accordance with the terms
thereof; the Confirmation Order has been entered, has not been reversed,
modified, amended or stayed (except for modifications consented to or
approved by the Agent in writing), and remains in full force and effect;
except as otherwise agreed in writing by the Agent, all appeal periods
relating thereto have expired; and, except as otherwise agreed in writing
by the Agent, no appeals therefrom are outstanding.
Section 9. CONDITIONS PRECEDENT.
Section 9.1. TO INITIAL DIP LOAN AND ISSUANCE OF LETTERS OF CREDIT. The
obligation of the Banks to make the initial DIP Loan or the Agent to issue the
initial Letters of Credit is subject to the satisfaction of the following
conditions precedent in addition to those set forth in Section 9.3 hereof:
Section 9.1.1. LOAN DOCUMENTS. Each of the Loan Documents (other than
the Security Documents (but including the Security Agreement, certain UCC
financing statements (to the greatest extent practicable), the Lock Box
Agreement with the Borrower and the Agency Account Agreement with Seafirst
and the Borrower required by Section 3.9 hereof), the Exit Notes and the
Ratification Certificate) shall have been duly executed and delivered by
the respective parties thereto, shall be in full force and effect and shall
be in form and substance satisfactory to the Agent and each of the Banks.
Section 9.1.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the
Banks shall have received from the Borrower a copy, certified by a duly
authorized officer of the Borrower to be true and complete on the Effective
Date, of each of its Charter Documents as in effect on such date, and a
legal existence and good standing certificate issued by the Borrower's
state of incorporation as of a recent date.
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Section 9.1.3. CORPORATE ACTION. All corporate action necessary for
the valid execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents to which it is or is to become a
party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Agent and the Banks shall have been provided to the
Agent and each of the Banks.
Section 9.1.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have
received from the Borrower an incumbency certificate, dated as of the
Effective Date, signed by a duly authorized officer of the Borrower and
giving the name and bearing a specimen signature of each individual who
shall be authorized: (i) to sign, in the name and on behalf of the Borrower
each of the Loan Documents to which the Borrower is or is to become a
party; (ii) to make Loan Requests and Conversion Requests and to apply for
Letters of Credit; and (iii) to give notices and to take other action on
its behalf under the Loan Documents.
Section 9.1.5. PERFECTION CERTIFICATE AND UCC SEARCH RESULTS. The
Agent shall have received from the Borrower and each of the Guarantors a
completed and fully executed Perfection Certificate and the results of
searches with respect to the Collateral including Uniform Commercial Code
("UCC") searches, tax lien searches, U.S. Patent and Trademark Office
("PTO") searches, and (if practicable) Real Estate title searches (with
respect to the Kitsap Store Real Estate), indicating in each case no Liens
other than Permitted Liens and otherwise in form and substance satisfactory
to the Agent.
Section 9.1.6. FINANCING ORDER. The Bankruptcy Court shall have
entered an order (the "Financing Order") in the Case satisfactory in form
and substance to the Agent and the Banks approving the transactions
contemplated herein and including, specifically but without limiting the
foregoing, (i) the grant to the Banks and the Agent of super-priority
status and a first-priority perfected Lien upon the Collateral, subject to
the matters referred to in Section 7.1 hereof, pursuant to Section
364(c)(1), (2) and (3) of the Bankruptcy Code and (ii) the grant to the
Agent of limited relief from the automatic stay of Section 362(a) of the
Bankruptcy Code for the purpose of enabling the Agent to make all filings
and recordings and take all other actions considered advisable by the Agent
to protect, perfect, or insure the priority of its security interest. The
Financing Order shall have authorized extensions of credit in the full
amount of the Total DIP Commitment or otherwise in an amount satisfactory
to the Banks and the Agent, shall be in full force and effect, and (except
for modifications consented to or approved by the Agent in writing) shall
not have been reversed, modified, amended, or stayed.
Section 9.1.7. CERTIFICATES OF INSURANCE. The Agent shall have
received (i) a certificate of insurance from an independent insurance
broker dated as of the Effective Date, identifying insurers, types of
insurance,
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insurance limits, and policy terms, and otherwise describing the insurance
obtained in accordance with the provisions of this Agreement and the
Security Agreement, naming the Agent as loss payee and additional insured,
as applicable, and (ii) certified copies of all policies evidencing such
insurance (or certificates therefore signed by the insurer or an agent
authorized to bind the insurer).
Section 9.1.8. AGENCY ACCOUNT AGREEMENTS. The Agent shall have
received the Agency Account Agreement required by Section 3.9 hereof
executed by Seafirst and the Borrower. The Agent shall have received
copies of the documentation referred to in Section 3.9 and such
documentation must be satisfactory to the Agent in form and substance. The
Agent shall be satisfied that all cash, checks, and other proceeds of
Collateral are being deposited and handled in accordance with the
procedures provided in Sections 3.7 and 3.9 hereof and shall otherwise be
satisfied with the Borrower's cash management system.
Section 9.1.9. BORROWING BASE REPORT. The Agent shall have received
from the Borrower the initial Borrowing Base Report dated as of the
Effective Date.
Section 9.1.10. OPINION OF COUNSEL. Each of the Banks and the Agent
shall have received a favorable legal opinion addressed to the Banks and
the Agent, dated as of the Effective Date, in form and substance
satisfactory to the Banks and the Agent, from Ryan, Swanson & Cleveland,
counsel to the Borrower.
Section 9.1.11. PAYMENT OF FEES. The Borrower shall have paid to the
Agent the first payment of the facility fee pursuant to the terms of the
Fee Letter as provided in Section 6.1(a) hereof, net of any payment with
respect thereto paid at the time of signing of the commitment letter with
respect to this Agreement, and $17,500 with respect to the first payment of
the Agent's administrative fee pursuant to Section 6.1(e), together with
all other fees and expense reimbursements due and payable to the Agent or
any Bank and all fees and disbursements of the Agent's Special Counsel.
Section 9.1.12. PAYOFF LETTER. The Agent shall have received a payoff
letter from Foothill, indicating the amount of the loan obligations of the
Borrower pursuant to the Foothill DIP Facility to be discharged on the
Effective Date and an acknowledgment by Foothill that upon receipt of such
funds it will forthwith execute and deliver to the Agent for filing all
termination statements and take such other actions as may be necessary to
discharge all mortgages, deeds of trust and security interests granted by
the Borrower in favor of Foothill and to terminate all blocked account
agreements and similar arrangements relating to the Foothill DIP Facility.
Arrangements satisfactory to the Agent shall have been made for the
issuance of any Letters of Credit necessary to support or replace
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other letters of credit previously issued or guarantied by Foothill
pursuant to the Foothill DIP Facility.
Section 9.1.13. DISBURSEMENT INSTRUCTIONS. The Agent shall have
received disbursement instructions from the Borrower, indicating, among
other items, that the proceeds of the initial DIP Loan in the amount equal
to the aggregate obligations of the Borrower to Foothill are to be paid on
the Effective Date. Any and all necessary Letter of Credit Applications
shall have been completed and the form of the requested Letters of Credit
(if any) shall be satisfactory to the Agent.
Section 9.1.14. PROJECTIONS AND OTHER INFORMATION; QUALITY OF ASSETS
AND INVENTORY. The Agent shall have received and be satisfied with all
revisions, if any, made to the four-year financial projections of the
Borrower previously delivered to the Agent, and all other information
(financial or otherwise) requested by the Agent shall be in all respects
satisfactory to the Agent. The Agent shall be satisfied that the assets of
the Borrower and its Subsidiaries are in the amounts and of the quality
previously represented by the Borrower to the Agent, and the Agent shall
have received such valuations, credit and background checks and other
reports, material and information concerning such assets as shall satisfy
the Agent in its sole discretion. In addition, the Agent shall be
satisfied that the inventory of the Borrower is located at such places and
is in the amounts and of the quality and value previously represented by
the Borrower to the Agent and the Agent shall have received such reports,
material and other information concerning the inventory and the Borrower's
suppliers as shall satisfy the Agent in its sole discretion.
Section 9.1.15. NO MATERIAL ADVERSE CHANGE. The Agent shall be
satisfied that any changes to the Financials previously delivered to the
Agent, and any other events or circumstances that may have arisen since the
date of such Financials, would not be likely to have a Materially Adverse
Effect.
Section 9.1.16. CAPITAL RAISING EVENT. If a Capital Raising Event
shall have occurred on or prior to the Effective Date, all documents and
instruments executed in connection therewith, all terms thereof and the
identity of the investor funding such Capital Raising Event shall in each
case be satisfactory in all respects to the Agent and the Banks.
Section 9.1.17. SUBORDINATED DEBT ARRANGEMENTS. If the Subordinated
Debt is incurred, (a) the Subordination and Intercreditor Agreement shall
have been duly executed and delivered by each of Remy, the Borrower and the
Agent, shall be in full force and effect and shall be in form and substance
satisfactory to the Agent and the Banks; and (b) each of the Subordinated
Debt Documents shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect
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and shall be in form and substance satisfactory to the Agent and the Banks.
Section 9.1.18. STORE CREDIT CARD PROGRAM. True and complete copies
of Store Credit Card Program Documents and the documentation for the other
credit card programs in which the Borrower participates shall have been
furnished to the Agent and shall be in form and substance satisfactory to
the Agent.
Section 9.1.19. INVENTORY DISTRIBUTION CENTER. The Borrower shall use
its best efforts to obtain and deliver to the Agent on the Effective Date
the waiver(s) from Assembly and the applicable "inventory consolidators"
for the Borrower and other applicable Persons that are required to be
obtained and delivered pursuant to Section 9.2.10 hereof.
Section 9.2. TO THE OCCURRENCE OF THE EXIT FACILITY DATE. The Banks shall
have no obligation to make any Loan on or after the DIP Maturity Date, the Agent
will not have any obligation to issue, extend or renew any Letter of Credit on
or after the DIP Maturity Date and the DIP Loans outstanding on the DIP Maturity
Date will not convert into Exit Loans as set forth in Section 2.3(a) hereof,
unless each of the following conditions precedent are satisfied:
Section 9.2.1. LOAN DOCUMENTS Each of the Security Documents, the
Exit Notes and Ratification Certificate and any other Loan Documents not
previously executed shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect and shall be
in form and substance satisfactory to the Agent and each of the Banks.
Section 9.2.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the
Banks shall have received from the Borrower a copy, certified by a duly
authorized officer of the Borrower to be true and complete on the Exit
Facility Date, of each of its Charter Documents as amended on such date
pursuant to the Reorganization Plan with the consent of the Agent and in
effect on such date, and a legal existence and good standing certificate
issued by the Borrower's state of incorporation as of a recent date.
Section 9.2.3. CORPORATE ACTION. All corporate action necessary for
the valid execution, delivery and performance by the Borrower of the Loan
Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Banks shall
have been provided to the Agent and each of the Banks.
Section 9.2.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have
received from the Borrower an incumbency certificate, dated as of the Exit
Facility Date, signed by a duly authorized officer of the Borrower and
giving the name and bearing a specimen signature of each individual who
shall be authorized: (i) to sign, in the name and on behalf of the Borrower
each of the Loan Documents to which the Borrower is or is to become a
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party; (ii) to make Loan Requests and Conversion Requests and to apply for
Letters of Credit; and (iii) to give notices and to take other action on
its behalf under the Loan Documents.
Section 9.2.5. VALIDITY OF LIENS. The Security Documents shall be
effective to create in favor of the Agent for the benefit of the Banks a
legal, valid and enforceable security interest in and Lien upon the
Collateral having such priority as is contemplated by this Agreement. All
filings, recordings, deliveries of instruments and other actions and
arrangements necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The
Agent shall have received evidence thereof in form and substance
satisfactory to the Agent.
Section 9.2.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The
Agent shall have received from the Borrower an updated Perfection
Certificate and the results of updated Lien and title searches, including
UCC, PTO, and tax lien searches with respect to the Collateral, and title
searches with respect to the Kitsap Store Real Estate, indicating in each
case no Liens other than Permitted Liens and otherwise in form and
substance satisfactory to the Agent.
Section 9.2.7. REORGANIZATION PLAN AND CONFIRMATION ORDER. The final
terms of the Reorganization Plan to be consummated and the order of the
Bankruptcy Court approving such Reorganization Plan (the "Confirmation
Order") shall be satisfactory to the Agent in all respects including,
without limitation, the requirement that, except as approved by the Agent,
all prepetition claims against and all interests in the Borrower shall be
discharged and/or extinguished pursuant to the Reorganization Plan and that
no Obligations hereunder or Liens in favor of the Agent or the Banks shall
be discharged until all such Obligations shall be paid in full in cash and
that all such claims and Liens shall survive the discharge of the Borrower
under Section 1141 of the Bankruptcy Code. The Bankruptcy Court shall have
approved any amendments or modifications to the Reorganization Plan or the
Confirmation Order and entered any and all related orders requested or
approved by the Agent in connection therewith, and no other amendments or
modifications thereto shall have occurred. All conditions precedent to the
consummation of the Reorganization Plan shall have been met (or the waiver
thereof shall have been consented to by the Agent) and the substantive
consummation of the Reorganization Plan shall have occurred or shall be
scheduled to occur but for the initial Exit Loans to be made on the Exit
Facility Date. The Agent and the Banks shall be satisfied with the equity
ownership of the Borrower, the composition of the Borrower's board of
directors, and the key executive and financial management of the Borrower.
The Confirmation Order shall not have been reversed, modified, amended, or
stayed, shall be in full force and effect, and, unless otherwise agreed by
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the Agent, all appeal periods relating to the Confirmation Order shall have
expired, and, unless otherwise agreed by the Agent, no appeals from the
Confirmation Order shall be outstanding. Except as consented to by the
Agent, the Bankruptcy Court's retention of jurisdiction under the
Confirmation Order shall not govern the enforcement of the Loan Document or
Security Documents from and after the Exit Facility Date, or any rights or
remedies relating thereto. With respect to provisions of this Agreement
which permit matters provided for in the Reorganization Plan, such
permission is granted only to the extent such matters are clearly disclosed
and expressly provided for in the Reorganization Plan and only to the
extent the Reorganization Plan is expressly approved in writing by the
Agent on or prior to the Exit Facility Date.
Section 9.2.8. SURVEY AND TAXES. The Agent shall have received (i) a
satisfactory survey of the Kitsap Store Real Estate, together with a
satisfactory surveyor's certificate relating thereto and (ii) evidence of
payment on or before the filing of the Mortgage with respect to the Kitsap
Store Real Estate of real estate taxes and municipal charges on the Kitsap
Store Real Estate except as not then delinquent.
Section 9.2.9. TITLE INSURANCE. The Agent shall have received a
mortgagee title insurance policy with respect to the Mortgage covering the
Kitsap Store Real Estate (or commitments to issue such policy, with all
conditions to issuance of the title policy deleted by an authorized agent
of the title insurance company) together with proof of payment of all fees
and premiums for such policy, from a nationally-recognized title insurance
company approved by, and in amounts and in form and substance satisfactory
to the Agent, insuring the interest of the Agent and each of the Banks as
mortgagee under the Mortgage.
Section 9.2.10. CONSENTS FOR MORTGAGE; LANDLORD LIEN WAIVERS;
ETC. The Borrower shall have obtained and delivered to the Agent all
consents (if any) of the landlord and other Persons (if any) required for
the Agent to receive a Mortgage on the Kitsap Store Real Estate. The
Borrower shall have used its best efforts to obtain and deliver to the
Agent Landlord Waivers with respect to all leaseholds of Real Estate on
which inventory will be located, and the Borrower shall have delivered with
respect to all such leases without such Landlord Waivers which constitute
Specified Leases an officer's certificate of the Borrower stating the
current monthly rental obligations with respect to each such lease and a
calculation in reasonable detail of the maximum potential claim of such
nonwaiving landlord. The Borrower shall have obtained and delivered to the
Agent a waiver of all claims against the Collateral in form and substance
satisfactory to the Agent from Assembly with respect to the Borrower's
distribution facility located in Kent, Washington and from any and all
"inventory consolidators" and other Persons in possession of inventory of
the Borrower in a similar capacity.
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Section 9.2.11. CERTIFICATES OF INSURANCE. The Agent shall have
received (to the extent not previously delivered on the Effective Date) (i)
a certificate of insurance from an independent insurance broker dated as of
the Exit Facility Date, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained
in accordance with the provisions of this Agreement and the Security
Agreement, naming the Agent as loss payee and additional insured, as
applicable, and (ii) certified copies of all policies evidencing such
insurance (or certificates therefore signed by the insurer or an agent
authorized to bind the insurer).
Section 9.2.12. BORROWING BASE REPORT. The Agent shall have received
from the Borrower a Borrowing Base Report dated as of the Exit Facility
Date.
Section 9.2.13. OPINION OF COUNSEL. Each of the Banks and the Agent
shall have received a favorable legal opinion addressed to the Banks and
the Agent, dated as of the Exit Facility Date, in form and substance
satisfactory to the Banks and the Agent, from Ryan, Swanson & Cleveland,
counsel to the Borrower.
Section 9.2.14. PAYMENT OF FEES. The Borrower shall have paid to the
Banks or the Agent, as appropriate, the initial portion of all facility
fees payable on the Exit Facility Date pursuant to the terms of the Fee
Letter as provided in Section 6.1(a) hereof, together with all other fees
and expense reimbursements due and payable to the Agent or any Bank, and
all fees and disbursements of the Agent's Special Counsel.
Section 9.2.15. AVAILABLE CASH AND BORROWING CAPACITY; AGENCY ACCOUNT
AGREEMENTS. After giving effect to all payments required to be made in
accordance with the Reorganization Plan and all borrowings hereunder
related thereto, the Borrower shall have cash and Exit Loan borrowing
availability (giving effect to the Borrowing Base limitations hereof) of
not less than $500,000. The Agent shall have received the Agency Account
Agreements executed by each of the depository banks (other than with
respect to payroll and sales tax trust accounts) listed on SCHEDULE 3.7
hereto; and the Agent shall have received all other documentation required
by Section 3.7 hereof. The Lock Box Agreement and the arrangements and
documentation referred to in Section 9.1.8 hereof shall be in full force
and effect. The Agent must be satisfied that all cash, checks, and other
proceeds of Collateral are being deposited and handled in accordance with
the procedures provided in Sections 3.7 and 3.9 hereof and shall otherwise
be satisfied with the Borrower's cash management system.
Section 9.2.16. POST-CONFIRMATION CAPITAL STRUCTURE AND LIABILITIES.
The Agent and the Banks shall be satisfied with all liabilities (including
contingent liabilities) and post- confirmation litigation risks that are to
survive the consummation of the
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Reorganization Plan and with the adequacy of appropriate accounting
reserves therefor. The Agent and the Banks shall be satisfied with the
financial condition, capital structure, corporate structure, assets,
liabilities and financial projections (including cash flow) of the Borrower
and its Subsidiaries and the terms of all capital stock and Indebtedness.
No event or circumstances shall have arisen that would in the reasonable
opinion of the Agent or any Bank have a Materially Adverse Effect.
Section 9.2.17. CAPITAL RAISING EVENT. If a Capital Raising Event
shall have occurred on or prior to the Exit Facility Date, all documents
and instruments executed in connection therewith, all terms thereof and the
identity of the investor funding such Capital Raising Event, shall in each
case be satisfactory in all respects to the Agent and the Banks.
Section 9.2.18 EXIT TO OCCUR CONCURRENT WITH DIP MATURITY DATE. The
Exit Facility Date must occur, if at all, on the DIP Maturity Date. The
Effective Date must have occurred previously, all conditions precedent set
forth in Section 9.1 hereof shall have been and remain satisfied, and the
Total DIP Commitment shall not have been terminated (whether by the Agent
or the Banks in accordance with the provisions of Section 11 or by the
Borrower in accordance with the provisions of Section 2.5 or otherwise),
such that there is a conversion of outstanding DIP Loans to Exit Loans on
the Exit Facility Date.
Section 9.2.19 CONVERSION OF SUBORDINATED DEBT. Any and all
Subordinated Debt shall have been exchanged in full for common stock of the
Borrower or shall have been cancelled (but not repaid except from the
proceeds of new cash equity investments in the Borrower made on the Exit
Facility Date), in each case as provided in the Reorganization Plan.
Section 9.3. TO EACH LOAN AND ISSUANCE, EXTENSION OR RENEWAL OF LETTERS OF
CREDIT. The obligation of the Banks to make any Loan or of the Agent to issue,
extend or renew any Letter of Credit and the conversion of the DIP Loans to Exit
Loans as set forth in Section 2.4(a) hereof, is subject to the satisfaction of
the following further conditions precedent:
(a) Each of the representations and warranties of the Borrower and
its Subsidiaries to the Agent and the Banks herein or in any of the other
Loan Documents or any document, certificate or other paper or notice in
connection herewith shall be true and correct in all material respects on
the date of such extension of credit, except to the extent that such
representations and warranties expressly relate to a prior date, in which
case they shall be true and correct in all materials respects as of such
earlier date. Each request by the Borrower for, and acceptance by the
Borrower of, each extension of credit shall be deemed to be a
representation and warranty by the Borrower that the applicable conditions
precedent in Section 9 have been satisfied and that, after giving effect to
such extension of credit, the Borrower shall continue to be in
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compliance with the provisions hereof relating to the Borrowing Base
restrictions on the Total Outstandings.
(b) No Default or Event of Default shall have occurred and be
continuing or shall result from such extension of credit.
