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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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FLEET RETAIL FINANCE INC.
AGENT
AND
FLEET ROBERTSON STEPHENS, INC.,
SYNDICATION AGENT
FOR THE TRANCHE A LENDERS REFERENCED HEREIN
AND
BACK BAY CAPITAL FUNDING, LLC
TRANCHE B LENDER
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LECHTERS, INC.,
LEAD BORROWER
FOR THE BORROWERS REFERENCED HEREIN
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NOVEMBER 14, 2000
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS.......................................................1
ARTICLE II - THE REVOLVING CREDIT AND TRANCHE B LOAN FACILITY................42
2.1 Establishment of Revolving Credit and Tranche B Loan Facility........42
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2.2 Advances in Excess of Borrowing Base.................................46
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2.3 Risks of Value of Collateral.........................................47
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2.4 Loan Requests........................................................47
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2.5 Making of Loans......................................................50
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2.6 SwingLine Loans......................................................51
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2.7 The Loan Account.....................................................52
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2.8 Notes................................................................53
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2.9 Payment of Loans.....................................................54
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2.10 Interest Rates.......................................................56
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2.11 Agent's Fee..........................................................59
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2.12 Amendment Fee; Tranche B Commitment Feet.............................59
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2.13 Line (Unused) Fee; Annual Facility Fee...............................59
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2.14 Early Termination Fees...............................................60
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2.15 Concerning Fees......................................................60
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2.16 Agent's and Lenders' Discretion......................................61
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2.17 Procedures For Issuance of L/C's.....................................62
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2.18 Fees For L/C's.......................................................64
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2.19 Concerning L/C's.....................................................65
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2.20 Changed Circumstances................................................68
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2.21 Increased Costs/Taxes................................................70
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2.22 Lenders' Commitments.................................................73
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2.23 Concerning Joint and Several Liability of the Borrowers..............75
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2.24 Lechters, Inc. as Lead Borrower......................................78
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ARTICLE III - CONDITIONS PRECEDENT...........................................79
3.1. Corporate Due Diligence..............................................80
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3.2. Opinion..............................................................80
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3.3. Additional Documents.................................................80
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3.4. Officers' Certificates...............................................81
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3.5. Representations and Warranties.......................................81
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3.6. Minimum Excess Availability..........................................81
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3.7. All Fees and Expenses Paid...........................................82
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3.8. No Event of Default..................................................82
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3.9. No Adverse Change....................................................82
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3.10. Delivery of Notices.................................................82
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ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES...............82
4.1. Payment and Performance of Liabilities...............................83
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4.2. Due Organization - Corporate Authorization - No Conflicts............83
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4.3. Trade Names..........................................................85
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4.4. Infrastructure.......................................................85
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4.5 Intentionally Omitted................................................86
4.6. Locations............................................................86
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4.7. Title to Assets......................................................89
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4.8 Indebtedness.........................................................89
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4.9 Repayment of 5.00% Notes.............................................91
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4.10. Insurance Policies...................................................91
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4.11. Licenses.............................................................93
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4.12. Leases...............................................................93
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4.13. Requirements of Law.................................................93
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4.14. Maintain Collateral.................................................94
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4.15. Pay Taxes...........................................................95
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4.16. No Margin Stock.....................................................96
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4.17. ERISA...............................................................97
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4.18. Hazardous Materials.................................................98
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4.19. Litigation..........................................................99
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4.20. Dividends, Investments, Repurchases and Debt Retirement.............99
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4.21. Loans..............................................................103
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4.22. Protection of Assets...............................................103
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4.23. Line of Business...................................................104
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4.24. Affiliate Transactions.............................................104
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4.25. Additional Assurances..............................................104
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4.26. Adequacy of Disclosure.............................................105
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4.27 No Restrictions on Liabilities......................................107
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4.28 Other Covenants.....................................................107
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ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS...................107