(c) All proceedings in connection with the transactions contemplated
hereby shall be in form and substance reasonably satisfactory to the Agent
and the Banks, and the Agent and the Banks shall have received all
information and documents as they shall have reasonably requested. No
change shall have occurred in any law or regulation or in the
interpretation thereof that in the reasonable opinion of the Agent or any
Bank would make it unlawful for such Bank to make such Loan or the Agent to
issue, extend or renew such Letter of Credit.
(d) With respect to DIP Loans and Letters of Credit to be issued,
extended or renewed prior to the DIP Maturity Date only, the Financing
Order shall be in full force and effect and (except for modifications
consented to or approved by the Agent in writing) shall not have been
reversed, modified, amended or stayed. If the Financing Order is the
subject of a pending appeal in any respect, none of such Financing Order,
the making of the DIP Loans, the issuance, extension or renewal of any
Letters of Credit prior to the Exit Facility Date, or the performance by
the Borrower or any of the Guarantors of any of its obligations under any
of the Loan Documents shall be the subject of a presently effective stay
pending appeal. The Borrower, the Agent and the Banks shall be entitled to
rely in good faith upon the Financing Order notwithstanding objection
thereto or appeal therefrom by any interested party. The Borrower, the
Agent and the Banks shall be permitted and required to perform their
respective obligations in compliance with this Agreement notwithstanding
any such objection or appeal unless the Financing Order has been stayed by
a court of competent jurisdiction.
(e) Except as otherwise provided in Section 3.2 hereof, the Agent
shall have received a Loan Request or Letter of Credit Application with
respect to the Loan or Letter of Credit requested. The Agent shall have
received the most recent Borrowing Base Report required hereunder as
provided in Section 10.1(a)(iv).
(f) From and after the Exit Facility Date only, the Confirmation
Order shall be in full force and effect, shall not have been reversed,
modified or amended in any material respect (except for modifications
consented to or approved by the Agent in writing), shall not (unless
otherwise agreed by the Agent) be subject to an unexpired appeals period,
and shall not (unless otherwise agreed by the Agent) be the subject of any
pending appeal.
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(g) All fees and expense reimbursements due and payable to the Agent
or any Bank hereunder shall have been paid to the Agent or (as the case may
be) such Bank.
(h) With respect to DIP Loans and Letters of Credit to be issued,
extended or renewed prior to the DIP Maturity Date only, no suit or action
against any Bank or the Agent shall have been commenced by any official
committee in the Case or any other Person (exclusive of the Borrower, any
Subsidiaries of the Borrower, or any Guarantor) which suit or action
asserts any claim or legal or equitable remedy contemplating subordination
of any claim or Lien of any of the Banks or the Agent.
Section 10. COVENANTS.
Section 10.1. AFFIRMATIVE COVENANTS. The Borrower agrees that so long as
there are any Loans or Letters of Credit outstanding and until the termination
of the Total DIP Commitment or, if the Exit Facility Date occurs, the Total Exit
Commitment and the payment and satisfaction in full in cash of all of the
Obligations, the Borrower will, and where applicable the Borrower will cause
each of its Subsidiaries to, comply with its obligations as set forth throughout
this Agreement and to:
(a) furnish the Agent and the Banks:
(i) as soon as available but in any event within ninety-five
(95) days after the close of each fiscal year, (A) its audited
consolidated Financials for such fiscal year, together with the
unqualified audit opinion letter with respect thereto of the
Borrower's accountants (other than, with respect only to periods prior
to the Exit Facility Date, such accountants' customary qualification
consistent with past practice with respect to the Borrower's ability
during the pendency of the Case to continue as a going concern),
together with a statement from such accountants as to the absence, to
their knowledge, of any Event of Default, and (B) its unaudited
consolidating Financials for such fiscal year; with such accountants
at all times to be one of the national, independent certified public
accounting firms presently referred to as the "Big Six" or such other
independent certified public accounting firm of recognized standing as
shall have been approved by the Agent;
(ii) as soon as available but in any event within thirty-five
(35) days after the end of each fiscal month and within fifty (50)
days after the end of each fiscal quarter, (A) its unaudited
consolidated and consolidating Financials for such period, and (B)
prior to the Exit Facility Date, an itemized accounting of all amounts
paid or credited to the Escrow Account during each such monthly or
quarterly period, in each case certified by its chief financial
officer;
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(iii) together with its Financials described in clauses (i) and
(ii) above, a certificate of the Borrower in the form attached hereto
as EXHIBIT E (the "Compliance Certificate") setting forth computations
demonstrating compliance with the Borrower's and its Subsidiaries
financial covenants set forth herein, containing (in the case of the
Financials described in clause (i) above) computations in reasonable
detail of the Applicable Pricing as to be determined on the applicable
Adjustment Date pertaining to such Financials, and in each case
describing and evidencing in reasonable detail any and all applicable
reconciliations to reflect changes in GAAP since February 3, 1996 and
the differences between GAAP and the accounting principles, methods,
interpretations, and procedures utilized by the Borrower in
determining compliance with Section 10.2(b), Section 10.2(c), Section
10.3, and Section 10.4 hereof, and certifying that no Default or Event
of Default has occurred, or if it has, describing the actions taken by
the Borrower and its Subsidiaries with respect thereto;
(iv) on Tuesday of each week (or, if such Tuesday is not a
Business Day, on the first Business Day thereafter), and at such other
time as the Agent or any Bank may reasonably request, a Borrowing Base
Report with respect to the prior business week (including and ending
on the immediately preceding Saturday) or such other applicable period
together with, in the case of any Borrowing Base Report delivered
immediately following the end of any fiscal month, such specific
inventory pledges or collateral designations as of the end of such
month as the Agent or any Bank may have reasonably requested;
(v) promptly upon the filing thereof copies of all material
pleadings, notices, orders and other papers filed in the Case;
(vi) prior to the commencement of each fiscal year of the
Borrower, the Borrower's updated forecasts and projections of future
financial performance from and including such fiscal year through the
last day of the Borrower's fiscal year ending on or about January 29,
2000;
(vii) within five (5) days after the filing or mailing thereof,
copies of all materials of a financial nature filed with the
Securities and Exchange Commission or sent to the stockholders of the
Borrower;
(viii) promptly following receipt thereof by the Borrower,
copies of all accountants management letters (if any) and related
recommendations (if any) received by the Borrower; and
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(ix) from time to time such other information concerning the
Borrower, its Subsidiaries, if any, the Guarantors, if any, or the
Case as the Agent or any Bank may reasonably request.
(b) keep true and accurate books of account in accordance with GAAP,
subject to year-end audit adjustments in the case of monthly and quarterly
Financials (other than those delivered with respect to the Borrower's full
fiscal year), maintain its current fiscal year and its current fiscal
quarters, and permit the Banks through the Agent or any of the Banks' other
designated representatives to inspect the Borrower's or its Subsidiaries'
premises during normal business hours, to examine and be advised as to the
Borrower's and its Subsidiaries' business records upon the request of the
Agent or any Bank, permit from time to time, at the Borrower's expense, the
Agent's commercial finance examiners, independent collateral auditors and
examiners, and independent appraisers to conduct periodic commercial
financial examinations, collateral audits conducted by The Asset Support
Group or other auditors acceptable to the Agent, liquidation analyses
conducted by Gordon Brothers, Inc. or other liquidation specialists chosen
by and acceptable to the Agent and appraisals by appraisers chosen by and
approved by the Agent from time to time, in each case at the Borrower's
expense, in each case in order to review and verify the components of the
Borrowing Base, including without limitation current appraisals of the
Kitsap Store Real Estate and examinations, collateral audits and
liquidation analyses of the inventory components included in the Borrower
Base, which appraisals, audits, examinations, and analyses may relate to
appropriate adjustments in the Borrowing Base formula, advance rates, and
components and may indicate whether the information set forth in the
Borrowing Base Report most recently delivered is accurate and complete in
all materials respects based upon a review by such applicable Persons of
the inventory (including verification as to value, location, type and
appropriate shrink reserves), as well as audits, examinations, appraisals
and liquidation analyses of all other assets of the Borrower and its
Subsidiaries and all systems and procedures of the Borrower and its
Subsidiaries, including those related to cash management, and permit the
Agent and, if accompanied by a representative of the Agent, the Banks to
communicate directly with the Borrower's independent certified public
accountants concerning the business, financial condition and other affairs
of the Borrower and its Subsidiaries;
(c) (i) maintain its and its Subsidiaries' corporate existence,
business and assets, (ii) keep its and its Subsidiaries' business and
assets adequately insured with insurers, types of insurance, insurance
limits and policy limits satisfactory to the Agent, with the Agent to be
named as loss payee and additional insured under all insurance and the
Agent entitled to receive from each insurer at least thirty (30) days prior
written notice of cancellation of any insurance, (iii) maintain its and its
Subsidiaries'
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chief executive offices in the United States, (iv) continue and cause each
of its Subsidiaries' to continue to engage in the same respective
businesses now conducted by them, (v) fund its payroll and that of its
Subsidiaries (including all withholdings) as and when required, (vi) prior
to the Exit Facility Date, pay all post-petition taxes as and when due and
payable, except where contested in good faith by appropriate proceedings
for which adequate reserves have been taken, and, on and after the Exit
Facility Date, pay all taxes as and when due and payable, after taking into
account the deferral of any priority tax claims under the Reorganization
Plan and except where contested in good faith by appropriate proceedings
for which adequate reserves have been taken, and (vii) comply with all
other Requirements of Law, including ERISA, OSHA and Environmental Laws
where the failure so to comply could have a Materially Adverse Effect;
(d) notify the Agent and the Banks promptly in writing of (i) the
occurrence of any Default or Event of Default, (ii) any noncompliance with
ERISA, OSHA or any Environmental Law or proceeding in respect thereof which
could have a Materially Adverse Effect, (iii) any change of address, (iv)
any threatened or pending litigation or similar proceeding affecting the
Borrower or any of its Subsidiaries which if adversely determined could
have a Materially Adverse Effect, or any material change in any such
litigation or proceeding previously reported, (v) any notice which the
Borrower or any of its Subsidiaries has received under any material supply
or other contract terminating or threatening to terminate the provisions of
supply or the provisions of other goods or services or otherwise claiming a
default thereunder and (vi) any material post-petition or post-Exit
Facility Date claims against any assets or properties of the Borrower or
any of its Subsidiaries constituting Collateral;
(e) use the proceeds of the Loans solely to refinance the Foothill
DIP Facility, to purchase inventory and for working capital purposes in the
ordinary course of the business of the Borrower, and use Letters of Credit
solely for working capital purposes approved by the Banks for Letters of
Credit and to support or replace letters of credit previously issued or
guarantied by Foothill under the Foothill DIP Facility. The proceeds of
the Loans and Letters of Credit shall not be used for the carrying of
"margin security" or "margin stock" within the meaning of Regulations U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224;
(f) (i) not later than the earlier to occur of (A) sixty (60) days
after the Effective Date and (B) the Exit Facility Date, the Borrower shall
cause each of the Security Documents to be duly executed and delivered by
the respective parties thereto, each of which shall be in full force and
effect and shall be in form and substance satisfactory to the Agent and the
Banks, and the Borrower shall cause all filings, recordings, deliveries of
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instruments and other action necessary or desirable in the opinion of the
Agent to protect, perfect, and preserve such security interests to be duly
effected, and shall deliver to the Agent evidence thereof in form and
substance satisfactory to the Agent; (ii) no later than such time, the
Borrower shall cause the Agent to receive (A) a satisfactory survey of the
Kitsap Store Real Estate together with a satisfactory surveyor's
certificate relating thereto, (B) evidence of payment of real estate taxes
and municipal charges on such Real Estate except as may be not yet
delinquent on or before the filing date of the Mortgage with respect to
such Real Estate, and (C) a mortgagee title insurance policy with respect
to the Mortgage, that would comply with the provisions of Section 9.2.9
hereof; (iii) no later than such time, the Borrower shall have used its
best efforts to obtain and deliver to the Agent Landlord Waivers with
respect to all leaseholds on which inventory is or will be located; and
(iv) at all times prior to such time and at all times thereafter, the
Borrower shall cooperate with the Agent and the Banks, take such action,
execute such documents (including additional, supplemental, or confirmatory
Security Documents), and provide such information as the Agent or any Bank
may from time to time reasonably request in order further to effect the
transactions contemplated by and the purposes of the Loan Documents,
including without limitation the delivery at the Borrower' expense of
additional title insurance, surveys, or environmental assessments
reasonably required by the Agent and not inconsistent with the provisions
of this Agreement;
(g) unless otherwise directed or approved by the Agent in writing,
cause all cash, checks and other payments or proceeds held or received by
it (other than cash permitted to be held overnight at the Borrower's stores
by the provisions of Section 3.7 or, as applicable, Section 3.9 hereof),
immediately upon receipt and in the identical form received, to be paid
directly into the Lock Box Account or a deposit account which is subject to
an Agency Account Agreement, or (to the extent permitted by Section 3.9
hereof) a deposit account which is set forth on SCHEDULE 3.9 hereto, in
each case in accordance with the requirements of Sections 3.7 or, as
applicable 3.9 hereof. Notwithstanding anything to the contrary, the
Operating Account and the Lock Box Account shall at all times be maintained
with the Agent or another financial institution acceptable to the Agent and
the Banks, and, except as may be agreed by the Agent, the Borrower shall
not maintain any other deposit accounts, except for (A) the deposit
accounts described in Section 3.7 hereof for which an Agency Account
Agreement is in effect as provided in Section 3.7 hereof, (B) the payroll
accounts (whether for payroll or for applicable withholding tax) and sales
tax accounts designated as such on SCHEDULE 3.7 hereto and (C) prior to the
date which is 30 days after the Exit Facility Date, the Seafirst Account
and the other deposit accounts described in Section 3.9 hereof; nor shall
the Borrower maintain investment accounts except as permitted by Section
10.2 hereof; pursuant to the Agency Account Agreements the Borrower shall,
except as may be agreed by the Agent, cause all such
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funds as are from time to time in its deposit accounts (other than funds in
its payroll and tax accounts to the extent otherwise permitted by Section
10.2(k)(iii) hereof, and other than the relevant amounts otherwise allowed
to remain in its deposit accounts as at the end of any day as provided in
Section 3.7 or, as applicable, Section 3.9 hereof) to be swept daily from
all such applicable accounts to the Lock Box Account (whether directly or,
to the extent permitted by Section 3.9, as applicable, through Seafirst);
and otherwise maintain at all times cash management systems satisfactory to
the Agent;
(h) notify the Agent and the Banks prior to rejecting any contract in
the Case or making any motion in the Case to reject any contract, setting
forth in such notice the reasons why such rejection (i) will be in the best
interests of the Borrower and (ii) will not have a Materially Adverse
Effect, and avoid proceeding with such rejection if in the reasonable
opinion of the Agent or any Bank such rejection will have a Materially
Adverse Effect; and
(i) pay or cause to be paid punctually the principal and interest on
the Loans, all Reimbursement Obligations, all facility fees, commitment
fees, Letters of Credit fees, administrative fees and all fees and expenses
of any consultants, appraisers and advisors retained by the Agent in
connection herewith in each case in accordance with the terms of this
Agreement and the other Loan Documents;
(j) keep its inventory only at Permitted Inventory Locations, unless
the Agent shall have been given thirty (30) days prior written notice of
each new store and other inventory locations and shall have taken all steps
necessary or advisable to perfect a security interest in such inventory or
such location in favor of the Agent for the benefit of the Banks shall have
been taken, and give the Agent and the Banks prior written notice of all
store closings;
(k) if the Borrower shall ever have, acquire or create any Subsidiary
(other than Subsidiaries existing on the Effective Date) it shall
immediately (A) notify the Agent and the Banks thereof, (B) take all steps
as may be necessary or advisable in the opinion of the Agent to pledge to
the Agent for the benefit of the Banks all of the capital stock of such
Subsidiary pursuant to a stock pledge agreement in form and substance
satisfactory to the Agent and the Banks, which such stock pledge agreement
shall be a Security Document hereunder, (C) cause such Subsidiary to
guaranty all of the Obligations hereunder pursuant to a Guaranty in form
and substance satisfactory to the Agent and the Banks, which such Guaranty
shall be a Security Document hereunder, (D) cause such Subsidiary to take
all steps as may be necessary or advisable in the opinion of the Agent to
grant to the Agent for the benefit of the Banks a first priority security
interest in all of its assets as collateral security for such Guaranty,
pursuant to security documents, mortgages, pledges and
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other documents in form and substance satisfactory to the Agent, each of
which documents shall be Security Documents hereunder, and, (E) deliver to
the Agent and the Banks an updated SCHEDULE 8(n) adding such new Subsidiary
thereto; and
(l) if a Capital Raising Event occurs, all documents and instruments
executed in connection therewith, all terms thereof and the identity of the
investor funding such Capital Raising Event shall in each case be
satisfactory in all respects to the Agent and the Banks.
Section 10.2. NEGATIVE COVENANTS. The Borrower agrees that so long as
there are any Loans or Letters of Credit outstanding and until the termination
of the Total DIP Commitment or, if the Exit Facility Date occurs, the Total Exit
Commitment, and the payment and satisfaction in full of all the Obligations, the
Borrower will not, and the Borrower will not cause or permit any of its
Subsidiaries to:
(a) seek, or consent to (i) any modification, stay, vacation or
amendment (other than modifications consented to or approved by the Agent
in writing) to the Financing Order or the Confirmation Order; (ii) a
priority claim for any administrative expense or an unsecured claim against
the Borrower (now existing or hereafter arising of any kind or nature
whatsoever, including without limitation any administrative expense of the
kind specified in Section 503(b), 506(c) or 507(b) of the Bankruptcy Code)
equal or superior to the priority claim of the Agent and the Banks in
respect of the Obligations, in an aggregate amount (taken together with all
other such claims) in excess of $100,000, except for Agreed Administrative
Expense Priorities and the proceeds of causes of action under Sections 544
through 550 of the Bankruptcy Code; (iii) a priority claim pursuant to
Section 364 of the Bankruptcy Code equal to or superior to the priority
claim of the Agent and the Banks in respect of the Obligations in an
aggregate amount (taken together with all other such claims) in excess of
$100,000; and (iv) any Lien on any Collateral, having a priority equal or
superior to the Liens in favor of the Agent for the benefit of the Banks in
respect of the Obligations, except for Permitted Prior Liens or as
permitted under Section 7.1 hereof; or suffer or permit to exist any of the
matters referred to in the foregoing clauses (i), (ii), (iii), or (iv)
which matters, in the case only of priority claims referred to in clauses
(ii) or (iii), are allowed as such by the Bankruptcy Court;
(b) create, incur, assume, or permit to exist any Indebtedness of the
Borrower or its Subsidiaries other than (i) Indebtedness to the Agent and
the Banks arising under the Loan Documents, (ii) current liabilities of the
Borrower or its Subsidiaries not incurred through the borrowing of money or
the obtaining of credit except credit on an open account customarily
extended, (iii) Indebtedness in respect of taxes or other governmental
charges not yet due and payable or, if due, being contested in good faith
and by appropriate proceedings and for which adequate reserves have
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been taken; (iv) Indebtedness in existence on the Filing Date, and
additional Indebtedness in existence on the Effective Date which additional
Indebtedness is listed and described in reasonable detail on SCHEDULE
10.2(b) hereto, so long as all such Indebtedness (whether in existence on
the Filing Date or the Effective Date) is discharged upon the consummation
of the Reorganization Plan except as otherwise expressly contemplated by
the Reorganization Plan, (v) purchase money Indebtedness incurred after the
Effective Date in respect of (A) the acquisition of property (other than
inventory) or (B) obligations under Capitalized Leases not at any time to
exceed, in the aggregate for purposes of this clause (v), an amount equal
to 25%, or, if a Capital Raising Event has occurred, 50% of the amount of
Capital Expenditures permitted pursuant to Section 10.3(a) since the
Effective Date, and any refinancings thereof (not exceeding the amount
refinanced) on terms no less favorable to the Borrower, the parties
agreeing that, solely for purposes of this Section 10.2(b), obligations
under new Real Estate leases in respect of new store locations that are
entered into after the Effective Date shall, solely to the extent such
obligations are reasonably attributable to the applicable Real Estate (and
not to furniture, fixtures, equipment, leasehold improvements, or other
personal property) (such qualifying obligations, if any, under such new
store Real Estate leases being referred to as the "Special Lease
Obligations") shall be deemed to be obligations in respect of operating
leases, notwithstanding whether such obligations would be treated as
Capitalized Lease obligations or operating lease obligations under GAAP,
(vi) the Subordinated Debt, (vii) the existing lease guaranty referred to
in Section 10.2(i) below, and (viii) unsecured Indebtedness in respect of
the presently-existing limited recourse arrangements under the Store Credit
Card Program with respect to not more than 50% of the amount from time to
time of the bad debts of credit card customers of the Borrower for
purchases made under the Store Credit Card Program;
(c) create or incur, assume, or permit to exist any Liens on any of
the property or assets of the Borrower or its Subsidiaries except
(collectively, "Permitted Liens") (i) Liens securing the Obligations; (ii)
those Permitted Prior Liens listed and described in reasonable detail on
SCHEDULE 10.2(c) hereto, so long as such Permitted Prior Liens are
discharged upon the consummation of the Reorganization Plan except as
otherwise expressly contemplated by the Reorganization Plan; (iii) Liens
securing taxes or other governmental charges not yet due; (iv) deposits or
pledges made in connection with social security obligations; (v) Liens of
carriers, warehousemen, mechanics and materialmen, less than 120 days old
and in respect of obligations not yet due; (vi) easements, rights-of-way,
zoning restrictions and similar minor Liens which individually and in the
aggregate do not have a Materially Adverse Effect; (vii) statutory or
common law (but not consensual or contractual) landlord's Liens relating to
leases of real property; (viii) purchase money security interests in
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property securing purchase money Indebtedness permitted by Section
10.2(b)(v), covering only the property so acquired, and Liens under
Capitalized Leases permitted by Section 10.2(b)(v) and Liens in respect of
Special Lease Obligations otherwise permitted by this Agreement (in each
case covering only the property leased thereunder); and (ix) Liens securing
the Subordinated Debt to the extent expressly provided for in the
Subordinated Debt Documents, that are subordinated and made junior to the
Liens and claims of the Agent and the Banks in respect of the Obligations
pursuant to the Subordination and Intercreditor Agreement and the
applicable order of the Bankruptcy Court referred to in the definition of
Subordinated Debt;
(d) create, form or permit to exist any Subsidiaries other than those
set forth on SCHEDULE 8(n) attached hereto as in effect on the Effective
Date, it being understood that, the provisions of Section 10.1(k) hereof
shall not be construed to permit any other Subsidiaries at any time to
exist, or permit to exist any investments other than investments in (i)
marketable obligations of the United States maturing within one (1) year,
(ii) certificates of deposit, bankers' acceptances and time and demand
deposits of United States banks having total assets in excess of
$1,000,000,000, (iii) presently existing investments in Subsidiaries, made
prior to the Effective Date, (iv) investments in mutual funds investing
solely in the investments permitted in clauses (i) and (ii) above, (v) such
other investments as the Agent and the Banks may from time to time approve
in writing; PROVIDED, HOWEVER, that (A) in each such case referred to in
this Section 10.2(d), arrangements have been made to the satisfaction of
the Agent and the Banks for the perfection and protection and the
preservation of the priority of the Agent's and the Banks' Lien therein and
(B) in the case of any investments referred to in clause (i), (ii) or (iv)
of this Section 10.2(d) which do not consist of cash collateral expressly
required to be delivered and which, in fact, have been delivered to the
Agent hereunder, such investments are made only at a time when Total
Outstandings are zero (other than Letters of Credit with respect to which
the Agent has received cash collateral in the amount of 105% of the Maximum
Drawing Amount);
(e) declare, make or pay any dividends or distributions on or in
respect of its capital stock of any nature whatsoever, other than (i)
dividends payable solely in shares of common stock or (ii) distributions by
a wholly-owned Subsidiary to the Borrower;
(f) be or become party to a merger or consolidation, or effect any
disposition of assets (other than (x) sales of inventory in the ordinary
course and, (y) so long as no Default or Event of Default has occurred and
is continuing, and none would exist after giving effect to the transactions
proposed to be effected, dispositions of (or abandonments or losses in
respect of) leasehold improvements in connection with store closings and
dispositions of obsolete fixtures and equipment no longer used or useful in
<PAGE>
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the Borrower's business up to an aggregate amount sold (or otherwise
disposed of) in any twelve (12) month period of $100,000 in gross cash
proceeds); or purchase, lease or otherwise acquire any stock or assets
other than purchases of equipment or inventory in the ordinary course and
Capital Expenditures (but not acquisitions of a division or business unit
or line of business from another Person) permitted under Section 10.3(a)
hereof; PROVIDED, that the Borrower may, so long as no Default or Event of
Default has occurred and is continuing, none would result from (or exist
after giving effect to) the transactions proposed to be effected, and after
giving effect thereto the Borrower is in compliance with the restrictions
contained in Section 2.2 and Section 2.4 hereof, (i) dispose of the Kitsap
Store Real Estate in an arms-length transaction to a non-Affiliate buyer so
long as (A) all such net cash proceeds of such disposition shall
immediately upon receipt be used to repay the outstanding Obligations
hereunder in the order provided in Section 3.7 hereof and (B) immediately
after such disposition and at all times thereafter, no amounts with respect
to the Kitsap Store shall be included in the formula for calculation of the
Borrowing Base hereunder, and (ii) dispose of the Borrower's Real Estate
located in Spanaway, Washington in an arms-length transaction to a non-
Affiliate buyer so long as all such net cash proceeds of such disposition
shall immediately upon receipt be used to repay the outstanding Obligations
hereunder in the order provided in Section 3.7 hereof;
(g) pay, prepay, redeem or repurchase any of the Indebtedness for
borrowed money in existence on the Filing Date except (A) as provided in
the Reorganization Plan, (B) for the repayment on the Effective Date of the
Indebtedness under the Foothill DIP Facility, (C) for cure payments on
executory contracts which are not financial accommodations, assumed by the
Borrower after the Filing Date, (D) other payments on such Indebtedness not
to exceed $100,000 in the aggregate, and (E) other such payments referred
to in Section 11.1(a)(xii) as permitted thereunder; or amend or modify the
terms thereof except as provided in the Reorganization Plan; and
(h) after the occurrence and during the continuance of an Event of
Default, deposit or otherwise credit any amounts to the Escrow Account
without the express prior written consent of the Agent;
(i) enter into or be or become obligated under or with respect to any
guaranty or similar undertaking with respect to the Indebtedness of any
other Person, other than the Borrower's guaranty in effect on the Effective
Date of the obligations of Assembly as lessee under the existing lease of
the Borrower's distribution center located at Kent, Washington with
RREEF-IV, Inc., a Delaware corporation, as lessor;
(j) except for matters expressly provided in the Reorganization Plan,
and employee discounts for merchandise in accordance with past practices,
engage in any transaction with any executive officer, director or
<PAGE>
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shareholder of the Borrower or its Subsidiaries on terms more favorable to
such other Person than the Borrower or such Subsidiary could obtain from
third parties, or pay, or enter into any agreement requiring it to pay
salary or bonus or other compensation payments to any executive officer,
director or shareholder of the Borrower or any of its Subsidiaries in an
amount in excess of reasonable compensation commensurate with historical
and customary levels of the Borrower or such Subsidiary, as the case may be
(including reasonable seasonal and periodic increases, raises, and bonuses)
(it being agreed that certain arrangements described to the Agent in
writing prior to the execution and delivery by the Agent of this Agreement
are in compliance with this paragraph (j) of Section 10.2);
(k) except as may be agreed by the Agent (i) establish or permit to
exist any bank accounts other than those listed on SCHEDULES 3.7 and 3.9
and at the time of reference thereto permitted by Sections 3.7 and 3.9
hereof without the Agent's prior written consent, (ii) violate any Agency
Account Agreement, or the Lock Box Agreement, or (iii) deposit in any
payroll or sales tax trust accounts designated as such on SCHEDULE 3.7 and
3.9 hereto any amounts in excess of amounts necessary to pay payroll
(including applicable withholding tax) or sales tax obligations as and when
required, as the case may be, from such accounts;
(l) permit, during any of the periods in the table set forth below,
the aggregate number of stores or other retail outlets of the Borrower to
exceed the maximum number of stores and retail outlets permitted for such
period set forth opposite such period in the table below:
-----------------------------------------------------------------------
Period Maximum Number
-----------------------------------------------------------------------
May 5, 1996 - February 1, 1997 42
-----------------------------------------------------------------------
February 2, 1997 - January 31, 1998 44
-----------------------------------------------------------------------
February 1, 1998 - January 30, 1999 48
-----------------------------------------------------------------------
January 31, 1999 - July 3, 1999 52
-----------------------------------------------------------------------
(m) amend, supplement, or otherwise modify the terms of any of the
Subordinated Debt Documents or pay, prepay, redeem or repurchase any of the
Subordinated Debt, or make any other payment on or with respect to the
Subordinated Debt other than as expressly permitted by the subordination
provisions applicable thereto;
(n) amend its Charter Documents, or permit any of its Subsidiaries to
amend its Charter Documents, in either case except in a manner which would
not be reasonably likely to have a Materially Adverse Effect or except as
provided in the Reorganization Plan; or
(o) permit to be amended or modified the Store Credit Card Program
Documents or the other documents referred to in Section 9.1.18 in any
manner adverse to the rights and interests of the Agents and the Banks.
<PAGE>
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Section 10.3. FINANCIAL COVENANTS. The Borrower agrees that so long as
there are any Loans or Letters of Credit outstanding and until the termination
of the Total DIP Commitment or, if the Exit Facility Date occurs, the Total Exit
Commitment and the payment and satisfaction in full in cash of all of the
Obligations, and subject to the provisions of Section 10.4 hereof regarding
application and interpretation of the financial covenants contained in this
Section 10.3, the Borrower will not, and will not permit any of its Subsidiaries
to:
(a) Make Capital Expenditures in any period described in the table
below that exceed, in the aggregate, the amount set forth opposite such
period in such table:
-----------------------------------------------------------------------
Period Amount
-----------------------------------------------------------------------
February 4, 1996 - February 1, 1997 $1,500,000
-----------------------------------------------------------------------
February 2, 1997 - January 31, 1998 $2,500,000
-----------------------------------------------------------------------
February 1, 1998 - January 30, 1999 $6,500,000
-----------------------------------------------------------------------
January 31, 1999 - July 3, 1999 $2,250,000
-----------------------------------------------------------------------
If during any of the periods set forth in the table above (other than the
period from January 31, 1999 through July 3, 1999) the amount of Capital
Expenditures permitted by the table for that period is not utilized, then
thirty-three percent (33%) of such unutilized amount may be utilized in
(but only in) the next succeeding period, where it shall be deemed to be
utilized last, and may not be utilized in any subsequent period.
(b) Permit at any time prior to the Exit Facility Date, Consolidated
EBITDA, determined on a cumulative basis for the period beginning on
February 4, 1996 and ending on any of the dates set forth in the table
below, to be less than the amount set forth opposite such date in such
table:
<PAGE>
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-----------------------------------------------------------------------
Minimum Cumulative
Consolidated EBITDA
Date Since February 4, 1996
-----------------------------------------------------------------------
May 4, 1996 -$2,900,000
-----------------------------------------------------------------------
June 1, 1996 -$2,700,000
-----------------------------------------------------------------------
July 6, 1996 -$2,600,000
-----------------------------------------------------------------------
August 3, 1996 -$1,800,000
-----------------------------------------------------------------------
August 31, 1996 -$1,050,000
-----------------------------------------------------------------------
October 5, 1996 -$200,000
-----------------------------------------------------------------------
November 2, 1996 $500,000
-----------------------------------------------------------------------
November 30, 1996 $800,000
-----------------------------------------------------------------------
January 4, 1997 $7,600,000
-----------------------------------------------------------------------
February 1, 1997 $5,900,000
-----------------------------------------------------------------------
March 1, 1997 $4,600,000
-----------------------------------------------------------------------
April 5, 1997 $4,700,000
-----------------------------------------------------------------------
May 3, 1997 $3,900,000
-----------------------------------------------------------------------
May 31, 1997 $4,100,000
-----------------------------------------------------------------------
(c) Permit, prior to the Exit Facility Date, as at any of the dates
set forth in the table below, the amount of the Borrower's inventory,
valued at Book Value (i) to be less than the minimum amount set forth
opposite such date in such table, or (ii) to exceed the maximum amount set
forth opposite such date in such table:
-----------------------------------------------------------------------
Minimum Amount Maximum Amount
-------------- --------------
Date
----
-----------------------------------------------------------------------
May 4, 1996 $35,400,000 $43,400,000
-----------------------------------------------------------------------
June 1, 1996 $36,900,000 $45,200,000
-----------------------------------------------------------------------
July 6, 1996 $36,600,000 $44,800,000
-----------------------------------------------------------------------
August 3, 1996 $36,200,000 $44,300,000
-----------------------------------------------------------------------
August 31, 1996 $37,800,000 $46,300,000
-----------------------------------------------------------------------
October 5, 1996 $39,100,000 $47,900,000
-----------------------------------------------------------------------
November 2, 1996 $43,500,000 $53,300,000
-----------------------------------------------------------------------
November 30, 1996 $47,500,000 $58,200,000
-----------------------------------------------------------------------
January 4, 1997 $31,000,000 $38,000,000
-----------------------------------------------------------------------
February 1, 1997 $31,100,000 $38,100,000
-----------------------------------------------------------------------
March 1, 1997 $34,300,000 $42,100,000
-----------------------------------------------------------------------
April 5, 1997 $34,000,000 $41,700,000
-----------------------------------------------------------------------
May 3, 1997 $35,400,000 $43,400,000
-----------------------------------------------------------------------
May 31, 1997 $37,000,000 $45,300,000
-----------------------------------------------------------------------
(d) Permit, from and after the Exit Facility Date if a Capital
Raising Event shall not have occurred, as at the end of any of the fiscal
quarters ending on the dates set forth in the table below, the amount of
the Borrower's inventory, valued at Book Value (i) to be less than the
<PAGE>
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minimum amount set forth opposite such date in such table, or (ii) to
exceed the maximum amount set forth opposite such date in such table:
-----------------------------------------------------------------------
Date Minimum Amount Maximum Amount
-----------------------------------------------------------------------
November 2, 1996 $43,500,000 $53,300,000
-----------------------------------------------------------------------
February 1, 1997 $31,100,000 $38,100,000
-----------------------------------------------------------------------
May 3, 1997 $35,400,000 $43,400,000
-----------------------------------------------------------------------
August 2, 1997 $38,000,000 $46,500,000
-----------------------------------------------------------------------
November 1, 1997 $45,700,000 $56,000,000
-----------------------------------------------------------------------
January 31, 1998 $32,600,000 $37,900,000
-----------------------------------------------------------------------
May 2, 1998 $37,200,000 $45,600,000
-----------------------------------------------------------------------
August 1, 1998 $42,100,000 $51,700,000
-----------------------------------------------------------------------
October 31, 1998 $50,700,000 $62,200,000
-----------------------------------------------------------------------
January 30, 1999 $36,100,000 $42,100,000
-----------------------------------------------------------------------
May 1, 1999 $41,200,000 $50,700,000
-----------------------------------------------------------------------
(e) Permit, from and after the Exit Facility Date if a Capital
Raising Event shall not have occurred, as at the end of any of the fiscal
quarters ending on the dates set forth in the table below for the period of
four consecutive fiscal quarters then ended (or such shorter period as has
elapsed since February 3, 1996), the Debt Service Coverage Ratio as
determined for such period then ended to be less than the ratio set forth
opposite such date in such table:
--------------------------------------
Date Minimum Ratio
--------------------------------------
November 2, 1996 0.22 to 1.00
--------------------------------------
February 1, 1997 1.00 to 1.00
--------------------------------------
May 3, 1997 1.00 to 1.00
--------------------------------------
August 2, 1997 0.95 to 1.00
--------------------------------------
November 1, 1997 1.00 to 1.00
--------------------------------------
January 31, 1998 1.00 to 1.00
--------------------------------------
May 2, 1998 1.00 to 1.00
--------------------------------------
August 1, 1998 1.00 to 1.00
--------------------------------------
October 31, 1998 1.00 to 1.00
--------------------------------------
January 30, 1999 1.00 to 1.00
--------------------------------------
May 1, 1999 1.00 to 1.00
--------------------------------------
(f) Permit, from and after the Exit Facility Date if a Capital
Raising Event shall have occurred, as at the end of any of the fiscal
quarters ending on the dates set forth in the table below, the amount of
the Borrower's inventory, valued at Book Value (i) to be less than the
minimum amount set forth opposite such date in such table, or (ii) to
exceed the maximum amount set forth opposite such date in such table:
<PAGE>
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-----------------------------------------------------------
Date Minimum Amount Maximum Amount
-----------------------------------------------------------
November 2, 1996 $47,000,000 $57,600,000
-----------------------------------------------------------
February 1, 1997 $33,000,000 $40,400,000
-----------------------------------------------------------
May 3, 1997 $39,000,000 $47,800,000
-----------------------------------------------------------
August 2, 1997 $40,400,000 $49,500,000
-----------------------------------------------------------
November 1, 1997 $47,700,000 $58,400,000
-----------------------------------------------------------
January 31, 1998 $32,700,000 $40,100,000
-----------------------------------------------------------
May 2, 1998 $41,000,000 $50,200,000
-----------------------------------------------------------
August 1, 1998 $42,500,000 $52,000,000
-----------------------------------------------------------
October 31, 1998 $50,100,000 $61,300,000
-----------------------------------------------------------
January 30, 1999 $34,400,000 $42,100,000
-----------------------------------------------------------
May 1, 1999 $45,500,000 $55,700,000
-----------------------------------------------------------
(g) Permit, from and after the Exit Facility Date if a Capital
Raising Event shall have occurred, as at the end of any of the fiscal
quarters ending on the dates set forth in the table below for the period of
four consecutive fiscal quarters then ended (or such shorter period as has
elapsed since February 3, 1996), the Debt Service Coverage Ratio as
determined for such period then ended to be less than the ratio set forth
opposite such date in such table:
---------------------------------
Date Minimum Ratio
---------------------------------
November 2, 1996 0.32 to 1.00
---------------------------------
February 1, 1997 1.30 to 1.00
---------------------------------
May 3, 1997 1.66 to 1.00
---------------------------------
August 2, 1997 1.90 to 1.00
---------------------------------
November 1, 1997 2.00 to 1.00
---------------------------------
January 31, 1998 2.00 to 1.00
---------------------------------
May 2, 1998 2.00 to 1.00
---------------------------------
August 1, 1998 2.00 to 1.00
---------------------------------
October 31, 1998 2.00 to 1.00
---------------------------------
January 30, 1999 2.00 to 1.00
---------------------------------
May 1, 1999 2.00 to 1.00
---------------------------------
Section 10.4. APPLICATION OF FINANCIAL COVENANTS.
(a) During the period prior to the Exit Facility Date, the Borrower shall
comply with the financial covenants set forth in Sections 10.3(a), (b) and (c).
During the period from and after the Exit Facility Date, in the event that a
Capital Raising Event shall not have occurred, the Borrower shall comply with
the financial covenants set forth in Sections 10.3(a), (d) and (e). During the
period after the Exit Facility Date, in the event that a Capital Raising Event
shall occur, then immediately with respect to the then applicable period in
which such Capital Raising Event occurs and at all times thereafter, the
Borrower shall comply with the financial covenants set forth in Sections
10.3(a), (f) and (g).
<PAGE>
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(b) The parties agree that, solely for purposes of application and
interpretation of the covenants contained in Section 10.3 hereof, (i) the
Special Lease Obligations shall be deemed to be obligations in respect of
operating leases, notwithstanding whether such obligations would be treated as
Capitalized Lease obligations or operating lease obligations under GAAP; and
(ii) each of the applicable defined terms utilized in, and the other applicable
financial components of, such covenants shall be determined and calculated
accordingly, but only for such limited purposes of Section 10.3, as aforesaid.
(c) If the Borrower notifies the Agent that the Borrower wishes or is
required to modify its accounting principles to reflect from the Exit Facility
Date "fresh start" accounting, the Borrower, the Banks and the Agent agree to
negotiate in good faith an amendment to this Agreement providing for appropriate
adjustments to the financial covenants set forth in Section 10.3, as well as to
the financial performance tests used in the determination of the Applicable
Pricing hereunder. In the event that the Borrower, the Banks and the Agent are
unable to agree as to such adjustments, the Borrower agrees to refrain from so
modifying its accounting principles if the Borrower has the election to do so
or, if the Borrower is required to so modify its accounting principles, to
provide to the Agent and the Banks from time to time, as and when required by
the terms of this Agreement or upon the request of the Agent, appropriate
reconciliations, based upon the accounting principles which would have been
applicable absent such modification, in order for the Agent and the Banks to
determine compliance with the financial covenants set forth in Section 10.3 and
the Applicable Pricing hereunder .