5.1. Maintain Records....................................................107
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5.2. Access to Records...................................................108
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5.3. Immediate Notice to Agent...........................................109
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5.4. Borrowing Base Certificate..........................................111
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5.5. Monthly Collateral Reports..........................................112
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5.7 Quarterly Financial Reports.........................................112
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5.8 Annual Reports......................................................112
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5.9 Officers' Certificates..............................................112
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5.10 Inventories, Appraisals, and Audits.................................113
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5.11. Additional Financial Information...................................115
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5.12. Financial Performance Covenants....................................116
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ARTICLE VI - USE AND COLLECTION OF COLLATERAL...............................117
6.1. Use of Inventory Collateral.........................................117
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6.2. Inventory Quality...................................................118
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6.3. Adjustments and Allowances..........................................118
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6.4. Validity of Accounts................................................118
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6.5. Notification to Account Debtors.....................................119
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ARTICLE VII - CASH MANAGEMENT; PAYMENT OF LIABILITIES.......................119
7.1. Depository Accounts.................................................119
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7.2. Credit Card Receipts................................................120
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7.3. The Concentration, Blocked, and Operating Accounts..................120
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7.4. Proceeds and Collection of Accounts.................................121
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7.5. Payment of Liabilities..............................................123
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7.6 The Operating Account...............................................124
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ARTICLE VIII - GRANT OF SECURITY INTEREST...................................124
8.1. Grant of Security Interest..........................................124
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8.2. Extent and Duration of Security Interest............................125
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8.3 Delivery of Instruments, etc........................................126
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8.4 Concerning Revised Article 9 of the Uniform Commercial Code.........127
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ARTICLE IX - AGENT AS BORROWERS' ATTORNEY-IN-FACT...........................129
9.1. Appointment as Attorney-In-Fact.....................................130
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9.2. No Obligation to Act................................................131
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ARTICLE X - EVENTS OF DEFAULT...............................................131
10.1. Failure to Pay Revolving Credit or Tranche B Loan..................132
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10.2. Failure To Make Other Payments.....................................132
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10.3. Failure to Perform Covenant or Liability (No Grace Period).........132
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10.4. Failure to Perform Covenant or Liability (Grace Period)............133
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10.5. Misrepresentation..................................................133
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10.6. Acceleration of Other Debt; Breach of Lease........................133
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10.7. Default Under Other Agreements.....................................134
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10.9. Judgment; Restraint of Business....................................134
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10.10. Business Failure...................................................135
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10.11. Bankruptcy.........................................................135
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10.13 Foreign Proceeding.................................................136
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10.14. Challenge to Loan Documents........................................136
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10.15. Change in Control..................................................137
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ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT...............................137
11.1. Rights of Enforcement..............................................137
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11.2. Sale of Collateral.................................................138
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11.3. Occupation of Business Location....................................139
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11.4. Grant of Nonexclusive License......................................140
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11.5. Assembly of Collateral.............................................140
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11.6. Rights and Remedies................................................140
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ARTICLE XII - NOTICES.......................................................141
12.1 Notice Addresses....................................................141
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12.2. Notice Given.......................................................142
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ARTICLE XIII - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS..................143
13.1. Revolving Credit Funding Procedures................................143
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13.2 SwingLine Loans.....................................................143
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13.3 Agent's Covering of Fundings........................................144
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13.4 Ordinary Course Distributions: Revolving Credit.....................147
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ARTICLE XIV- ACCELERATION AND LIQUIDATION...................................149
14.1 Acceleration Notices................................................149
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14.2 Acceleration Notice by the Tranche B Lender.........................149
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14.3 Mandatory Acceleration Right of Tranche B Lender....................150
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14.4 Acceleration........................................................151
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14.5 Initiation of Liquidation...........................................151
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14.6 Actions At and Following Initiation of Liquidation..................151
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14.7 Agent's Conduct of Liquidation......................................152
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14.8 Distribution of Liquidation Proceeds................................153
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14.9 Relative Priorities To Proceeds of Liquidation......................153
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ARTICLE XV - THE AGENT......................................................154