Section 11. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 11.1. EVENTS OF DEFAULT; ACCELERATION. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) prior to the Exit Facility Date:
(i) the Borrower shall fail to comply with Section 2.2(c) or Section
2.4(c) within one Business Day after the Agent has given written notice of
such failure to the Borrower; or the Borrower or any of the Guarantors
shall otherwise fail to pay when due and payable any principal of the
Loans, any Reimbursement Obligation not funded by a Loan pursuant to
Section 3.2(a) hereof, or any cash collateral requirements, provided for in
the Loan Documents when the same becomes due and payable;
(ii) the Borrower or any of the Guarantors shall fail to pay any
interest on the Loans, fees, or other sums due or required to be paid under
this Agreement or any of the other Loan Documents (A) in the case of the
Borrower, within one Business Day after the Agent has given written notice
to the Borrower that such payment will not be made pursuant to Section 3.1
as requested by standing instructions of the Borrower or Section 3.2(c) in
<PAGE>
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the Agent's discretion and (B) otherwise within three (3) days after the
same becomes due and payable;
(iii) the Borrower or any of the Guarantors shall fail to perform any
other term, covenant or agreement contained in Sections 2.2, 2.4, 3.7
(which failure, in the case only of a default consisting of failure under
Section 3.7 to send Direct Collection Letters, extends as to substantially
all account debtors and obligors), 3.9, 7.3, Section 10.1(g) (which
failure, in the case only of a default consisting of a failure to send
Direct Collection Letters, extends as to substantially all account debtors
and obligors), 10.2(b), (c) and (i)(exclusive of inadvertent failures which
are capable of cure, and are being forthwith remedied, without violation of
other provisions of the Loan Documents and which do not in the aggregate
exceed the sum of $100,000 for all of Sections 10.2(b), (c) and (i)
considered together) or any other lettered paragraph of Section 10.1 (other
than Section 10.1(i)), 10.2 or 10.3;
(iv) the Borrower or any of the Guarantors shall fail to perform any
other term, covenant or agreement contained in this Agreement or any of the
other Loan Documents within ten (10) days after the Agent has given written
notice of such failure to the Borrower;
(v) any representation or warranty of the Borrower or any of its
Subsidiaries or any of the Guarantors in this Agreement or any of the other
Loan Documents or in any document, certificate or other paper or notice
given in connection therewith shall have been false or misleading in any
material respect at the time made or deemed to have been made or repeated;
(vi) the Borrower or any of its Subsidiaries or any of the Guarantors
shall be in default under any agreement or agreements (other than the Loan
Documents) evidencing post-petition Indebtedness owing to the Agent or any
Bank, or any affiliates of the Agent or any Bank; or the Borrower or any of
its Subsidiaries or any of the Guarantors shall be in default under any
agreement or agreements evidencing any other post-petition Indebtedness
(including without limitation the Subordinated Debt) or any pre-petition
Indebtedness or shall fail to pay any such Indebtedness when due, or within
any applicable period of grace if, with respect to any such Indebtedness
referred to in this sub-clause by order of the Bankruptcy Court issued or
previously issued at the time of reference thereto with respect to such
Indebtedness, such default or failure to pay when due thereunder would
entitle the holder thereof to relief from automatic stay of Section 362(a)
of the Bankruptcy Code, in excess of $100,000 in aggregate principal amount
of such post- and pre-petition Indebtedness; or the Borrower or any of its
Subsidiaries or any of the Guarantors shall be in default under any of the
terms, conditions or provisions of any supply or other contract, such
contract is terminated by the supplier or other provider of goods or
services thereunder as a result of such default and such termination has a
Materially Adverse Effect;
<PAGE>
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(vii) any material provision of any of the Loan Documents shall cease
to be in full force and effect, or the Agent's and the Banks' Liens on a
material amount of the Collateral shall fail to be perfected at any time
following the later to occur of the Effective Date or the entry of the
Financing Order or shall fail to have the priority contemplated hereby at
any time after such date;
(viii) the Bankruptcy Court or another court of competent
jurisdiction shall enter any order (A) amending, or modifying the Financing
Order without the consent or approval of the Agent, or staying, vacating or
rescinding the Financing Order, (B) appointing a chapter 11 trustee or an
examiner with enlarged powers relating to the operation of the business
(powers beyond those set forth in Section 1106(a)(3) and (4) of the
Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code in the Case,
(C) dismissing the Case or converting the Case to a chapter 7 case, or (D)
granting relief from the automatic stay to any creditor holding or
asserting a Lien or reclamation claim on any material assets of any of the
Borrower or any of its Subsidiaries or any of the Guarantors in an
aggregate amount (by value of assets or by amount of the claim or Lien) in
excess of $100,000 or where the deprivation of such Borrower, such
Subsidiary or such Guarantor of such assets will, in the reasonable opinion
of the Agent, have a Materially Adverse Effect;
(ix) an application shall be filed by the Borrower or any of its
Subsidiaries or any of the Guarantors for the approval of any other
Super-Priority Claim in the Case which is PARI PASSU with or senior to the
claims of the Agent and the Banks against the Borrower, its Subsidiaries or
the Guarantors under this Agreement or any of the other Loan Documents
(unless upon giving effect to the transactions contemplated by such
application, all Obligations (whether contingent or otherwise) shall be
paid in full in cash and the Total DIP Commitment shall be terminated), or
there shall be granted any such Super-Priority Claim or Super- Priority
Claims for an amount singularly or in the aggregate, in excess of $100,000;
(x) the Borrower shall be unable to pay its post-petition debts as
they mature or shall fail to comply with any order of the Bankruptcy Court
in any respect having, in the reasonable opinion of the Agent, a Materially
Adverse Effect; or if any of the Borrower's Subsidiaries (other than a
Subsidiary with nominal assets and liabilities) or any of the Guarantors
shall be unable to pay its debts as they mature;
(xi) there shall remain undischarged for more than thirty (30) days
any final post-petition judgments or execution actions with respect to an
aggregate amount in excess of $100,000 against the Borrower, any of its
Subsidiaries or any of the Guarantors, or relief from the automatic stay of
Section 362(a) of the Bankruptcy Code shall be granted to any creditor or
creditors of the Borrower, and of its Subsidiaries or any of the Guarantors
<PAGE>
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with respect to assets having an aggregate value in excess of $100,000 or
where the deprivation of the Borrower, any of its Subsidiaries or any of
the Guarantors of such assets will, in the reasonable opinion of the Agent,
have a Materially Adverse Effect;
(xii) the Borrower shall pay or discharge any Indebtedness of the
Borrower in existence on the Filing Date, except for cure payments with
respect to the assumption after the Filing Date of executory contracts
which are not financial accommodations, the repayment on the Effective Date
of the Indebtedness under the Foothill DIP Facility, the payment of
regularly scheduled lease payments under pre-petition leases of Real Estate
and regularly scheduled payments under other pre-petition executory
contracts that are not financial accommodations (in each case in the
ordinary course of business), the making of regularly scheduled debt
service payments with respect to pre-petition secured Indebtedness
permitted by Section 10.2(b) hereof, honoring obligations under
arrangements in respect of customer returns of merchandise, gift
certificates, and layaways of merchandise (in each case in the ordinary
course of business), payments in respect of employee payroll and related
employee benefit arrangements consistent with past practices, and other
payments on such Indebtedness not to exceed $100,000 in the aggregate;
(xiii) a disclosure statement shall be approved by the Bankruptcy
Court in the Case for a Reorganization Plan which does not satisfy the
requirements of Section 7.3 hereof;
(xiv) the Borrower shall be enjoined, restrained, or in any way
prevented by the order of any Tribunal from conducting any part of its
business as a debtor in possession, or the Borrower, any of its
Subsidiaries or any of the Guarantors shall be enjoined, restrained in any
way prevented by the order of any such Tribunal from conducting any part of
its business, or there shall occur any disruption to any such business
which continues for more than ten (10) days, or loss or damage to the
Borrower's assets, which in any such case results in an impairment or
decrease in the value of the assets of such Person or the Collateral in an
amount in excess of $100,000;
(xv) Alan R. Schlesinger or some other person reasonably satisfactory
to the Agent and the Banks shall cease to be the Chief Executive Officer
and President of the Borrower; or there shall occur any change in the
membership of the board of directors of the Borrower or any of its
Subsidiaries or any of the Guarantors or in the key executive or financial
management of the Borrower or any of its Subsidiaries or any of the
Guarantors, which, in any such case, the Agent reasonably believes will
have a Materially Adverse Effect;
(xvi) the Borrower shall fail to comply in any material respect with
the Financing Order;
<PAGE>
-80-
(xvii) the Borrower shall file a motion to reject any lease with
respect to the Kitsap Store Real Estate or any store lease;
(xviii) the Borrower shall file a motion in the Case (A) to use cash
collateral of the Banks under Section 363(c) of the Bankruptcy Code without
the consent of the Banks, (B) to recover from any portion of the Collateral
any costs or expenses or preserving or disposing of such Collateral under
Section 506(c) of the Bankruptcy Code, or (C) to take any other action or
actions adverse to the Banks or their rights and remedies hereunder or
under any of the other Loan Documents or the Banks' interest in any of the
Collateral, which other action or actions would, individually or in the
aggregate, have a Materially Adverse Effect;
(xix) a suit or action against the Banks or the Agent shall be
commenced by the Borrower, any Subsidiary of the Borrower or any Guarantor
which suit or action asserts any claim or legal or equitable remedy
contemplating subordination of any claim or Lien of the Banks or the Agent
or any such suit or action is commenced by an official committee in the
Case or any other Person which results in the granting of any such remedy;;
(xx) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt, or the
Subordinated Debt shall be prepaid, redeemed or repurchased in whole or in
part or the Subordinated Debt Documents shall be amended, supplemented or
otherwise modified, in each case other than as expressly contemplated by
the Reorganization Plan or the Subordination and Intercreditor Agreement;
or
(xxi) in the case of the Financing Order having been initially
entered on an interim basis by the Bankruptcy Court, the Financing Order
does not, within 15 days after the Effective Date, become or constitute a
final order in the Case (pursuant to an order of the Bankruptcy Court,
entered upon requisite and proper prior notice of at least fifteen (15)
days to the parties in interest in the Case and a related final hearing in
the Case, if required by the Bankruptcy Court, with respect to the matters
set forth in the Financing Order held under Section 364(c) of the
Bankruptcy Code and Bankruptcy Rule 4001(c)(2)), authorizing extensions of
credit under this Agreement in the full maximum amount of the Total DIP
Commitment, authorizing and approving all matters initially set forth in
the Financing Order without any modifications or amendments thereto or
reversal thereof, otherwise in form and substance satisfactory to the Agent
and the Banks and the Agent's Special Counsel, and in full force and
effect.
(b) upon and at any time from and after the Exit Facility Date:
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(i) the Borrower shall fail to comply with Section 2.2(c) or Section
2.4(c) within one Business day after the Agent has given written notice of
such failure to the Borrower; or the Borrower or any Guarantor shall
otherwise fail to pay when due and payable any principal of the Loans, any
Reimbursement Obligation not funded by a Loan pursuant to Section 3.2(a)
hereof, or any cash collateral requirements provided for in the Loan
Documents when the same shall have first become due and payable;
(ii) the Borrower or any of the Guarantors shall fail to pay any
interest on the Loans, fees, or other sums due or required to be paid under
this Agreement or any of the other Loan Documents (A) in the case of the
Borrower, within one Business Day after the Agent has given written notice
to the Borrower that such payment will not be made pursuant to Section 3.1
as requested by standing instructions of the Borrower or Section 3.2(c) in
the Agent's discretion and (B) otherwise within three (3) days after the
same becomes due and payable;
(iii) the Borrower shall fail to perform any other term, covenant or
agreement contained in Sections 2.2, 2.4, 3.7 (which failure, in the case
only of a default consisting of a failure to send Direct Collection
Letters, extends as to substantially all account debtors and obligors),
3.9, 7.3, 10.1(g) (which failure, in the case only of a default consisting
of a failure to send Direct Collection Letters, extends as to substantially
all account debtors and obligors), 10.2(b), (c) and (i)(exclusive of
inadvertent failures which are capable of cure, and are being forthwith
remedied, without violation of other provisions of the Loan Documents and
which do not in the aggregate exceed the sum of $100,000 for all of
Sections 10.2(b), (c) and (i) considered together) or any other lettered
paragraph of Section 10.1 (other than Section 10.1(i)), 10.2 or 10.3;
(iv) the Borrower or Guarantor shall fail to perform any other term,
covenant or agreement contained in this Agreement or any of the other Loan
Documents within ten (10) days after the Agent has given written notice of
such failure to the Borrower;
(v) any representation or warranty of the Borrower or any of its
Subsidiaries or any of the Guarantors in this agreement or any of the other
Loan Documents or in any document, certificate or notice given in
connection therewith shall have been false or misleading in any material
respect at the time made or deemed to have been made;
(vi) after any applicable period of grace or cure, any Indebtedness
of the Borrower, any of its Subsidiaries or any of the Guarantors shall not
be paid when due, or shall be declared due prior to its scheduled maturity,
or any default shall occur in any material respect under any agreement or
agreements evidencing Indebtedness owing to the Agent or any Bank or any
affiliates of the Agent or any Bank, or Indebtedness to any other Person
(including without limitation the Subordinated Debt) which
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permits the holder or holders of that Indebtedness to declare the
Indebtedness to become due and payable prior to its scheduled maturity, and
the aggregate amount of such Indebtedness due, declared due or capable of
being declared due and payable exceeds the sum of $100,000;
(vii) any material provision of any of the Loan Documents shall cease
to be in full force and effect, or the Agent's and the Banks' Liens on a
material amount of the Collateral shall fail to be perfected at any time or
shall fail to have the priority contemplated hereby;
(viii) the Bankruptcy Court or another court of competent
jurisdiction shall enter any order amending, supplementing, altering,
staying, suspending, vacating, rescinding or otherwise modifying the
Confirmation Order (other than amendments consented to or approved by the
Agent) in a manner which could adversely affect the Agent or the Banks;
(ix) the Borrower or any of its Subsidiaries or any of the Guarantors
(A) shall make an assignment for the benefit of creditors, (B) shall be
adjudicated bankrupt or insolvent, (C) shall seek the appointment of, or be
the subject of an order appointing, a trustee, custodian, liquidator or
receiver as to all or part of its assets, (D) shall commence, approve or
consent to, or be the subject of any case of proceeding under any
bankruptcy, reorganization or similar law and, in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed
within thirty (30) days following the commencement thereof, or (E) shall be
the subject of an order or decree for relief in an involuntary case under
federal bankruptcy law;
(x) the Borrower or any of its Subsidiaries (other than a Subsidiary
with nominal assets and liabilities) or any of the Guarantors shall be
unable to pay its debts as they mature;
(xi) there shall remain undischarged for more than thirty (30) days
any final judgment or execution action against the Borrower or any of its
Subsidiaries or any of the Guarantors that, together with other outstanding
claims and execution actions against the Borrower and its Subsidiaries and
the Guarantors exceeds $100,000 in the aggregate;
(xii) the Borrower or any of its Subsidiaries or any of the
Guarantors shall be enjoined, restrained or any way prevented by the order
of any Tribunal from conducting any part of its business; or there shall
occur any disruption to such business which continues for more than ten
(10) days, or loss or damage to the Borrower's or any Subsidiary's or any
Guarantor's assets, which in any such case results in an impairment or
decrease in the value of the assets of such Person or the Collateral in an
amount in excess of $100,000;
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(xiii) there shall occur the loss, suspension or revocation of, or
failure to renew, any lease, contract, license, Consent or permit held by
the Borrower or any of its Subsidiaries or any of the Guarantors, which in
any such case the Agent reasonably believes could have a Materially Adverse
Effect;
(xiv) there shall occur any Change of Control; the term "Change of
Control," as used herein, means:
(A) individuals who, as of the Exit Facility Date, constituted
the Board of Directors of the Borrower (as of the Exit Facility Date,
the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors of the Borrower, PROVIDED that any
individual becoming a director, subsequent to the Exit Facility Date,
whose election, or nomination for election by the Borrower's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board; or
(B) in the event that Remy or its Affiliates acquire common
stock of the Borrower on or before the Exit Facility Date, Remy and
its Affiliates (the "Remy Group") shall at any time from and after
such stock is acquired but prior to the Qualifying Post-Exit Public
Offering (as defined herein), own legally and beneficially, less than
40% of the issued and outstanding capital stock of the Borrower; the
term "Qualifying Post-Exit Public Offering", as used herein, means an
underwritten public offering of capital stock of the Borrower
subsequent to the Exit Facility Date with the Remy Group legally and
beneficially owning at least 40% of the Borrower's issued and
outstanding capital stock immediately prior to the consummation of
such public offering and legally and beneficially owing less than 40%
of the Borrower's issued and outstanding capital stock immediately
after giving effect to (and as the result of) the consummation of such
public offering); or
(C) subsequent to the Exit Facility Date, any Person or group of
Persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended), which were not, as of the Exit
Facility Date, stockholders of the Borrower disclosed to and approved
by the Agent for purposes of this clause (C), shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under said Act) of 20% or more
of the issued and outstanding shares of the capital stock of the
Borrower (unless such Persons are reasonably satisfactory to the
Agent);
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(xv) Alan R. Schlesinger or some other person reasonably satisfactory
to the Agent and Banks shall cease to be the Chief Executive Officer and
President of the Borrower;
(xvi) with respect to an employee benefit plan within the meaning of
Section 3.2 of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, the benefits of which are guaranteed upon termination in
full or in part by the PBGC (other than a multiemployer plan) (each a
"Guaranteed Pension Plan"), a "reportable event" within the meaning of
Section 4043 of ERISA for which the PBGC requires notice shall have
occurred which the Majority Banks reasonably believe could result in the
liability of the Borrower or any of its Subsidiaries or any Guarantor to
the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding
$100,000 and such event reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been
appointed by the United States District Court to administer such Guaranteed
Pension Plan; or the PBGC shall have instituted proceedings to terminate
such Guaranteed Pension Plan; or
(xvii) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt, or the
Subordinated Debt shall be prepaid, redeemed or repurchased in whole or in
part, or if the Subordinated Debt Documents shall be amended, supplemented
or otherwise modified, in each case other than as expressly contemplated by
the Reorganization Plan or the Subordination and Intercreditor Agreement;
THEN, or at any time thereafter the Agent may, and upon the request of the
Majority Banks shall, subject to the conditions described below, by written
notice to the Borrower, terminate the DIP Commitments or, if the Exit Facility
Date has occurred, the Exit Commitments and/or declare and require (i) the
unpaid principal amount of the Loans and all interest accrued and unpaid thereon
forthwith to be due and payable, (ii) that cash be delivered to the Agent in the
amount of 105% of the Maximum Drawing Amount to be held by the Agent for the
benefit of the Agent and the Banks as cash collateral for all Reimbursement
Obligations, and (iii) all other amounts payable hereunder and under the other
Loan Documents to be forthwith due and payable, in each case without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower and the Guarantors, PROVIDED that in the
event of an Event of Default specified in Sections 11.1(a)(xx), 11.1(b)(ix) or
11.1(b)(xvii) hereof, such termination of the Exit Commitment shall occur, and
all such amounts shall become immediately due and payable in each case
automatically and without any requirement of notice from the Agent or any Bank.
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Section 11.2. REMEDIES. If an Event of Default shall occur and be
continuing, and whether or not the Banks shall have accelerated the maturity of
the Loans as set forth above, each Bank if owed any amount with respect to the
Loans or the Reimbursement Obligations may (subject, but prior to the Exit
Facility Date only, to the provisions of Section 11.3 hereof), with the consent
of the Majority Banks but not otherwise, exercise the rights and remedies which
such Bank may have hereunder or under any of the other Loan Documents or at law
(including but not limited to the Bankruptcy Code and the Uniform Commercial
Code) or in equity or otherwise. No remedy herein conferred upon any Bank or
the Agent is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and in addition to every other remedy hereunder, now
or hereafter existing at law or in equity or otherwise.
Section 11.3. RELIEF FROM STAY. Prior to the Exit Facility Date only,
upon the occurrence and during the continuance of an Event of Default which has
resulted in any of the Obligations having been declared (or otherwise becoming)
due and payable prior to their stated maturity (an "Acceleration"), the Agent
may not exercise any of the Agent's and the Banks' rights or remedies relating
to the enforcement of its Liens against the Collateral or the exercise of its
rights of set-off pursuant to Section 12 hereof without obtaining from the
Bankruptcy Court relief from the automatic stay. The Agent shall, however, be
entitled to request from the Bankruptcy Court a hearing on any request by it
that the automatic stay be lifted so that the Agent may exercise such rights and
remedies and, if the Agent does do, it shall provide prompt notice of such
request to the Borrower and the Guarantors, bankruptcy counsel to the Borrower,
and to counsel to the official creditor's committees in the Case, and the Office
of the United States Trustee, setting forth the Event of Default or Events of
Default which the Agent or the Banks believe in good faith to have occurred and
be continuing and stating that the Agent intends, upon the Bankruptcy Court
granting relief from the automatic stay for the Agent to do so, to enforce its
Liens and/or to exercise its rights of set-off. Whether or not relief from the
automatic stay is granted, during the continuance of an Event of Default the
Banks shall have no further obligation to make any additional Loans hereunder,
and the Agent shall have no obligation to issue, extend or renew any Letter of
Credit.
Section 11.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that
following the occurrence or during the continuance of any Event of Default, the
Agent or any Bank, as the case may be, receives any monies whether pursuant to
Section 3.7 or Section 3.9 hereof, in connection with the enforcement of any of
the Security Documents, or otherwise, with respect to the collection or
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) FIRST, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
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or any of the rights, remedies, powers and privileges of the Agent under
this Agreement or any of the other Loan Documents or in respect of the
Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) SECOND, to all other Obligations in such order or preference as
the Majority Banks may determine; PROVIDED, HOWEVER, that distributions in
respect of such obligations shall be made (i) PARI PASSU among Obligations
with respect to the facility fees referred to in Section 6.1(a) hereof and
the Agent's administrative fee payable pursuant to Section 6.1(e) hereof
and all other Obligations and (ii) such that payments in respect of
Obligations owing to the Banks with respect to each type of Obligation such
as interest, principal, fees and expenses, shall be made among the Banks
PRO RATA; and PROVIDED, FURTHER, that the Agent shall be entitled to
receive and hold cash collateral in the amount of 105% of the aggregate
Maximum Drawing Amount of outstanding Letters of Credit and the Agent
further may in its discretion make proper allowance to take into account
any other Obligations not then due and payable;
(c) THIRD, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth
of Massachusetts; and
(d) FOURTH, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
Section 12. SETOFF.
Any deposits or other sums at any time credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
such Bank's possession may at all times after the occurrence and during the
continuance of an Event of Default hereunder be held and treated as collateral
security for the payment and performance of the Obligations and any and all
other liabilities, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, of the Borrower to such Bank.
Regardless of the adequacy of any collateral, any deposits or other sums
credited by or due from any of the Banks to the Borrower may after the
occurrence and during the continuance of an Event of Default hereunder be
appropriately applied to or set-off against any of the Obligations due to such
Bank hereunder at any time without notice to the Borrower or compliance with any
other condition precedent now or hereafter imposed by statute, rule of law or
otherwise (all of which are hereby expressly waived by the Borrower), PROVIDED
however, that prior to the Exit Facility Date only, such Bank shall comply with
the requirements of Section 11.3 hereof prior to any such application or
set-off. Any assignee or loan participant of any Bank shall, to the extent of
such assignment or participation, be entitled
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to the set-off rights granted to such Bank under this Section 12. Each of the
Banks agrees with each other Bank that (a) if an account to be set off is to be
applied to Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced by the DIP Note or Exit Note, as the case may be, held by such Bank,
such amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by such Note held by such Bank, and (b) if such Bank
shall receive from the Borrower, whether by voluntary payment, exercise of right
of set-off, counterclaim, cross action, enforcement of the claim evidenced by
the Note held by such Bank by proceedings against the Borrower at law or in
equity or otherwise, and shall retain and apply to the payment of the Notes held
by such Bank any amount in excess of its ratable portion of the payment received
by all of the Banks with respect to the Notes held by all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, PRO TANTO assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Note held by it its proportionate payment as contemplated by this
Agreement, PROVIDED that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
Section 13. THE AGENT.