15.1 Appointment of Agent................................................154
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15.2 Responsibilities of Agent...........................................155
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15.3 Concerning Distributions By the Agent...............................156
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15.4 Dispute Resolution..................................................158
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15.5 Distributions of Notices and of Documents...........................158
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15.6 Confidential Information............................................158
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15.7 Reliance by Agent...................................................159
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15.8 Non-Reliance on Agent and Other Lenders.............................159
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15.9 Indemnification.....................................................161
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15.10 Resignation of Agent................................................161
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ARTICLE XVI - ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS................162
16.1 Administration of Credit Facilities.................................162
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16.2 Actions Requiring Consent or Direction of Majority Lenders..........164
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16.3 Actions Requiring Consent or Direction of SuperMajority Lenders.....164
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16.4 Actions Requiring or Directed By Unanimous Consent..................165
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16.5 Actions Requiring SwingLine Lender Consent..........................167
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16.6 Tranche B Lender Consent............................................167
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16.7 Actions Requiring Agent's Consent...................................168
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16.8 Miscellaneous Actions...............................................168
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16.9 Nonconsenting Tranche A Lenders.....................................169
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ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS.................................171
17.1 Assignments and Assumptions by Lenders..............................171
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17.2 Participations......................................................175
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17.3 Pledges To Federal Reserve Banks....................................175
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ARTICLE XVIII - TERM........................................................175
18.1 Termination of Revolving Credit.....................................175
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18.2 Effect of Termination...............................................175
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ARTICLE XIX - GENERAL.......................................................176
19.1. Protection of Collateral...........................................176
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19.2. Successors and Assigns.............................................176
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19.3. Severability.......................................................177
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19.4. Amendments; Course of Dealing......................................177
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19.5. Power of Attorney..................................................178
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19.7. Costs and Expenses of Agent and Of Lenders.........................179
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19.8. Copies and Facsimiles..............................................180
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19.9. New York Law.......................................................180
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19.11. Indemnification....................................................182
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19.12. Rules of Construction..............................................182
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19.13. Intent.............................................................185
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19.14. Right of Set-Off...................................................185
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19.15. Maximum Interest Rate..............................................185
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19.16. Waivers............................................................186
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19.17 Transitional Arrangements..........................................187
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LIST OF EXHIBITS
EXHIBIT A _________ List of Borrowers EXHIBIT 1 _________ Local Disbursement
Account EXHIBIT 2.4(b) ____ Form of Revolving Credit Loan Request EXHIBIT 2.4(g)
____ Form of Tranche B Loan Request EXHIBIT 2.6(c) ____ Form of SwingLine Note
EXHIBIT 2.8 _______ Form of Revolving Credit Note EXHIBIT 2.8(b) ____ Form of
Tranche B Note EXHIBIT 3.3(1) ____ Pledge Agreement EXHIBIT 4.2 _______ State of
Organization EXHIBIT 4.3 _______ Trade Names / Related Entities EXHIBIT 4.6(a)
____ Executive Office and Other Locations EXHIBIT 4.6(c)(i) Form of Landlord
Waiver
EXHIBIT 4.6(c) ____ List of States where Landlord Waivers are Required EXHIBIT
4.7 _______ Permitted Encumbrances EXHIBIT 4.8 _______ Indebtedness EXHIBIT 4.10
______ Schedule of all insurance policies owned by the Borrowers
where Landlord Waivers are Required
EXHIBIT 4.12 Leases
EXHIBIT 4.15 Taxes
EXHIBIT 4.19 Litigation
EXHIBIT 4.25 Additional Assurances
EXHIBIT 5.4 Borrowing Base Certificate
EXHIBIT 5.5 Monthly Collateral Reports
EXHIBIT 5.11(c) Business Plan
EXHIBIT 7.1 Depository Accounts
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EXHIBIT 7.2 Credit Card Receipts
EXHIBIT 7.4(b)(i) Balances for each DDA
EXHIBIT 17.1 Tranche A Assignment and Acceptance
EXHIBIT 17.2 Tranche B Assignment and Acceptance
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AMENDED AND RESTATED FLEET RETAIL FINANCE INC.
LOAN AND SECURITY AGREEMENT AGENT
November 14, 2000
THIS AGREEMENT is made among
FLEET RETAIL FINANCE INC., (in such capacity, herein the "AGENT")
a Delaware corporation with offices at 40 Broad Street, Boston, Massachusetts
02109, as agent for the benefit of (i) the "Tranche A Lenders", on a Tranche A
Pro Rata basis, based upon each Tranche A Lender's Commitment Percentage, who
are, at present, those financial institutions identified on the signature pages
of this Agreement and who in the future shall include those Persons (if any) who
become "Tranche A Lenders" in accordance with the provisions of Section 2.22(c)
below and (ii) the Tranche B Lender and those Persons (if any) who in the future
become a "Tranche B Lender " in accordance with the provisions of Section
2.22(e) below;
FLEET ROBERTSON STEPHENS, INC., a Massachusetts corporation with
offices at 100 Federal Street, Boston, Massachusetts 02110 in its capacity as
syndication agent for the Lenders;
Each of the Tranche A Lenders identified on the signature pages
of this Agreement;
BACK BAY CAPITAL FUNDING, LLC, a Delaware limited liability
company, with offices at 40 Broad Street, Boston, Massachusetts 02109 (the
"Tranche B Lender");
Each of the corporations described on Exhibit A of this Agreement
(collectively the "Borrowers" and except in the case of Lechters, Inc., the
"Subsidiaries", and each individually, a "BORROWER" and except in the case of
Lechters, Inc., a "Subsidiary"), each of which has its principal executive
offices at One Cape May Street, Harrison, NJ 07029;
and
LECHTERS, INC., a New Jersey corporation with its principal
executive offices at One Cape May Street, Harrison, New Jersey 07029 (the "LEAD
BORROWER" and the "PARENT", as well as a "Borrower") in consideration of the
mutual covenants contained herein and benefits to be derived herefrom,
WITNESSETH:
ARTICLE I - DEFINITIONS:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"5.00% NOTES": The Parent's 5.00% Convertible Subordinated Debentures due
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September 27, 2001.
"ACCELERATION": With respect to any Indebtedness, its becoming due and
payable prior to its stated maturity. Derivations of the word
"Acceleration" (such as "Accelerate") are used with like meaning
in this Agreement.
"ACCELERATION NOTICE": Written notice as follows:
(a)From the SuperMajority Lenders, as provided in Section
14.1.
(b)From the Tranche B Lender, as provided in Section 14.2.
The Agent shall provide copies of any Acceleration notice
to each Lender.
"ACCEPTABLE CASH COLLATERAL": Cash or any Permitted Investment held by
Fleet National Bank in a restricted cash collateral, treasury or
securities account, as appropriate.
"ACCEPTABLE CREDIT CARD RECEIVABLES": Those Accounts that from time to
time are due and owing to each Borrower on a non-recourse basis
from major credit card processors that are acceptable to the
Agent, which processors include, without limitation, Visa,
MasterCard, Discover and American Express.
"ACCEPTABLE IN-TRANSIT INVENTORY": That portion of the Borrowers'
Inventory (without duplication as to Acceptable L/C Inventory),
title to which has passed to a Borrower and which has been
shipped from a foreign location to one of the Borrowers'
warehouses provided that
(a) Such Inventory is of such type, character,
qualities and quantities as the Agent in its discretion from time
to time determines to be Acceptable Inventory;
(b) The documents which relate to such shipment name
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the Agent as consignee of the subject inventory and the Agent has
control over the documents which evidence ownership of the
subject Inventory (such as by providing a Customs Brokers
Agreement to the Agent); and
(c) ______ Such Inventory has not yet been delivered to
one of Borrowers' warehouses and has been in transit from the
applicable foreign location for no more than 45 calendar days.
"ACCEPTABLE INVENTORY": Such of the Borrowers' Inventory, at such
locations, and of such types, character, qualities and
quantities, as the Agent in its sole discretion from time to time
determines to be acceptable Collateral for Borrowing Base
purposes, including Acceptable L/C Inventory and Acceptable
In-Transit Inventory, as to which the Agent has a perfected
security interest that is prior and superior to all claims and
Encumbrances (other than Permitted Encumbrances, subject to the
Agent's right to establish Reserves therefor). Without limiting
the foregoing, "Acceptable Inventory" shall not include: (i) any
non-merchandise Inventory (such as labels, bags and purchasing
materials) and (ii) damaged goods, return to vendor merchandise,
packages, consigned inventory and other similar categories.
"ACCEPTABLE L/C INVENTORY": That portion of the Borrower's Inventory
(without duplication as to Acceptable In-Transit Inventory), the
purchase of which is supported by a documentary L/C then having
an expiry within sixty (60) days of the issuance of such L/C,
provided that
(a) Such Inventory is of such types, character,
qualities and quantities as the Agent in its discretion from time
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to time determines to be Acceptable Inventory; and
(b) The documentary L/C supporting such purchase
names the Agent as consignee of the subject Inventory and the
Agent has control over the documents which evidence ownership of
the subject Inventory (such as by providing a Customs Brokers
Agreement to the Agent).
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts,
accounts receivable, credit card receivables, notes, drafts,
acceptances, and other forms of obligations and receivables and
rights to payment for credit extended and for goods sold or
leased, or services rendered, whether or not yet earned by
performance; all "contract rights" as formerly defined in the
UCC; all Inventory which gave rise thereto, and all rights
associated with such Inventory, including the right of stoppage
in transit; and all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"AFFILIATE": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other; or
(b) one has, directly or indirectly, the right, under ordinary
circumstances, to elect a majority of the directors (or other
body or Person who has those powers customarily vested in a board
of directors of a corporation); or (c) the same third Person
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holds, directly or indirectly, not less than Twenty Five percent
(25%) of their respective capital stock, beneficial interests,
partnership interests or other equity interests; or has directly
or indirectly the right to elect the majority of directors of
both such parties.