Section 13.1. AUTHORIZATION. (a) The Agent is authorized to take such
action on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, PROVIDED that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that of an
independent contractor. The use of the term "Agent" is for convenience only and
is used to describe, as a form of convention, the independent contractual
relationship between the Agent and each of the Banks. Nothing contained in this
Agreement nor the other Loan Documents shall be construed to create an agency,
trust or other fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Agent is nevertheless a "representative" of
the Banks, as that term is defined in Article 1 of the Uniform Commercial Code,
for purposes of actions for the benefit of the Agent and the Banks with respect
to all collateral security and guaranties contemplated by the Loan Documents.
Such actions include the designation of the Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents and
instruments, whether recorded or otherwise, relating to the attachment,
perfection, priority or enforcement of any security interests, mortgages or
deeds
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of trust in collateral security intended to secure the payment or performance of
any of the Obligations, all for the benefit of the Agent and the Banks.
Section 13.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
Section 13.3. NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
Section 13.4. NO REPRESENTATIONS. The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any of
the other Loan Documents or any instrument at any time constituting, or intended
to constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of any
such amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower or any of its Subsidiaries, be bound to ascertain or inquire as to
the performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or intended to
constitute, collateral security for the Notes or to inspect any of the
properties, books or records of the Borrower or any of its Subsidiaries. The
Agent shall not be bound to ascertain whether any notice, consent, waiver or
request delivered to it by the Borrower or any holder of any of the Notes shall
have been duly authorized or is true, accurate and complete. The Agent has not
made nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of the Borrower, any of its Subsidiaries or
the Guarantors. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.
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Section 13.5. PAYMENTS.
(a) All payments by the Borrower to the Agent hereunder or under any
of the other Loan Documents shall be made to the Agent for the respective
accounts of the Banks and such payments shall constitute payments by the
Borrower to the Banks. Except as otherwise provided in Section 3.7 hereof,
not later than 1:00 p.m. Boston time, on the day of any proposed prepayment
or repayment of any Loan for which the Agent has received notice thereof in
accordance with Sections 2.2 or 2.4 hereof, the Agent shall notify each of
the Banks by telephone or in writing of the Borrower's proposed prepayment
or repayment of such Loan, and, not later than 4:00 p.m. Boston time, on
such date (PROVIDED that the Agent shall have already actually received
such prepayment or repayment from the Borrower in readily available funds
not later than 3:00 p.m. Boston time on the proposed prepayment or
repayment date), the Agent agrees to distribute promptly to each Bank such
Bank's PRO RATA share in accordance with its respective Commitment
Percentage, or other applicable share of such prepayment or repayment
received by the Agent for the account of the Banks, except as otherwise
expressly provided herein or in any of the other Loan Documents.
(b) If the Agent makes available to the Banks any prepayment or
repayment of any Loan received from it by the Borrower as set forth above
after such prepayment or repayment date, the Agent shall pay to each Bank
on demand its PRO RATA share of the amount equal to the product of (i) the
average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds acquired
by the Agent during each day included in such period, TIMES (ii) the amount
of the prepayment or repayment of the Loans made by the Borrower in
accordance with Sections 2.2 or 2.4 hereof, as applicable, TIMES (iii) a
fraction, the numerator of which is the number of days that elapse from and
including such prepayment or repayment date to the date on which the PRO
RATA or other applicable share of the amount of the Loans prepaid or repaid
by the Borrower in accordance with Sections 2.2 or 2.4 hereof, as
applicable, shall become immediately available to such Bank, and the
denominator of which is 365.
(c) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of
the other Loan Documents might involve it in liability, it may refrain from
making such distribution until its right to make such distribution shall
have been adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay
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over the same in such manner and to such Persons as shall be determined by
such court.
(d) Each distribution of cash, property, securities or other value
received by any Bank, directly or indirectly, in respect of the Borrower's
or any Guarantor's Obligations hereunder, whether pursuant to any
attachment, garnishment, execution or other proceedings for collection
thereof or pursuant to any bankruptcy, reorganization, liquidation or other
similar proceeding, after payment of collection and other expenses as
provided herein and in the Security Documents, shall be apportioned among
the Banks PRO RATA in accordance with their Commitment Percentages or other
applicable shares thereof and such Bank shall promptly pay to the Agent for
distribution to the Banks as set forth herein their respective PRO RATA
shares of such cash, property, securities or other value, unless such Bank
is legally required to return such recovery, in which case each Person
receiving a portion thereof shall return to such Bank its PRO RATA share of
the sum required to be returned without interest.
(e) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to
make available to the Agent its PRO RATA share of any Loan as provided in
Sections 2.1, 2.3 or 3.6 hereof or (ii) to comply with the provisions of
Section 12 hereof with respect to making dispositions and arrangements with
the other Banks, where such Bank's share of any payment received, whether
by set-off or otherwise, is in excess of its PRO RATA share of such
payments due and payable to all of the Banks, in each case as, when and to
the full extent required by the provisions of this Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent
Bank until such time as such delinquency is satisfied. A Delinquent Bank
shall be deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective PRO RATA shares of all outstanding Loans.
The Delinquent Bank hereby authorizes the Agent to distribute such payments
to the nondelinquent Banks in proportion to their respective PRO RATA
shares of all outstanding Loans. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of
the assigned payments to all outstanding Loans of the nondelinquent Banks,
the Banks' respective PRO RATA shares of all outstanding Loans have
returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
Section 13.6. HOLDERS OF NOTES. The Agent may deem and treat the payee
of any Note as the absolute owner thereof for all purposes hereof until it shall
have
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been furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
Section 13.7. INDEMNITY. The Banks ratably agree hereby to indemnify and
hold harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 16.1 hereof), and liabilities of every nature and character
arising out of or related to this Agreement, the Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or thereby, or
the Agent's actions taken hereunder or thereunder, except to the extent that any
of the same shall be directly caused by the Agent's willful misconduct or gross
negligence.
Section 13.8. AGENT AS LENDER. In its individual capacity, FNBB shall
have the same obligations and the same rights, powers and privileges in respect
to its DIP Commitment, Exit Commitment and the Loans made by it, and as the
holder of any of the Notes as it would have were it not also the Agent.
Section 13.9. RESIGNATION. The Agent may resign at any time by giving
thirty (30) days' prior written notice thereof to the Banks and the Borrower.
Upon any such resignation, the Banks shall have the right to appoint a successor
Agent. Unless an Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrower. If no successor
Agent shall have been so appointed by the Banks and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a financial institution having a rating of not
less than A or its equivalent by Standard & Poor's Ratings Group. 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 hereunder. After any
retiring Agent's resignation, the provisions of this Agreement and the other
Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
Section 13.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank
hereby agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this Section 13.10 or upon learning of the
existence of a Default or Event of Default it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
Section 13.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Banks and (b) the Banks shall have provided to the Agent such
<PAGE>
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additional indemnities and assurances against expenses and liabilities as the
Agent may reasonably request, proceed to enforce the provisions of the Security
Documents authorizing the sale or other disposition of all or any part of the
Collateral (as such term is defined therein) and exercise all or any such other
legal and equitable and other rights or remedies as it may have in respect of
such Collateral. The Banks may direct the Agent in writing as to the method and
the extent of any such sale or other disposition, the Banks hereby agreeing to
indemnify and hold the Agent harmless from all liabilities incurred in respect
of all actions taken or omitted in accordance with such directions, provided
that the Agent need not comply with any such direction to the extent that the
Agent reasonably believes the Agent's compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction.
Section 14. ASSIGNMENT AND PARTICIPATION.
Section 14.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided
herein, each Bank may assign to one or more Eligible Assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment Percentage, DIP Commitment and Exit Commitment and
the same portion of the DIP Loans and Exit Loans at the time owing to it, the
Notes held by it, and its share of the Reimbursement Obligations with respect to
Letters of Credit); PROVIDED that (a) each of the Agent and, unless an Event of
Default shall have occurred and be continuing, the Borrower shall have given its
prior written consent to such assignment, which consent, in the case of the
Borrower, will not be unreasonably withheld, (b) each such assignment shall be
of a constant, and not a varying, percentage of all the assigning Bank's rights
and obligations under this Agreement, (c) each assignment shall be in an amount
that is a minimum of $7,500,000 or integral multiples of $500,000 in excess
thereof, and (d) the parties to such assignment shall execute and deliver to the
Agent, for recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of EXHIBIT F attached hereto (an
"Assignment and Acceptance"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in
such assignment and upon payment to the Agent of the registration fee referred
to in Section 14.3 hereof, be released from its obligations under this
Agreement.
Section 14.2 CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS;
COVENANTS. By executing and delivering an Assignment and Acceptance, the
parties to the assignment thereunder confirm to and agree with each other and
the other parties hereto as follows: (a) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim or encumbrance, the
assigning Bank
<PAGE>
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makes no representation or warranty, express or implied, and assumes and shall
have no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or the attachment, perfection or priority of any
security interest or mortgage; (b) the assigning Bank makes no representation or
warranty and assumes and shall have no responsibility with respect to the
financial condition of the Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and the Guarantors or any other Person
primarily or secondarily liable in respect of any of the Obligations of any of
their obligations under this Agreement or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (c) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the most recent financial statements referred to in Section 8(e) and
Sections 10.1(a)(i) and (ii) hereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (d) such assignee will, independently and
without reliance upon the assigning Bank, the Agent or any other Bank 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; (e) such assignee represents and warrants that it is an Eligible
Assignee; (f) 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 Loan Documents as are delegated to the Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; (g)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Bank; and (h) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Acceptance.
Section 14.3. REGISTER. The Agent shall maintain a copy of each Assignment
and Acceptance delivered to it and a register of similar list (the "Register")
for the recordation of the names and addresses of the Banks and the Commitment
Percentage, DIP Commitment, and Exit Commitment of, and principal amount of the
Loans owing to, the Banks from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower and the Banks at any reasonable time and from
time to time upon reasonable prior notice. Upon each such recordation, the
assigning Bank agrees to pay to the Agent a registration fee in the sum of
$3000.
Section 14.4 NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
<PAGE>
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such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be substantially the form of
the assigned Notes. Within five (5) days after the issuance of any new Notes
pursuant to this Section 14.4, the Borrower shall, at its reasonable expense,
deliver an opinion of counsel, addressed to the Banks and the Agent, relating to
the due authorization, execution and delivery of such new Notes and the
legality, validity, binding effect and enforceability thereof, in form and
substance reasonably satisfactory to the Agent and the Banks. The surrendered
Notes shall be canceled and returned to the Borrower.
Section 14.5. PARTICIPATIONS. Each Bank may sell participations to one or
more banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; PROVIDED that (a)
each such participation shall be in an initial amount of not less than
$5,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the right to approve waivers, amendments or modifications that would (i) reduce
the principal of or the interest rate on any Loans, (ii) extend the duration or
increase the amount of the DIP Commitment or Exit Commitment, as the case may
be, of such Bank as it relates to such participant, (iii) reduce the amount of
any commitment fees, facility fees or other fees to which such participant is
entitled, (iv) extend any regularly scheduled payment date for principal or
interest or (v) release any Collateral (other than asset dispositions permitted
by the Loan Documents, and other than with respect to cash collateral in any
bankruptcy proceeding after the Exit Facility Date).
Section 14.6. DISCLOSURE. The Borrower agrees that in addition to
disclosures made in accordance with standard and customary banking practices any
Bank may disclose information obtained by such Bank pursuant to this Agreement
to assignees or participants and with the written consent of the Borrower (such
consent not to be unreasonably withheld) to potential assignees or participants
hereunder; PROVIDED that such assignees or participants or potential assignees
or participants shall agree (a) to treat in confidence such information unless
such information otherwise becomes public knowledge, (b) not to disclose such
<PAGE>
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information to a third party, except as required by law or legal process, and
(c) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
Section 14.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to Section 11 hereof, and
the determination of the Majority Banks shall for all purposes of this Agreement
and the other Loan Documents be made without regard to such assignee Bank's
interest in any of the Loans. If any Bank sells a participating interest in any
of the Loans to a participant, and such participant is the Borrower or an
Affiliate of the Borrower, then such transferor Bank shall promptly notify the
Agent of the sale of such participation. A transferor Bank shall have no right
to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Loan Documents or for purposes of
making requests to the Agent pursuant to Section 11 hereof to the extent that
such participation is beneficially owned by the Borrower or any Affiliate of the
Borrower, and the determination of the Majority Banks shall for all purposes of
this Agreement and the other Loan Documents be made without regard to the
interest of such participation.
Section 14.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank
shall retain its rights to be indemnified pursuant to Section 16.2 hereof with
respect to any claims or actions arising prior to the date of such assignment.
If any assignee Bank is not incorporated under the laws of the United States of
America or any state thereof, it shall, prior to the date on which any interest
or fees are payable hereunder or under any of the other Loan Documents for its
account, deliver to the Borrower and the Agent certification as to its exemption
from deduction or withholding of any United States federal income taxes.
Anything contained in this Section 14 to the contrary notwithstanding, any Bank
may at any time pledge all or any portion of its interest and rights under this
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or assignment or the enforcement thereof
shall release the pledgor or assignor Bank from its obligations hereunder or
under any of the other Loan Documents.
Section 14.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
<PAGE>
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Section 15 AGENT AND BANKS AS PARTIES IN INTEREST.
The Borrower hereby stipulates and agrees that the Agent and each of the
Banks is and shall remain a party in interest in the Case and shall have the
right to participate, object and be heard in any motion or proceeding in
connection therewith and to appeal therefrom. Neither the failure to so
participate, object or be heard nor anything in this Agreement or any other Loan
Documents shall be deemed to be a waiver of the Agent's or any Bank's rights or
remedies thereunder or under applicable law. Without limitation of the
foregoing, the Agent and each of the Banks shall have the right to make any
motion or raise any objection which it deems to be in its interest (specifically
including but not limited to objections to use of proceeds of the Loans, use of
Letters of Credit, payment of professional fees and expenses or the amount
thereof, sales or other transactions outside the ordinary course of business or
assumption or rejection of any executory contract or lease) whether or not the
action or inaction by the Borrower which is the subject of such motion or
objection violates or is expressly permitted by any covenant or provisions of
this Agreement or any other Loan Document.
Section 16. MISCELLANEOUS.
Section 16.1. COSTS AND EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Borrower shall pay (a) to the Agent
promptly on demand all reasonable costs and expenses (including any taxes and
reasonable legal and other professional fees and expenses and reasonable fees
and expenses of the Agent's commercial finance examiners, liquidation analysis
consultants, collateral auditors, appraisers, and other professional advisors)
incurred by the Agent in connection with its due diligence or the preparation,
negotiation, execution, syndication, amendment, and administration of the Loan
Documents, the Financing Order, and the Confirmation Order, and (b) to the Agent
and each of the Banks promptly on demand all costs and expenses (including any
taxes and reasonable legal and other professional fees and expenses and
reasonable fees and expenses of such other Persons as referred to above)
incurred by the Agent or such Bank in connection with the enforcement of or
preservation of rights under any of the Loan Documents or the administration
thereof after the occurrence of an Event of Default, or in connection with any
litigation in any way related to any Bank's or the Agent's relationship with the
Borrower and all fees, expenses and disbursements in connection with the
perfection, protection or priority of any Liens upon any of the Collateral and
in connection with any Bankruptcy Court or other court appearances. The
covenants of this Section 16.1 shall survive payment or satisfaction in full of
all other Obligations.
Section 16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agent and each of the Banks and their respective officers,
employees, affiliates, agents and controlling Persons from and against any and
all losses, claims, damages and liabilities to which any such Person may be
subject arising out of or in connection with this Agreement and the other Loan
<PAGE>
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Documents or any of the transactions contemplated hereby or thereby or any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not such indemnified Person is a party hereto or thereto, and to
reimburse each of such indemnified Persons, from time to time upon its or his
demand, for any reasonable legal or other expenses incurred in connection with
investigating or defending any of the foregoing, whether or not the transactions
contemplated hereby are consummated; PROVIDED, HOWEVER, that the foregoing
indemnity will not, as to any indemnified Person, apply to losses, claims,
damages, liabilities or related expenses to the extent that they have been
determined by a court of competent jurisdiction by final non-appealable order to
arise from the bad faith, willful misconduct or gross negligence of such
indemnified Person. In litigation, or the preparation therefor, the Agent and
the Banks will be entitled to select their own counsel and, in addition to the
foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and
expenses of such counsel. The covenants of this Section 16.2 shall survive
payment or satisfaction in full of all other Obligations.
Section 16.3. NOTICES. Any communication to be made hereunder shall (a) be
made in writing, but unless otherwise stated, may be made by facsimile
transmission or letter, and (b) be made or delivered to the address of the party
receiving notice which is identified with its signature below (unless such party
has by five (5) days written notice specified another address), and shall be
deemed made or delivered when left at or delivered to that address, or five (5)
days after being mailed, postage prepaid, to such address, or in the case of
facsimile transmission, at the time of dispatch thereof if during normal
business hours on a Business Day in the country and city of receipt, or
otherwise at the opening of business on the following Business Day in such
destination location.
Section 16.4. AMENDMENT, ETC.
(a) Except as otherwise expressly provided in this Agreement, any
consent or approval required or permitted by this Agreement to be given by
all of the Banks, may be given, and any term of this Agreement or of any
other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower of any terms of this Agreement or
such other instrument or the continuance of any Default or Event of Default
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with the written consent of
the Majority Banks. Notwithstanding the foregoing, the rate of interest on
the Notes (other than interest accruing pursuant to Section 3.4(b)
following the effective date of any applicable waiver by the Majority
Banks, or, where required, all of the Banks, of the Event of Default
relating thereto), the amounts and terms and maturity of the Notes, the
dates and amounts of any required principal or interest payments, the
amount and duration of the respective DIP Commitments and the Exit
Commitments of the Banks, and the date and amount of the commitment fees or
letter of credit fees hereunder may not be changed without the written
consent of the Borrower and the
<PAGE>
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written consent of each of the Banks; the definition of Majority Banks, any
provision of the Loan Documents providing for or requiring the approval,
consent, or direction of the Agent, or of a specified number, combination,
or percentage of the Banks or holders of a certain percentage of the DIP
Commitments, the Exit Commitments, or the Obligations, in any case with
respect to any action or matter relating to the Loan Documents, and the
provisions of this Section 16.4(a) may not be amended without the written
consent of all of the Banks; SCHEDULE 3.7, SCHEDULE 3.7A, and SCHEDULE 3.9
may be amended from time to time with the written agreement of the Agent
and the Borrower; except for the use of cash collateral in any bankruptcy
proceeding after the Exit Facility Date, and except for asset dispositions
permitted by Section 10.2(f) as in effect on the Effective Date, Collateral
may not be released without the written consent of all of the Banks and the
Agent; and the amount of the Agent's administrative fee or facility fees or
other fees for the Agent's own account or any fees with respect to the
Letters of Credit payable for the Agent's account, and the provisions of
Section 13 hereof and the Fee Letter may not be amended without the written
consent of the Agent.
(b) No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or
delay or omission on the part of the Agent or any Bank in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial
thereto. No notice to or demand upon the Borrower or any of its
Subsidiaries or any of the Guarantors shall entitle the Borrower or any
Subsidiary or any Guarantor to other or further notice or demand in similar
or other circumstances. No failure or delay by the Agent or any Bank to
exercise any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege preclude
any other right, power or privilege.
(c) The provisions of this Agreement are severable and if any one
provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, such invalidity or unenforceability shall affect only
such provision in such jurisdiction. This Agreement, together with all
exhibits and schedules hereto, expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. This
Agreement and any amendment hereby may be executed in several counterparts,
each of which shall be an original, and all of which shall constitute one
agreement. In proving this Agreement, it shall not be necessary to produce
more than one such counterpart executed by the party to be charged.
(D) THIS AGREEMENT AND THE NOTES ARE CONTRACTS UNDER SEAL UNDER THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF SAID COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW)
AND, PRIOR TO THE EXIT FACILITY DATE BUT ONLY TO THE EXTENT
<PAGE>
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APPLICABLE, OR AS OTHERWISE PROVIDED IN THE REORGANIZATION PLAN, THE
PROVISIONS OF THE BANKRUPTCY CODE. The Borrower agrees that during the
period prior to the Exit Facility Date, any suit for the enforcement of
this Agreement and any other Loan Documents may be brought in the
Bankruptcy Court and consents to the nonexclusive jurisdiction of such
court. The Borrower agrees that during the period from and after the Exit
Facility Date, any suit for the enforcement of this Agreement and any of
the other Loan Documents may be brought in the courts of the Commonwealth
of Massachusetts or any federal court sitting therein and consents to the
nonexclusive jurisdiction of such court. The Borrower hereby waives any
objection that it may now or hereafter have to the venue of any such suit
or any such court or that such suit is brought in an inconvenient court.
THE BORROWER, AS AN INDUCEMENT TO THE AGENT AND EACH OF THE BANKS TO ENTER
INTO THIS AGREEMENT, HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY ACTION ARISING IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER LOAN
DOCUMENT.
<PAGE>
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first above written.
LAMONTS APPAREL, INC., a Delaware
corporation, debtor and debtor in
possession
By: /s/ Loren Rothschild
--------------------------
Name: LOREN ROTHSCHILD
Title: VICE CHAIRMAN
12413 Willows Road, N.E. Kirkland,
Washington 98034
Tel: 1-206-814-5461
-----------------------
Fax: 1-206-814-9749
-----------------------
Attention: Debbie Brownfield
-----------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By:
-----------------------
Name:
Title:
Address:
100 Federal Street
Boston, Massachusetts 02110
Tel: (617) 434-____
Fax: (617) 434-____
Attention:
------------------
<PAGE>
EXHIBIT A
FORM OF BORROWING BASE REPORT AND WORKSHEETS
<PAGE>
FORM OF
BORROWING BASE REPORT
Dated:_____________
For Period Ended: _____________________
The undersigned, __________, the duly elected and qualified
_________________ of Lamonts Apparel, Inc., [debtor and debtor in possession*]
(the "Borrower"), hereby certifies pursuant to Section 10.1(a)(iv) of the Debtor
in Possession and Exit Financing Loan Agreement, dated as of June 4, 1996 (as
amended, modified, supplemented or restated and in effect from time to time, the
"Loan Agreement"), among the Borrower, The First National Bank of Boston and the
other lending institutions that are or may become parties thereto from time to
time (collectively, the "Banks") and The First National Bank of Boston in its
capacity as agent (the "Agent") for the Banks, that (a) the information set
forth in this Borrowing Base Report was true and correct as of the last day of
the period specified herein, (b) this Borrowing Base Report has been prepared in
accordance with the applicable provisions of the Loan Agreement relating to the
computation of the Borrowing Base and the various components thereof, and (c) as
of the date of this Borrowing Base Report, there exists no Default or Event of
Default.
Capitalized terms used herein without definition that are defined in the
Loan Agreement shall have the same meanings herein as in the Loan Agreement.
LAMONTS APPAREL, INC., [DEBTOR
AND DEBTOR IN POSSESSION*]
By:______________________________
Name:
Title:
*Applicable only for the period of time prior to the Exit Facility Date
<PAGE>
-2-
BORROWING BASE AS OF _______, 19___ FOR THE PERIOD ENDED _______, 19___
<PAGE>
PRE-EXIT FACILITY DATE BORROWING BASE REPORT WORKSHEET
Book Value of inventory $____________
Less:consigned inventory $____________
returns not of first quality ____________
obsolete inventory ____________
inventory liened other than to Agent ____________
inventory not in possession of Borrower
with no acceptable waiver ____________
inventory held by Assembly with no
acceptable waiver ____________
inventory outside the United States of
America ____________
inventory shipped to a customer(s) ____________
inventory not at a Permitted Inventory
Location ____________
damaged inventory ____________
inventory deemed ineligible by Agent ____________
Total $
Eligible Inventory $____________
Gross inventory availability (Eligible Inventory
x___%) $____________
Less: Inventory Shrink Reserve (Book Value
x__%) $____________
Net inventory availability $____________
Kitsap Store availability:
the lesser of $1,910,000 or 60% of the
Kitsap Store appraisal $____________
Gross Availability (Net inventory availability
plus Kitsap Store availability) $____________
Less: outstanding DIP Loans $____________
outstanding Letters of Credit ____________
Total $
Net availability $____________
<PAGE>
POST EXIT FACILITY DATE BORROWING BASE REPORT
WORKSHEET WITH NO CAPITAL RAISING EVENT
Book Value of inventory $____________
Less: consigned inventory $____________
returns not of first quality ____________
obsolete inventory ____________
inventory liened other than to Agent ____________
inventory not in possession of Borrower
with no acceptable waiver ____________
inventory held by Assembly with no
acceptable waiver ____________
inventory outside the United States of
America ____________
inventory shipped to a customer(s) ____________
inventory not a Permitted Inventory
Location ____________
damaged inventory ____________
inventory deemed ineligible by Agent ____________
Total $
Eligible Inventory $____________
Gross inventory availability (Eligible Inventory
x___%) $____________
Less: Inventory Shrink Reserve (Book Value
x__%) $____________
Landlord Lien Reserves ____________
Total $
Net inventory availability $____________
Kitsap Store availability:
the lesser of $1,910,000 or 60% of the
Kitsap Store appraisal $____________
Gross Availability (Net inventory availability
plus Kitsap Store availability) $____________
Less: outstanding Exit Loans $____________
outstanding Letters of Credit ____________
Total $
Net availability $____________
<PAGE>
POST EXIT FACILITY DATE BORROWING BASE REPORT
WORKSHEET AFTER A CAPITAL RAISING EVENT
Book Value of inventory $____________
Less: consigned inventory $____________
returns not of first quality ____________
obsolete inventory ____________
inventory liened other than to Agent ____________
inventory not in possession of Borrower
with no acceptable waiver ____________
inventory held by Assembly with no
acceptable waiver ____________
inventory outside the United States of
America ____________
inventory shipped to a customer(s) ____________
inventory not a Permitted Inventory ____________
Location
damaged inventory ____________
inventory deemed ineligible by Agent ____________
Total $____________
Eligible Inventory $____________
Gross inventory availability (Eligible Inventory
x 65%) $____________
Less: Inventory Shrink Reserve (Book Value
x__%) $____________
Landlord Lien Reserves ____________
Total $
Net inventory availability $____________
Less: outstanding Exit Loans $____________
outstanding Letters of Credit ____________
Total $
Net availability $____________
<PAGE>
EXHIBIT B
FORM OF LANDLORD WAIVER
<PAGE>
EXHIBIT B
LANDLORD WAIVER in favor of The First National Bank of Boston as Agent,
100 Federal Street, Boston, Massachusetts 02110 (Attention:[*****]).
Lamonts Apparel, Inc. (the "COMPANY") is the lessee under a lease between
the Company and the undersigned (the "LANDLORD") covering the premises located
at [**address**] (the "PREMISES") of which the Landlord is the sole owner. The
Company is entering into certain financing arrangements with The First National
Bank of Boston as agent (the "AGENT") for certain lenders (collectively, the
"LENDERS") which require, among other things, that the Company grant a security
interest in favor of the Agent in all of the inventory and any other personal
property of the Company at any time located on the Premises (collectively, the
"COLLATERAL").
To induce the Lenders to extend credit to the Company, the Landlord
agrees that: (a) none of the Collateral located on the Premises shall be deemed
to be fixtures, and all of the Collateral shall remain the personal property of
the Company; (b) the Landlord will notify the Agent if the Company defaults
under the lease and allow the Agent at least 15 days from its receipt of such
notice in which to cure or cause the Company to cure any such default; (c) if
the Landlord intends to take possession of the Premises during the term of the
lease, it will notify the Agent at least 15 days before taking such action; (d)
the Landlord will not assert against any of the Collateral any security
interest, landlord's lien, claim or any other statutory or possessory lien or
right, including, without limitation, any right of levy or distraint for rent;
and (e) if the Company defaults on its obligations to the Lenders and, as a
result, the Agent undertakes to enforce its security interest in the Collateral,
the Landlord will permit the Agent for a period of 15 days after the Agent
notifies the Landlord of such default to preserve and remove during non-
business hours any Collateral from the Premises, the Agent agreeing (i) to be
responsible for any damage to the Premises caused by any such removal and (ii)
not to hold any "going out of business" sale on the Premises without the
Landlord's consent.
Any notices under this Waiver shall be by certified mail, addressed to
the Agent at its address set forth above or to the Landlord at its address set
forth below. The Landlord will notify all successor claimants to an interest in
the Premises of this Waiver which shall be binding upon the Landlord's
successors and assigns.
[LANDLORD]
By:___________________________ Address:_______________________________
Name:_________________________ _______________________________
Title:________________________ _______________________________
Date:________________________
<PAGE>
EXHIBIT C
FORM OF DIP NOTE
<PAGE>
EXHIBIT C
FORM OF DIP NOTE
$___________ June ___, 1996
FOR VALUE RECEIVED, the undersigned LAMONTS APPAREL, INC., a Delaware
corporation, debtor and debtor in possession (the "Borrower"), hereby promises
to pay to the order of [INSERT NAME OF BANK], a [INSERT TYPE OF BANK ENTITY]
(the "Bank") at the Agent's Head Office (as defined in the Loan Agreement
referred to below):
(a) prior to or on the DIP Maturity Date the principal amount of
[INSERT BANK'S COMMITMENT AMOUNT] Dollars ($________) or, if less, the
aggregate unpaid principal amount of DIP Loans advanced by the Bank to
the Borrower pursuant to the Debtor in Possession and Exit Financing
Loan Agreement dated as of June 4, 1996 (as amended, modified,
supplemented or restated and in effect from time to time, the "Loan
Agreement"), by and among the Borrower, the Bank, the other lending
institutions party thereto and The First National Bank of Boston in its
capacity as agent for the Bank and such lending institutions (the
"Agent"); and
(b) interest on the principal balance hereof from time to time
outstanding from the Effective Date under the Loan Agreement through and
including the maturity date hereof at the times and at the rates
provided in the Loan Agreement.
This Note evidences borrowings under and has been issued by the Borrower
in accordance with the terms of the Loan Agreement. The Bank and any holder
hereof is entitled to the benefits of the Loan Agreement, the Security Documents
and the other Loan Documents, and may enforce the agreements of the Borrower
contained therein, and any holder hereof may exercise the respective remedies
provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in
this Note and not otherwise defined herein shall have the same meanings herein
as in the Loan Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any DIP Loan or at the time
of receipt of any payment of principal of this Note, an appropriate notation on
the grid attached to this Note, or the continuation of such grid, or any other
similar record, including computer records,
<PAGE>
-2-
reflecting the making of such DIP Loan or (as the case may be) the receipt of
such payment. The outstanding amount of the DIP Loans set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to any
DIP Loans shall be PRIMA FACIE evidence of the principal amount thereof owing
and unpaid to the Bank, but the failure to record, or any error in so recording,
any such amount on any such grid, continuation or other record shall not limit
or otherwise affect the obligation of the Borrower hereunder or under the Loan
Agreement to make payments of principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Loan Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Loan Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW) AND, TO THE EXTENT APPLICABLE, THE PROVISIONS OF THE BANKRUPTCY
CODE. BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE BANKRUPTCY COURT AND
<PAGE>
-3-
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT. THE BORROWER HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has caused this DIP Note to be
signed in its corporate name and its corporate seal to be impressed thereon by
its duly authorized officer as an instrument under seal as of the day and year
first above written.
LAMONTS APPAREL, INC.,
DEBTOR AND DEBTOR IN POSSESSION
By:
---------------------------
Name:
Title:
<PAGE>
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Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
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<PAGE>
EXHIBIT D
FORM OF EXIT NOTE
<PAGE>
EXHIBIT D
FORM OF EXIT NOTE
$___________ [ ], 1996
FOR VALUE RECEIVED, the undersigned LAMONTS APPAREL, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of [INSERT
NAME OF BANK], a [INSERT TYPE OF BANK ENTITY] (the "Bank") at the Agent's Head
Office (as defined in the Loan Agreement referred to below):
(a) prior to or on the Exit Maturity Date the principal amount
of [INSERT BANK'S COMMITMENT AMOUNT] Dollars ($________) or, if less,
the aggregate unpaid principal amount of Exit Loans advanced by the
Bank to the Borrower pursuant to the Debtor in Possession and Exit
Financing Loan Agreement dated as of June 4, 1996 (as amended,
modified, supplemented or restated and in effect from time to time,
the "Loan Agreement"), by and among the Borrower, the Bank, the other
lending institutions party thereto and The First National Bank of
Boston in its capacity as agent for the Bank and such lending
institutions (the "Agent");
(b) interest on the principal balance hereof from time to time
outstanding from the Exit Facility Date under the Loan Agreement
through and including the maturity date hereof at the times and at the
rates provided in the Loan Agreement; and
(c) any interest on the principal balance of the DIP Loans
unpaid as of the Exit Facility Date, at the times and at the rates
provided in the Loan Agreement.
This Note evidences borrowings under and has been issued by the
Borrower in accordance with the terms of the Loan Agreement. The Bank and any
holder hereof is entitled to the benefits of the Loan Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any holder hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in
this Note and not otherwise defined herein shall have the same meanings herein
as in the Loan Agreement.
<PAGE>
-2-
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Exit Loan or at the time
of receipt of any payment of principal of this Note, an appropriate notation on
the grid attached to this Note, or the continuation of such grid, or any other
similar record, including computer records, reflecting the making of such Exit
Loan or (as the case may be) the receipt of such payment. The outstanding
amount of the Exit Loans set forth on the grid attached to this Note, or the
continuation of such grid, or any other similar record, including computer
records, maintained by the Bank with respect to any Exit Loans shall be PRIMA
FACIE evidence of the principal amount thereof owing and unpaid to the Bank, but
the failure to record, or any error in so recording, any such amount on any such
grid, continuation or other record shall not limit or otherwise affect the
obligation of the Borrower hereunder or under the Loan Agreement to make
payments of principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Loan Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Loan Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS
<PAGE>
-3-
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW) AND, TO THE EXTENT
PROVIDED IN THE REORGANIZATION PLAN, THE BANKRUPTCY CODE. THE BORROWER AGREES
THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF
THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF EACH SUCH COURT. THE BORROWER
HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has caused this Exit Note to be
signed in its corporate name and its corporate seal to be impressed thereon by
its duly authorized officer as an instrument under seal as of the day and year
first above written.
LAMONTS APPAREL, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
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Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
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<PAGE>
EXHIBIT E
FORM OF COMPLIANCE CERTIFICATE AND WORKSHEET
<PAGE>
EXHIBIT E
FORM OF
COMPLIANCE CERTIFICATE
_______ __, 199__
To the Banks party to the Loan
Agreement referred to below
c/o The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Steven B. Atwater, Director
Ladies and Gentlemen:
Reference is made to the Debtor in Possession and Exit Financing Loan
Agreement, dated as of June 4, 1996 (as amended, modified, supplemented or
restated and in effect from time to time, the "Loan Agreement"), by and among
Lamonts Apparel, Inc., [debtor and debtor in possession*] (the "Borrower"), The
First National Bank of Boston and the other lending institutions party thereto
(collectively, the "Banks") and The First National Bank of Boston in its
capacity as agent (the "Agent") for the Banks. Capitalized terms used herein
without definition that are defined in the Loan Agreement shall have the
respective meanings assigned to such terms in the Loan Agreement.
This Compliance Certificate refers to the financial statements enclosed
herewith for the fiscal [year] [quarter] [month] ended _______. Pursuant to
Section 10.1(a)(iii) of the Loan Agreement, the Borrower, by the
undersigned officer of the Borrower (who has reviewed the Loan Documents) hereby
certifies to each of you as follows: (a) the information furnished in the
calculations attached hereto was true and correct as of the last day of the
fiscal [year] [quarter] [month] referred to above, which is the end of the
fiscal [year] [quarter] [month] next preceding the date of this certificate; (b)
as of the date of this certificate, there exists no Default or Event of Default;
and (c) the financial statements delivered herewith were prepared in accordance
with generally accepted accounting principles and the requirements of the Loan
Agreement.
<PAGE>
-2-
IN WITNESS WHEREOF, Lamonts Apparel, Inc. has executed this Compliance
Certificate as of the date first written above.
LAMONTS APPAREL, INC., [DEBTOR
AND DEBTOR IN POSSESSION*]
By:
---------------------------
Name:
Title:
*Applicable only for the period of time prior to the Exit Facility Date
<PAGE>
-3-
COMPLIANCE CERTIFICATE WORKSHEET
LAMONTS APPAREL, INC.
Section General Covenant Description Compliance
------- ---------------------------- ----------
10.2(a)(ii) $100,000 limit on certain priority yes/no
claims
10.2.(a)(iii) $100,000 limit on Section 364 priority yes/no
claims
10.2.(b)(v) $______ limit on purchase money yes/no
Indebtedness/ Capitalized Leases
10.2.(f)(y) $100,000 twelve month obsolete F&E yes/no
limit
10.2.(g)(D) $100,000 limit on certain Indebtedness yes/no
payments
10.2(l) Limit on number of stores and retail yes/no
outlets
Period Maximum Number Actual
------ -------------- ------
5/5/96 - 2/1/97 42 _____
2/2/96 - 1/31/98 44 _____
2/1/98 - 1/30/99 48 _____
1/31/99 - 7/3/99 52 _____
10.3(a) Limit on Capital Expenditures yes/no
<TABLE>
<CAPTION>
Period Limit Carry-Over Revised Limit Actual
- ------ ----- ---------- ------------- ------
<S> <C> <C> <C> <C>
2/4/96 - 2/1/97 $1,500,000 0 $1,500,000 _________
2/2/97 - 1/31/98 $2,500,000 _______ _______ _________
2/1/98 - 1/30/99 $6,500,000 _______ _______ _________
1/31/99 - 7/3/99 $2,250,000 _______ _______ _________
</TABLE>
<PAGE>
-4-
10.3(b) Minimum Cumulative Consolidated EBITDA yes/no
<TABLE>
<CAPTION>
Minimum
Date Since 2/4/96 Actual
<S> <C> <C>
5/4/96 ($2,900,000) ______
6/1/96 ($2,700,000) ______
7/6/96 ($2,600,000) ______
8/3/96 ($1,800,000) ______
8/31/96 ($1,050,000) ______
10/5/96 ($ 200,000) ______
11/2/96 $ 500,000 ______
11/30/96 $ 800,000 ______
1/4/97 $7,600,000 ______
2/1/97 $5,900,000 ______
3/1/97 $4,600,000 ______
4/5/97 $4,700,000 ______
5/3/97 $3,900,000 ______
5/31/97 $4,100,000 ______
</TABLE>
10.3.(c) Pre-Exit Facility Date Minimum/Maximum Inventory yes/no
Limits
<TABLE>
<CAPTION>
Minimum Amount Maximum Amount Actual Actual
Date -------------- -------------- ------ ------
---- Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
May 4, 1996 $35,400,000 $43,400,000 _______ _______
June 1, 1996 $36,900,000 $45,200,000 _______ _______
July 6, 1996 $36,600,000 $44,800,000 _______ _______
August 3, 1996 $36,200,000 $44,300,000 _______ _______
August 31, 1996 $37,800,000 $46,300,000 _______ _______
October 5, 1996 $39,100,000 $47,900,000 _______ _______
November 2, 1996 $43,500,000 $53,300,000 _______ _______
November 30, 1996 $47,500,000 $58,200,000 _______ _______
January 4, 1997 $31,000,000 $38,000,000 _______ _______
February 1, 1997 $31,100,000 $38,100,000 _______ _______
March 1, 1997 $34,300,000 $42,100,000 _______ _______
April 5, 1997 $34,000,000 $41,700,000 _______ _______
May 3, 1997 $35,400,000 $43,400,000 _______ _______
May 31, 1997 $37,000,000 $45,300,000 _______ _______
</TABLE>
<PAGE>
-5-
10.3.(d) Minimum/Maximum Inventory Limit With No yes/no
Capital Raising Event
<TABLE>
<CAPTION>
Date Minimum Amount Maximum Amount Actual Actual
---- -------------- -------------- ------ ------
Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
November 2, $43,500,000 $53,300,000 _______ _______
1996
February 1, $31,100,000 $38,100,000 _______ _______
1997
May 3, 1997 $35,400,000 $43,400,000 _______ _______
August 2, 1997 $38,000,000 $46,500,000 _______ _______
November 1, $45,700,000 $56,000,000 _______ _______
1997
January 31, $32,600,000 $37,900,000 _______ _______
1998
May 2, 1998 $37,200,000 $45,600,000 _______ _______
August 1, 1998 $42,100,000 $51,700,000 _______ _______
October 31, $50,700,000 $62,200,000 _______ _______
1998
January 30, $36,100,000 $42,100,000 _______ _______
1999
May 1, 1999 $41,200,000 $50,700,000 _______ _______
</TABLE>
10.3.(e) Debt Service Coverage Ratio with No yes/no
Capital Raising Event
Actual
Date Minimum Ratio Ratio (a)
November 2, 1996 0.22 to 1.00 _______
February 1, 1997 1.00 to 1.00 _______
May 3, 1997 1.00 to 1.00 _______
August 2, 1997 0.95 to 1.00 _______
November 1, 1997 1.00 to 1.00 _______
January 31, 1998 1.00 to 1.00 _______
May 2, 1998 1.00 to 1.00 _______
August 1, 1998 1.00 to 1.00 _______
October 31, 1998 1.00 to 1.00 _______
January 30, 1999 1.00 to 1.00 _______
May 1, 1999 1.00 to 1.00 _______
<PAGE>
-6-
10.3.(f) Minimum/Maximum Inventory Limits With a yes/no
Capital Raising Event
<TABLE>
<CAPTION>
Minimum Amount Maximum Amount Actual Actual
Date -------------- -------------- ------- ------
---- Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
November 2, 1996 $47,000,000 $57,600,000 _______ _______
February 1, 1997 $33,000,000 $40,400,000 _______ _______
May 3, 1997 $39,000,000 $47,800,000 _______ _______
August 2, 1997 $40,400,000 $49,500,000 _______ _______
November 1, 1997 $47,700,000 $58,400,000 _______ _______
January 31, 1998 $32,700,000 $40,100,000 _______ _______
May 2, 1998 $41,000,000 $50,200,000 _______ _______
August 1, 1998 $42,500,000 $52,000,000 _______ _______
October 31, 1998 $50,100,000 $61,300,000 _______ _______
January 30, 1998 $34,400,000 $42,100,000 _______ _______
May 1, 1999 $45,500,000 $55,700,000 _______ _______
</TABLE>
10.3.(g) Debt Service Coverage Ratio with a Capital yes/no
Raising Event
Actual
Date Minimum Ratio Ratio (a)
---- ------------- ---------
November 2, 1996 0.32 to 1.00 _______
February 1, 1997 1.30 to 1.00 _______
May 3, 1997 1.66 to 1.00 _______
August 2, 1997 1.90 to 1.00 _______
November 1, 1997 2.00 to 1.00 _______
January 31, 1998 2.00 to 1.00 _______
May 2, 1998 2.00 to 1.00 _______
August 1, 1998 2.00 to 1.00 _______
Octoboer 31, 1998 2.00 to 1.00 _______
January 30, 1998 2.00 to 1.00 _______
May 1, 1999 2.00 to 1.00 _______
<PAGE>
-7-
(a) Debt Service Coverage Ratio Calculation Summary
Operating Cash Flow:
Consolidated EBITDA ____________
minus cash taxes ____________
minus cash Capital expenditures ____________
Operating Cash Flow
Total Debt Service:
Consolidated Total Interest Expense ____________
plus non-excluded cash financing fees ____________
plus principal Indebtedness payments ____________
plus principal Capitalized lease payments ____________
Total Debt Service
Operating Cash Flow divided by Total Debt Service ____________
<PAGE>
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
Date as of______ _____, 19_____
Reference is made to the Debtor In Possession and Exit Financing Loan
Agreement, dated as of June 4, 1996 (as from time to time amended and in
effect, the "Loan Agreement"), by and among Lamonts Apparel, Inc., a Delaware
Corporation [debtor and debtor in possession*] (the "Borrower"), the lenders
referred to therein as Banks (collectively, the "Banks"), and The First
National Bank of Boston, a national banking association, as agent (in such
capacity, the "Agent") for the Banks. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Loan
Agreement.
[INSERT ASSIGNING BANK'S NAME] (the "Assignor") and [INSERT ELIGIBLE
ASSIGNEE'S NAME] (the "Assignee") hereby agree as follows:
1. ASSIGNMENT. Subject to the terms and conditions of this Assignment
and Acceptance, the Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes to without recourse to the Assignor, a
$[INSERT PURCHASE AMOUNT] interest in and to the rights, benefits, indemnities
and obligations of the Assignor under the Loan Agreement equal to [INSERT
PERCENTAGE OF TOTAL COMMITMENT] in respect of the Total DIP Commitment and
the same percentage of the Total Exit Commitment, as applicable, as in effect
immediately prior to the Effective Date (as defined below) of this Assignment
and Acceptance.
2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants
that (A) it is legally authorized to enter into this Assignment and Acceptance,
(B) as of the date hereof, the amount of its DIP Commitment and its Exit
Commitment, as applicable, is [INSERT ASSIGNOR'S COMMITMENT], its Commitment
Percentage is [INSERT ASSIGNOR'S COMMITMENT PERCENTAGE], the aggregate
outstanding principal balance of its DIP Loans or Exit Loans, as applicable,
equals [INSERT OUTSTANDING PRINCIPAL BALANCE OF APPLICABLE LOANS], the aggregate
amount of its Letter of Credit Participations equals [INSERT TOTAL LETTER OF
CREDIT PARTICIPATIONS] (in each case without giving effect to its Assignment and
Acceptance or to any contemplated other assignments which have not yet become
effective), and
<PAGE>
-2-
(C) immediately after giving effect to all other assignments which have not
yet become effective, the Assignor's Commitment Percentage will be sufficient
to give effect to this Assignment and Acceptance, (ii) makes no
representation or warranty, express or implied, and assumes and shall have no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement, the other Loan Documents or any
other instrument or document furnished pursuant thereto or the attachment,
perfection or priority of any security interest or mortgage, other than it is
legal and beneficial owner of the interest being assigned by it hereunder
free and clear of any adverse claim or encumbrance; (iii) makes no
representation or warranty and assumes and shall have no responsibility with
respect to the financial condition of the Borrower or any of its Subsidiaries
or any other Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrower or any of its
Subsidiaries or any other Person primarily or secondarily liable in respect
of any of the Obligations of any of its obligations under the Loan Agreement
or any of the other Loan Documents or any other instrument or document
delivered or executed pursuant thereto; and (iv) attaches hereto the
[DIP Note] [Exit Note] delivered to and held by it under the Loan Agreement.
The Assignor requests that the Borrower exchange the Assignor's [DIP Note]
[Exit Note] for a new [DIP Notes] [Exit Notes] payable to the Assignor and the
Assignee as follows:
Notes Payable to Amount of[DIP Note]
the Order of: [Exit Note]
- ----------------- -----------------
Assignor $[ ]
Assignee $[ ]
3. ASSIGNEE'S REPRESENTATIONS. The Assignee (i) represents and
warrants that (A) it is duly and legally authorized to enter into this
Assignment and Acceptance, (B) the execution, delivery and performance of
this Assignment and Acceptance do not conflict with any provision of law or
of the charter or by-laws of the Assignee, or of any agreement binding on the
Assignee, (C) all acts, conditions and things required to be done and
performed and to have occurred prior to the execution, delivery and
performance of this Assignment and Acceptance, and to render the same the
legal, valid and binding obligation of the Assignee, enforceable
<PAGE>
-3-
against it in accordance with its terms, have been done and performed and
have occurred in due and strict compliance with all applicable laws; (ii)
confirms that it has received a copy of the Loan Agreement, together with
copies of the most recent financial statements delivered pursuant to Section
8(e) and Section 10.1 thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into the Assignment and Acceptance; (iii) agrees that it will, independently
and without reliance upon the Assignor, the Agent or any other Bank 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 the Loan Agreement; (iv) represents and warrants that it is an Eligible
Assignee; (v) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Agreement and the
other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (vi) agrees
that it will perform in accordance with their terms all the obligations which
by the terms of the Loan Agreement are required to be performed by it as a
Bank; and (vii) acknowledges that it has made arrangements with the Assignor
satisfactory to the Assignee with respect to its PRO RATA share of Letter of
Credit Fees in respect of outstanding Letters of Credit.
4. EFFECTIVE DATE. The effective date for this Assignment and
Acceptance shall be ____________ ____, 19___ (the "Effective Date").
Following the execution of this Assignment and Acceptance, the payment of the
registration fee required by Section 14.3 of the Loan Agreement, the consent
of the Agent, and the consent of the Borrower hereof (if required under the
Loan Agreement) having been obtained, each party hereto shall deliver its
duly executed counterpart hereof to the Agent for acceptance by the Agent and
recording in the Register by the Agent. SCHEDULE 1 to the Loan Agreement
shall thereupon be replaced as of the Effective Date by the SCHEDULE 1
annexed hereto.
5. RIGHTS UNDER LOAN AGREEMENT. Upon such acceptance and recording,
from and after the Effective Date, (i) the Assignee shall be a party to the
Loan Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Bank thereunder, and (ii) the Assignor
shall, with respect to that portion of its interest under the Loan Agreement
assigned hereunder, relinquish its rights and be released from its
obligations under the Loan Agreement; PROVIDED, HOWEVER, that the Assignor
shall retain its rights to be indemnified pursuant to Section 16.2 of the
Loan Agreement with respect to any claims or actions arising prior to the
Effective Date.
<PAGE>
-4-
6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by
the Agent and such recording, from and after the Effective Date, the Agent
shall make all payments in respect of the rights and interests assigned
hereby (including payments of principal, Reimbursement Obligations, interest,
fees and other amounts) to the Assignee. The Assignor and the Assignee
shall make any appropriate adjustments in payments for periods prior to the
Effective Date hereof or with respect to the making of this assignment
directly between themselves.
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE
TO CONFLICT OF LAWS).
8. COUNTERPARTS. This Assignment and Acceptance may be executed in any
number of counterparts which shall together constitute but one and the same
agreement.
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.
[INSERT ASSIGNING BANK'S NAME]
By:____________________________________
Name:______________________________
Title:_____________________________
<PAGE>
-5-
[INSERT ELIGIBLE ASSIGNEE'S NAME]
By:____________________________________
Name:______________________________
Title:_____________________________
CONSENTED TO:
LAMONTS APPAREL, INC.,
[debtor and debtor in possession*]
By:_____________________________
Name:_______________________
Title:______________________
THE FIRST NATIONAL
BANK OF BOSTON, As Agent
By:_____________________________
Name:_______________________
Title:______________________
* Applicable only for the period of time prior to the Exit Facility Date.
<PAGE>
Schedule 1
Banks; Commitment Percentages
<PAGE>
SCHEDULE 1
BANKS; COMMITMENT PERCENTAGES
Commitment Percentage of Total
DIP Commitments or Total Exit
Bank Commitments, as applicable
---- ------------------------------
The First National Bank of Boston 100%
100 Federal Street
Boston, MA 02110
<PAGE>
SCHEDULE 3.7
LOCK BOX AND DEPOSITORY INSTITUTION ACCOUNTS
<PAGE>
SCHEDULE 3.7
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
LAMONTS OUTSIDE CONCENTRATION
STORE DEPOSITORY STRUCTURE
AS OF MAY 28, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Lamonts Outside Concentration Account
Seafirst Account #63489314
- -----------------------------------------------------------------------------------------------------------------------------------
| | | | | |
| | | | | |
<S> <C> <C> <C> <C> <C>
BANK OF ASTORIA FIRST NATIONAL BANK FIRST SECURITY BANK FIRST SECURITY BANK WEST ONE BANK* WEST ONE BANK*
ALASKA MONTANA UTAH IDAHO OREGON
1601 E. Harbor Drive 646 West 4th Avenue PO Box 4506 1320 North & Main 701 E. 59 E
Warrenton, OR 97146 PO Box 100720 Missoula, MT 59806 Logan, UT 84321 Morrison-Knudsen Drive 11th Avenue
(503) 861-9750 Anchorage, AK 99510 (406) 728-3115 (208) 383-5370 Plaza II Eugene, OR 97402
(907) 265-3552 Boise, ID 83712 (503) 345-2365
(208) 383-5370
Account #02301873 Account #01113232 Account #94019 Account #0320012545 Account #0054011725 Account #0102022610
STORES STORES STORES STORES STORES STORES
------ ------ ------ ------ ------ ------
608 516 596 600 522 582
524 530 594
544 542
548 564
550 570
552 602
562
</TABLE>
*West One Banks have been acquired by US Bank, accounts will transfer to US Bank
locations effective July 1996.
<PAGE>
SCHEDULE 3.7A
CERTAIN TYPES OF PAYMENTS TO BE RECEIVED
DIRECTLY BY THE BORROWER
<PAGE>
SCHEDULE 3.7(a)
DEPOSIT CONTROL ITEMS
1) Merchandise Vendor-Related (when not offset to invoices)
Markdown Moneys
Cosmetic Commissions Receivable
Advertising Coop Receivable
Debit Balance Receivable
Subtenant Reimbursements/Income (Santa Photo, Hair Salon,
Fridgerator Co.)
Retired Inventory Liquidation
2) Expense Vendor-Related Reimbursements/Refunds (when not offset to invoices)
Advertising Vendors
Maintenance Work / Landlord Reimbursements
Utility Company Reimbursements
Prepaid: Insurance, Benefits, Software, Supplies
Other
3) Employee-Related Reimbursements
Payroll Garnishments
Executive Personal Expense Reimbursements
Employee Long Distance Phone Reimbursements
Benefits: Cobra Self-Pay, MDDV Reimbursements
4) Legal and out of the ordinary course of business payments
5) Distribution Center
Freight Vendor Reimbursements (Inbound, Outbound, RTV, etc.);
WOSCA Misc.
<PAGE>
SCHEDULE 3.9
CONCENTRATION ACCOUNT ARRANGEMENTS
AND DEPOSITORY INSTITUTION ACCOUNTS
<PAGE>
Schedule 3.9
LAMONTS BANK ACCOUNT STRUCTURE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Bank of Boston ------------
| |
| | ZBA
| | Lamonts General Deposit Control
| ---- Operating A/C - Seafirst ------------------------ A/C - Seafirst
| 68320605 67630210
| 1025 1036
| |
| ------------------------------------------------------------------------
| | | | | |
Blocked ZBA ZBA ZBA
Concentration A/C Workmans Tax A/C Payroll A/C Employee 2 Seafirst
Seafirst Comp. (checking) incl. ACH Benefit Plan Mirror
67630111 A/C-Seafirst Seafirst Seafirst A/C-Seafirst Accounts
| | 68327014 68320514 68320506 68332105 |
| | 1054 1029 1032 1057 |
| | |
| |---------------------------------------------- |
| | | | | | |
ZBA ZBA ZBA ZBA ZBA ZBA |
Return Deposit Seafirst Outside VISA/MC Credit Card Utilities A/C TRIP 2 First Union
Items Control Deposit Conc. Dep. Deposit Deposit Mkt Rate Account Controlled
Account Account Account Account Account Account Savings Disb. A/Cs
63492003 63490015 63491906 63489314 63744213 67630202 54103916 68323112 |
1053 1035 1066 1060 1074 1051 1056 |
| | | |
| | | |
| | | First Union Mirror
| | 1305 LCC ----------- ------
All WA All Stores 1300 Amex 1026 Merchandise A/C 2079900002771 1175009
Stores Outside WA 1073 Discover 1027 Expense A/C 2079900002810 1169119
</TABLE>
<PAGE>
SCHEDULE 8(n)
SUBSIDIARIES OF BORROWER
<PAGE>
SCHEDULE 8(n)
1) Texstyrine Corporation
<PAGE>
SCHEDULE 8(p)
BORROWER LOCATIONS
<PAGE>
SCHEDULE 8(p)
<TABLE>
<CAPTION>
DIST # NAME PHONE ADDRESS CITY ST ZIP
<S> <C> <C> <C> <C> <C> <C> <C>
AK 502 BURIEN 206 433-0676 460 SW 152ND STREET SEATTLE WA 98166
LP 506 FOREST PARK 206 367-7716 17171 BOTHELL WAY NE FOREST PARK WA 98155
LP 508 CROSSROADS 206 644-2941 156TH NE & NE 8TH BELLEVUE WA 98008
DG 510 MANITO 509 747-2043 E 802 29TH AVE SPOKANE WA 99203
LP 512 TOTEM LAKE 206 821-7788 12601 120TH NE KIRKLAND WA 98034
DG 514 SHADLE 509 326-5750 WELLESLEY @ ALBERTA SPOKANE WA 99205
JM 516 UNIVERSITY CTR 907 562-2333 3909 SEWARD HIGHWAY ANCHORAGE AK 99503
AK 518 WESTWOOD 206 938-4116 2600 SW BARTON SEATTLE WA 98126
AK 520 SEA-TAC 206 839-8950 2001 S 320 PACIFIC HWY FEDERAL WAY WA 98003
DG 522 POCATELLO 208 233-8112 800 YELLOWSTONE AVE POCATELLO ID 83201
JM 524 FAIRBANKS 907 456-2550 1255 AIRPORT WAY & COWLES FAIRBANKS AK 99701
LP 526 FACTORIA 206 644-2921 4001 FACTORIA SQ MALL BELLEVUE WA 98006
LP 528 NORTHGATE 206 367-7690 300 NORTHGATE PLAZA SEATTLE WA 98125
DG 530 IDAHO FALLS 208 524-1621 1515 NORTHGATE MILE IDAHO FALLS ID 83401
DG 532 WENATCHEE 509 884-1431 511 VALLEY MALL PARKWAY EAST WENATCHEE WA 98802
DG 536 YAKIMA 509 453-4891 2515 MAIN STREET UNION GAP WA 98903
AK 538 OLYMPIA 360 754-8025 625 BLACKLAKE BOULEVARD OLYMPIA WA 98502
LP 540 ALDERWOOD 206 771-6497 3100 184TH STREET SW LYNNWOOD WA 98037
DG 542 MOSCOW 208 882-9580 1922 W PULLMAN ROAD MOSCOW ID 83843
JM 544 NORTHWAY 907 276-2070 3101 PENLAND PARKWAY ANCHORAGE AK 99508
AK 546 ABERDEEN 360 533-4832 1137 E WISHKAH ABERDEEN WA 98520
JM 548 JUNEAU 907 789-2243 8745 GLACIER HIGHWAY JUNEAU AK 99801
JM 550 SOLDOTNA 907 262-7000 35249 SPUR HIGHWAY SOLDOTNA AK 99669
JM 552 DIMOND 907 349-6591 800 E. DIMOND BLVD. #1 ANCHORAGE AK 99515
AK 556 PORT ANGELES 360 452-4571 200 WEST 1ST PORT ANGELES WA 98362
AK 558 SILVERDALE 360 698-2151 10317 SILVERDALE WAY N SILVERDALE WA 98383
MAIL GOES TO: PO BOX 1937 SILVERDALE WA 98383
JM 562 WASILLA 907 376-9740 1800 PARKS HWY. STE B WASILLA AK 99687
DG 564 LEWISTON 208 746-8300 1720 19TH AVE LEWISTON ID 83501
AK 566 HIGHLAND 206 565-8885 5915 6TH AVE TACOMA WA 98406
LP 568 MARYSVILLE 360 659-7709 205 MARYSVILLE MALL MARYSVILLE WA 98270
DG 570 COEUR D'ALENE 208 762-2150 WEST 200 HANLEY AVE. #4 COEUR D'ALENE ID 83814
AK 572 PUYALLUP 206 840-1794 3500 S MERIDIAN #600 PUYALLUP WA 98373
LP 582 HILLSBORO 503 693-1345 2175 SE TUALATIN VLY HWY HILLSBORO OR 97213
DG 586 TRI-CITIES 509 736-0888 415 COLUMBIA CENTER KENNEWICK WA 99336
LP 594 CORVALLIS 503 753-2110 215 SW 4TH ST CORVALLIS OR 97333
DG 596 MISSOULA-SOUTHGATE MALL 406 721-1948 SOUTHGATE MALL MISSOULA MT 59801
DG 600 LOGAN-CACHE VALLEY MALL 801 753-6130 1300 N. MAIN ST. LOGAN UT 84341
DG 602 TWIN FALLS 208 736-8081 1485 POLE LINE RD. #126 TWIN FALLS ID 83301
DG 604 U-CITY 509 921-9408 100 U. CITY MALL E.S. SPOKANE WA 99206
DG 606 MOSES LAKE 509 765-9450 813 N. STRATFORD ROAD MOSES LAKE WA 98837
LP 608 ASTORIA 503 861-3780 141 SOUTH HIGHWAY 101 WARRENTON OR 97146
AK 610 ISSAQUAH 206 557-6550 775 NW GILMAN BLVD. W. ISSAQUAH WA 98027
DISTRIBUTION CENTER 206 872-3307 7202 S 212TH ST. KENT WA 98032
WOSCA 101 VAN KAREN AVE. JERSEY CITY NJ 07306
WOSCA 2610 WISCONSIN ST. SOUTHGATE CA 90280
WOSCA 1021 MELROSE ST. MEMPHIS TN 38114
WOSCA 300 EAST 27TH ST. CHARLOTTE NC 28206
CORPORATE OFFICE 12413 WILLOWS RD. NE KIRKLAND WA 98034
</TABLE>
<PAGE>
SCHEDULE 8(q)
INTELLECTUAL PROPERTY; LICENSES; PERMITS;
CONSENTS; FRANCHISES; APPLICATIONS
<PAGE>
TRADEMARK SEARCH SUMMARY
SCHEDULE 8(q)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTRATION
TRADEMARK OWNER/ASSIGNEE JURISDICTION REGISTRATION NO. DATE COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE RIGHT FASHION Lamonts Apparel, Inc. U.S. 1,870,174 12/27/94
THE RIGHT PRICE
THE RIGHT STORE Alaska 2,344 07/26/93
Minnesota 20,924 06/23/93
Montana 17,463 07/19/93
Nebraska 1,251,575 06/22/93
Oregon S27,232 06/25/93
Utah 33,875 06/21/93
Washington 22,264 06/16/93
- ------------------------------------------------------------------------------------------------------------------------------------
H.Q. STUDIO Lamonts Apparel, Inc. U.S. 1,866,465 12/06/94
- ------------------------------------------------------------------------------------------------------------------------------------
NORTHWEST Lamonts Apparel, Inc. U.S. 1,834,723 05/03/94 State applications being
OUTFITTERS made for Alaska, Idaho,
Montana, Oregon, Utah and
Washington
- ------------------------------------------------------------------------------------------------------------------------------------
LAMONTS FOR KIDS Lamonts Apparel, Inc. U.S. 1,697,219 06/23/92
Idaho 13,556 03/06/92
Minnesota 20,925 06/23/93 (and Design)
Nebraska 1,251,564 06/22/93
Utah 32,898 03/04/92
- ------------------------------------------------------------------------------------------------------------------------------------
LAMONTS (and Design) Lamonts Apparel, Inc. U.S. Serial #74-258,257 Filed: 03/23/92 Abandoned: 04/02/93
- ------------------------------------------------------------------------------------------------------------------------------------
JUST S-A-S-H-A Lamonts Apparel, Inc. U.S. Serial #74-165,143 Filed: 05/09/91 Abandoned: 12/20/95
(no longer used) Serial #73-814,162 Filed: 07/24/89 Abandoned: 06/11/90
- ------------------------------------------------------------------------------------------------------------------------------------
TRADITIONS (and Lamonts Apparel, Inc. U.S. 1,612,148 09/04/90 Sections 8 and 15
Designs) Declaration filed May 8,
1996. Applications being
made for the states of
Alaska, Idaho, Montana,
Oregon, Utah and Washington
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTRATION
TRADEMARK OWNER/ASSIGNEE JURISDICTION REGISTRATION NO. DATE COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HUNTS POINT (and Lamonts Apparel, Inc. U.S. 1,591,011 04/10/90 Sections 8 and 15
Design) Declaration filed December
12, 1995. Applications
being made for the states
of Alaska, Idaho, Montana,
Oregon, Utah and Washington
- ------------------------------------------------------------------------------------------------------------------------------------
LIVIN ON THE EDGE Lamonts Apparel, Inc. U.S. 1,591,010 04/10/90 Sections 8 and 15
Declaration filed December
11, 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
ACTION SPORT Lamonts Apparel, Inc. U.S. 1,582,669 02/13/90 Applications being made for
the states of Alaska,
Idaho, Montana, Oregon,
Utah and Washington
- ------------------------------------------------------------------------------------------------------------------------------------
STUDIO HQ (and Design) Lamonts Apparel, Inc. U.S. 1,582,645 02/13/90
(being renewed by HQ
Studio)
- ------------------------------------------------------------------------------------------------------------------------------------
BLUEBERRIES (and Lamonts Apparel, Inc. U.S. Serial #73-806,205 Filed: 06/12/89 Abandoned: 05/04/90
Design) (no longer used)
- ------------------------------------------------------------------------------------------------------------------------------------
IMPACT (and Design) Lamonts Apparel, Inc. U.S. Serial #73-806,159 Filed: 06/12/89 Abandoned: 03/22/90
(no longer used)
- ------------------------------------------------------------------------------------------------------------------------------------
CAUTION (and Design) Lamonts Apparel, Inc. U.S. Serial #73-806-158 FIled: 06/12/89 Abandoned: 03/22/90
(no longer used)
- ------------------------------------------------------------------------------------------------------------------------------------
LAMONSTERS (and Lamonts Apparel, Inc. U.S. 1,541,643 05/30/89 Canceled: 12/04/95
Design) (not renewed --
filing Lil' Lamonsters Alaska 1,905 02/08/88
in its place) Oregon 22,249 03/04/88 Expired: 09/04/90
Washington 17,831 02/08/88
- ------------------------------------------------------------------------------------------------------------------------------------
CONTEMPORARY Lamonts Apparel, Inc. U.S. 1,510,212 10/25/88
CLASSICS (and Design)
(no longer used) Alaska 1,900 01/29/88
Idaho 12,219 01/29/88
Oregon 22,248 03/04/88 Expired: 09/04/90
Washington 17,809 01/29/88
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTRATION
TRADEMARK OWNER/ASSIGNEE JURISDICTION REGISTRATION NO. DATE COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERSUASION Lamonts Apparel, Inc. U.S. 1,510,206 10/25/88
Alaska 1,898 01/29/88
Idaho 12,221 01/29/88
Oregon 22,247 03/04/88 Expired: 09/04/90
Washington 17,810 01/29/88 (and Design)
- ------------------------------------------------------------------------------------------------------------------------------------
RICHARDS ROAD Lamonts Apparel, Inc. U.S. 1,508,304 10/11/88
Alaska 1,899 01/29/88
Idaho 12,222 01/29/88
Oregon 22,243 03/04/88 Expired: 09/04/90
Washington 17,811 01/29/88 (and Design)
- ------------------------------------------------------------------------------------------------------------------------------------
IMAGES (and Design) Lamonts Apparel, Inc. U.S. Serial #73-711,575 Filed: 02/11/88 Abandoned: 01/19/89
(no longer used)
Alaska 1,827 12/01/86
Oregon 21,258 12/01/86 Expired: 12/01/91
Washington 16,907 12/16/86
- ------------------------------------------------------------------------------------------------------------------------------------
CASCADE CLASSICS (and Lamonts Apparel, Inc. U.S. Serial #73-711,573 Filed: 02/11/88 Abandoned: 12/29/89
Design)
Alaska 1,901 01/29/88
Idaho 12,220 01/29/88
Oregon 22,246 03/04/88 Expired: 09/04/90
Washington 17,807 01/21/88
Applications being made for
the states of Utah and
Montana
- ------------------------------------------------------------------------------------------------------------------------------------
LAMONSTER (THE Lamonts Apparel, Inc. Idaho 12,237 02/09/88
MONSTER)
- ------------------------------------------------------------------------------------------------------------------------------------
COLLECTIONS Lamonts Apparel, Inc. U.S. Serial #73-708,921 02/01/88 Abandoned: 03/03/89
(no longer used)
Alaska 1,897 01/29/88
Idaho 12,223 01/29/88
Oregon 22,245 03/04/88 Expired: 09/04/90
Washington 17,808 01/29/88
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTRATION
TRADEMARK OWNER/ASSIGNEE JURISDICTION REGISTRATION NO. DATE COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CARAMELLA Lamonts Apparel, Inc. U.S. Serial #73-708,920 02/01/88 Abandoned: 08/23/89
(no longer used)
Alaska 1,902 01/29/88
Idaho 12,224 01/29/88
Oregon 22,244 03/04/88 Expired: 09/04/90
Washington 17,806 01/29/88
- ------------------------------------------------------------------------------------------------------------------------------------
IMAGES (and Design) Lamonts Apparel, Inc. Idaho 10,904 01/02/87
- ------------------------------------------------------------------------------------------------------------------------------------
LAMONTS THE FAMILY Lamonts Apparel, Inc. U.S. 1,415,442 10/28/86 Canceled: 05/04/93
CLOTHING STORE
(no longer used)
- ------------------------------------------------------------------------------------------------------------------------------------
LIL' LAMONSTERS Lamonts Apparel, Inc. U.S. 0 0 Federal registration being
made
- ------------------------------------------------------------------------------------------------------------------------------------
NWO ACTIVE Lamonts Apparel, Inc. U.S. 0 0 Federal registration being
made
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
SCHEDULE 10.2 (b)
CERTAIN EXISTING INDEBTEDNESS
<PAGE>
SCHEDULE 10.2 (b)
CERTAIN EXISTING INDEBTEDNESS
1) Deferred Gain on sale of Alderwood $224,362
2) Accumulated Benefit Obligation (Pension) $250,000
--------
Total $474,362
<PAGE>
SCHEDULE 10.2(C)
CERTAIN PERMITTED PRIOR LIENS
<PAGE>
SCHEDULE 10.2(C)
PRIOR PERMITTED LIENS
The following interests evidenced by UCC-1 Financing Statements:
<TABLE>
- ----------------------------------------------------------------------------------------------
Secured Party Jurisdiction File Number Collateral
------------- ------------ ----------- ----------
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
London Fog Industries, Inc. SOS, Alaska 384299 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Alaska 401773 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
London Fog Industries, Inc. SOS, Idaho B616127 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Idaho B666718 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
London Fog Industries, Inc. SOS, Montana 435255 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Montana 461811 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
London Fog Industries, Inc. SOS, Oregon S09122 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Oregon S61138 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
Sensormatic Electronics Corp. SOS, Oregon S18331 Leased and Purchased
Theft Protection
Equipment
- ----------------------------------------------------------------------------------------------
London Fog Industries, Inc. SOS, Utah 399753 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Utah 444654 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
General Electric Capital SOS, Washington 92-104-1226 Leased Equipment
Corporation assigned by JWP
Credit Corp.
- ----------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation SOS, Washington 92-230-1067 Leased Equipment
- ----------------------------------------------------------------------------------------------
NCF Financial, Inc. SOS, Washington 92-329-0401 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
AGFA Financial Services, Inc. SOS, Washington 93-039-0115 Leased Equipment
- ----------------------------------------------------------------------------------------------
</TABLE>
- 1 -
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
Secured Party Jurisdiction File Number Collateral
------------- ------------ ----------- ----------
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NCF Financial, Inc. SOS, Washington 93-195-0719 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
NCF Financial, Inc. SOS, Washington 93-335-0058 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
NCF Financial, Inc. SOS, Washington 94-077-0408 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
London Fog Industries, Inc. SOS, Washington 94-160-0272 Consigned Goods
(Apparel)
- ----------------------------------------------------------------------------------------------
NCF Financial, Inc. SOS, Washington 94-284-0431 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Washington 95-069-0161 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
JBI, Inc. d/b/a Shoe Corporation SOS, Washington 95-186-0257 License Arrangement
of America (Footwear)
- ----------------------------------------------------------------------------------------------
NCF Financial, Inc. SOS, Washington 95-317-0361 Leased Personal
Computers
- ----------------------------------------------------------------------------------------------
</TABLE>
The following claims were filed in the Case as secured claims. Those
marked with an asterisk are not or may not be, to the best of Borrower's
current knowledge, secured claims. Items marked in the Amount column with a
double asterisk will be paid on or before the Exit Facility Date, to the
extent allowed by the Bankruptcy Court.
<TABLE>
- ----------------------------------------------------------------------------------------------
Secured Party Address Amount Collateral
------------- ------- ------ ----------
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chugach Electric Association, P.O. Box 196300 $11,453.62 None of
Inc.* Anchorage, AK Borrower's
99519-6300
- ---------------------------------------------------------------------------------------------
The Herald* Attn: Linda J. $47,404.68 Unknown
Piekkola
P.O. Box 930
Everett, WA 98206
- ---------------------------------------------------------------------------------------------
Pacific Power* 988 Commercial St. $4,819.49 None of
Astoria, OR 97103 Borrower's
- ---------------------------------------------------------------------------------------------
Safeco Credit Company, Inc. Safeco Plaza, Bldg. A $1,581.61 Unknown
Seattle, WA 98185
- ---------------------------------------------------------------------------------------------
</TABLE>
- 2 -
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
Secured Party Address Amount Collateral
------------- ------- ------ ----------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sensormatic Electronics Corp. Attn: Connie Johnson Theft prevention
550 N.W. 12th Ave. $165,455.67 equipment and
Deerfield Beach, FL (current supplies
33442 balance due is
$122,000.00)
- --------------------------------------------------------------------------------------------------
Stanley Creations, Inc.* 1414 Willow Ave. $45,576.00 Inventory but no
Melrose Park, PA UCC's or
19126 reclamation
claims was filed.
- --------------------------------------------------------------------------------------------------
Walsh Construction Co.* 3015 S.W. First Ave. $9,290.00 None of
Portland, OR 97201 Borrower's
- --------------------------------------------------------------------------------------------------
Highland Sixth Assocs.* Highland Hill Shopping $9,844.72 Landlord's lien
Center includes inventory
Koehler McFadden &
Co
Attn: Dan Kettman
1601 5th Ave. #2210
Seattle, WA 98101
- --------------------------------------------------------------------------------------------------
Wesbild, Inc.* Attn: David R. Riley $16,116.00 Landlord's lien
800 Fifth Ave. #4100 includes inventory
Seattle, WA 98104
- --------------------------------------------------------------------------------------------------
CITY-Kennewick* Attn: Evelyn Lusignan $214.34 None of
P.O. Box 6108 Borrower's
Kennewick, WA
99336
- --------------------------------------------------------------------------------------------------
CITY-Marysville* 514 Delta Ave. $93.50 None of
Marysville, WA Borrower's
98270
- --------------------------------------------------------------------------------------------------
CITY-Port Angeles* P.O. Box 1150 $3,498.65 None of
Port Angeles, WA Borrower's
98362
- --------------------------------------------------------------------------------------------------
CITY-Union Gap* P.O. Box 3008 $334.12 None of
Union Gap, WA Borrower's
98903-0008
- --------------------------------------------------------------------------------------------------
CNTY-Ada-Treasurer 650 Main St. **$3,126.73 Personal property
P.O. Box 2868 possibly includes
Boise, ID 83701 inventory
- --------------------------------------------------------------------------------------------------
CNTY-Bannock-Treasurer Attn: Shelley Shannon **$715.59 Personal property
P.O. Box 4626 possibly includes
Pocatello, ID 83205- inventory
2646
- --------------------------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
Secured Party Address Amount Collateral
------------- ------- ------ ----------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CNTY-Benton-Treasurer Benton County **$2,270.40 Personal property
Prosecuting Attorney not including
7320 W. Quinault inventory
Kennewick, WA
99336
- --------------------------------------------------------------------------------------------------
CNTY-Douglas-Treasurer P.O. Box 609 **$2,155.23 Personal property
Waterville, WA not including
98858 inventory
- --------------------------------------------------------------------------------------------------
CNTY-Grant-PUD #2* Attn: Diane L. $2,576.18 None of
Chestnut, Office Borrower's
Supervisor
312 W. Third Ave.
Moses Lake, WA
98837
- --------------------------------------------------------------------------------------------------
CNTY-King-Finance Division* Attn: Philip A. $46,462.36 Personal property
as to $19,733.35 Sanders not including
King County inventory
Administration Bldg.
500 Fourth Ave. #600
Seattle, WA 98104-
2387
- --------------------------------------------------------------------------------------------------
CNTY-Kitsap-Treasurer Attn: Allen **$2,017.04 Personal property
Richardson not including
P.O. Box 169 inventory
Port Orchard, WA
98366
- --------------------------------------------------------------------------------------------------
CNTY-Latah-Tax Collector Attn: Nonrae **$2,778.97 Personal property
Robinson including
P.O. Box 8068 inventory
Moscow, ID 83843
- --------------------------------------------------------------------------------------------------
CNTY-Nez Perce-Tax Collector P.O. Box 896 **$7,994.73 Personal property
Lewiston, ID 83501 including
inventory
- --------------------------------------------------------------------------------------------------
CNTY-Snohomish-Treasurer Attn: Linda L. **$9,012.69 Personal property
Ferrucci M/S 501 not including
3000 Rockefeller inventory
Everett, WA 98201-
4060
- --------------------------------------------------------------------------------------------------
CNTY-Spokane-Treasurer P.O. Box 2165 **$5,189.55 Personal property
Spokane, WA 99210 not including
inventory
- --------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
Secured Party Address Amount Collateral
------------- ------- ------ ----------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CNTY-Twin Falls-Treasurer Attn: Bonnie Bruning **$2,018.93 Personal property
P.O. Box 88 not including
Twin Falls, ID inventory
83303-0088
- --------------------------------------------------------------------------------------------------
CNTY-Yakima-Treasurer P.O. Box 1408 **$2,665.99 Personal property
Yakima, WA 98907- not including
1408 inventory
- --------------------------------------------------------------------------------------------------
Kenai Peninsula Borough Legal Dept. Wm. R. **$1,810.25 Personal property
Evans, Deputy possibly includes
Attorney inventory
144 N. Binkley St.
Soldotna, AK 99669
- --------------------------------------------------------------------------------------------------
Matanuska-Susitna Borough Finance Dept.-Tammy **$13,013.75 Personal property
Clayton-Comptroller possibly includes
350 E. Dahlia inventory
Palmer, AK 99645
- --------------------------------------------------------------------------------------------------
Municipality of Anchorage Attn: G. Peter **$1,214.72 Personal property
Hallgrimson possibly includes
Municipal Attorney's inventory
Office
P.O. Box 196650
Anchorage, AK
99519-6650
- --------------------------------------------------------------------------------------------------
Thurston County Treasurer 2000 Lakeridge Drive **$10,402.30 Personal property
Olympia, WA 98502 not including
inventory
- --------------------------------------------------------------------------------------------------
Kitsap County Treasurer P.O. Box 169 **$2,359.54 Personal property
Port Orchard, WA not including
98366 inventory
- --------------------------------------------------------------------------------------------------
John J. Gilbert* 29 E. 64th St. $1,223.44 Unknown
New York, NY
10021-7043
- --------------------------------------------------------------------------------------------------
</TABLE>
Premium Financing Agreement for insurance premiums with Imperial Premium
Finance, Inc. which grants a security interest in unearned premiums and loss
payments for the amount of the premiums financed.
Encumbrance on Borrower's interest in $570,832.00
Frederick Atkins
- 5 -
<PAGE>
The following deposits and retainers with various entities listed below:
Prepayment to U.S. Postal Service $4,832.00
Retainer with Conner, Grabrock (law firm) $12,776.50
Deposit with RVL Packaging (labels) $15,000.00
Deposit with L&E Packaging (labels) $5,347.00
Deposit with AT&T (utility deposit) $11,800.00(1)
Deposit with Puget Power (utility deposit) $26,250.00(1)
Chugach Electric (utility deposit) $6,000.00(1)
Deposit in restricted bank account at $240,955.00(1)
Seafirst(required by Bankruptcy Court)
for two months utilities expenses
Prepaid Premium for D&O Insurance $182,750.00
for 11/95 to 10/96 (Premiums paid
at rate of $30,458 per month)
Retainer with Skadden Arps (attorneys) $31,881.00
Deposit with Frederick Atkins $1,020,000.00(1)
(buying cooperative)
Deposit with NPC for workers compensation $319,923.00(2)
(Wn.)
Deposit NPC for workers compensation (Or.) $47,935.00(2)
Deposit with Ernst Home Center for workers $12,390.00(1)
compensation (Or.)
Deposit with State of New Jersey $50,222.00(1)
Deposit with Bank of America as collateral
for outstanding Letter of Credit $100,000.00
- -----------------------
(1) Shown on balance sheet as restricted cash.
(2) Shown on balance sheet as restricted cash of $196,846.
- 6 -
<PAGE>
Deposit with WOSCA (consolidator) for
estimated two months' freight charges
for shipments of consolidated
merchandise $25,000.00
The attached list of encumbrances of the Kitsap Store Real Property.
- 7 -
<PAGE>
SPECIAL EXCEPTIONS:
1. Easement affecting a portion of said premises and for the purposes
hereinafter stated, as granted by instrument recorded October 6, 1984,
in the office of the recording officer of Kitsap County, Washington
under Auditor's File No. 8410080040:
In favor of: PUGET SOUND POWER AND LIGHT COMPANY
For: Underground and/or overhead transmission and electric
lines and appurtenances thereto:
Affects: portion of said premises
2. Easement, including its terms, covenants and provisions as disclosed by
instrument;
Dated: January 21, 1988
Recorded: March 16, 1988
Recording No.: 8803160048
In Favor of: Silverdale Water District No. 16
For: water main
Affects: 10 foot wide portion of said premises
3. Easement, including its terms, covenants and provisions as disclosed by
instrument;
Dated: June 16, 1986
Recorded: July 7, 1986
Recording No.: 8607070007
In Favor of: Cascade Natural Gas
For: pipeline
Affects: 10 foot wide portion of said premises
4. Easement, including its terms, covenants and provisions as disclosed by
instrument;
Dated: April 27, 1988
Recorded: May 5, 1988
Recording No.: 8805050140
In Favor of: Kitsap County
For: sewer main
Affects: 10 foot and 20 foot wide portions of said premises
5. Easement, including its terms, covenants and provisions as disclosed by
instrument;
Dated: May 23, 1988
Recorded: May 31, 1988
Recording No.: 8805310019
In Favor of: Cascade Natural Gas
For: pipeline
Affects: 10 foot wide portion of said premises
<PAGE>
6. Agreement including its terms, covenants and provisions;
Recorded: May 10, 1993
Recording No.: 9305100088
For: Third Amendment to Construction, Operation
and Reciprocal Easement
Said instrument being a third amendment and restatement of documents
filed under Auditor's Filer Nos. 8408230089, 8706040092 and 8807070057.
7. Terms and conditions of that certain Short Form Lease recorded under
Auditor's file No. 8408220150, as disclosed in Exhibit "B".
8. Liability for future assessments and additional tap and connection
charges, if any, levied by Silverdale Water and/or Sewer District, as
disclosed by letter recorded under Auditor's File Nos. 7902280087 and
8004010110.
9. Pendency of United States Bankruptcy Court, for Western, Washington.
Case No.: 95-00100
Wherein: Lamont's Apparel, Inc., a Washington
Corporation filed a petition for bankruptcy
On: January 6, 1995
Trustee: unknown
Attorney for
Debtor: Richard J. Hyatt
Any transactions involving this property must be made pursuant to
bankruptcy court order. A copy of the order should be presented to this
company.
10. Assessment of:
Amount: $15,926.99
Payable in: 15 annual installments, plus interest
From: December 15, 1984
Account No.: 709-0439
Affects: said premises
Contact 876-7135 for further information.
11. Assessment of:
Amount: $11,284.35
Payable in: 15 annual installments, plus interest
From: January 3, 1985
Account No.: 504-0307
Affects: said premises
Contact 876-7135 for further information.
12. Liability for future assessments and additional tap and connection
charges, if any, levied by Silverdale Water and/or Sewer District, as
disclosed by letter recorded under Auditor's File Nos. 7902280087 and
8004010110.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 2,083
<SECURITIES> 0
<RECEIVABLES> 2,256
<ALLOWANCES> 0
<INVENTORY> 34,973
<CURRENT-ASSETS> 41,965
<PP&E> 36,951
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,258
<CURRENT-LIABILITIES> 42,076<F1>
<BONDS> 0
0
0
<COMMON> 179
<OTHER-SE> (48,824)
<TOTAL-LIABILITY-AND-EQUITY> 101,258
<SALES> 37,922
<TOTAL-REVENUES> 37,922
<CGS> 24,348
<TOTAL-COSTS> 24,348
<OTHER-EXPENSES> 18,482<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,198
<INCOME-PRETAX> (6,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,103)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> 0
<FN>
<F1>EXCLUDES LIABILITIES SUBJECT TO SETTLEMENT UNDER REORGANIZATION PROCEEDINGS.
<F2>INCLUDES: OPERATING AND ADMINISTRATIVE EXPENSES OF $16,446, DEPRECIATION AND
AMORTIZATION OF $2,037, AND REORGANIZATION EXPENSES OF $670.
</FN>
</TABLE>