"AGENT": Defined in the Preamble.
"AGENT FEE LETTER": Defined in Section 2.11.
"AGENT'S COVER": The amount which the Agent makes available to the
Borrowers, as provided in Section 13.3(c)(i), below, on behalf of
a Tranche A Lender that was obligated to provide such amount to
the Agent in accordance with this Agreement.
"AGENT'S FEE": Defined in Section 2.11.
"AGENT'S RIGHTS AND REMEDIES": Defined in Section 11.6.
"ASSIGNING LENDER": Defined in Section 17.l(a).
"ASSIGNMENT AND ACCEPTANCE": Defined in Section 17.1(b).
"AVAILABILITY": Defined in Section 2.l(c)(i).
"AVAILABILITY RESERVES": Such reserves as the Agent from time to time
determines in the Agent's discretion as being appropriate to
reflect the impediments to the Agent's ability to realize upon
the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to)
reserves based on the following:
(i) ____ Rent for (x) up to three (3) months (based on the
"base" rent under the applicable lease) for any Borrower
location in a Landlord State for which a landlord's waiver
or subordination (in form acceptable to the Agent) has not
been provided to the Agent; (y) any location for which
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rent is past due, any grace period has passed and a notice
of rent default has been received by the Borrower,
provided, that such reserves shall not exceed the amount
of rent that is past due for said location; and (z) any
location at any time upon the occurrence and continuance
of an Event of Default.
(ii) In-store customer credits, which shall initially be 50% of
that amount reflected on the Borrowers' Consolidated
general ledger.
(iii) Gift Certificates, which shall initially be 50% of that
amount reflected as such on the Borrowers' Consolidated
general ledger.
(iv) Frequent Shopper Programs, which shall initially be zero.
(v) Layaways and Customer Deposits, which shall initially be
zero.
(vi) Taxes and other governmental charges as estimated or
calculated by the Agent with reasonable particularity (and
notice to the Lead Borrower), including ad valorem,
personal property, and other taxes which will have
priority over the security interests of the Agent in the
Collateral, which initially shall be zero.
(vii) L/C Landing Costs.
(viii)Payables (based upon payables which are past the
Borrowers' normal trade terms).
"BANKRUPTCY CODE": Title 11 U.S.C., as amended from time to time.
"BASE": The Prime Rate announced from time to time by Fleet National
Bank (or any successor in interest to Fleet National Bank). In
the event that said bank(or any such successor)ceases to announce
such a rate, "Base" shall refer to that rate or index announced
or published from time to time as the Agent, in good faith,
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designates as the functional equivalent to said Prime Rate. Any
change in Base shall be effective, for purposes of the
calculation of interest due hereunder, when such change is made
effective generally by the bank on the basis of whose rate or
index Base is being set. In all events, interest that is
determined by reference to Base (or any successor to Base) shall
be calculated on a 360 day year and actual days elapsed.
"BASE MARGIN": Until a Base rate pricing adjustment pursuant to Section
2.10(e) is applicable: zero (0) percent; thereafter as determined
pursuant to the applicable section of the Margin Pricing Grid set
forth in Section 2.10(e).
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"BASE MARGIN RATE": The aggregate of Base plus the Base Margin per
annum.
"BLOCKED ACCOUNT": A DDA that conforms with the requirements of
Section 7.l(b)(i), and initially as specified in Section 7.3(a)
(ii).
"BLOCKED ACCOUNT AGREEMENT": A tri-party agreement in a form acceptable
to the Agent, among the Lead Borrower, the Agent and a depository
institution at which the Lead Borrower maintains one or more
DDAs, providing for the Agent's dominion and control over such
DDAs upon notice by the Agent to such depository institution of
the occurrence of a Cash Management Condition.
"BORROWER": Defined in the Preamble.
"BORROWER DEFAULT": Any Borrowing Base Default, Tranche B Payment
Default or General Default.
"BORROWING BASE": Defined in Section 2.1(b)(ii).
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"BORROWING BASE DEFAULT": Any time that the unpaid balance of the Loan
Account (excluding the outstanding amount of the Tranche B Loans)
plus the then stated amount of all L/Cs shall exceed the
Borrowing Base for two (2) consecutive days and the Borrowers
shall have failed to have cured such condition within one day
after notice thereof from the Agent to the Lead Borrower which
notice may be given by Agent on the first day that the Loan
Account (excluding the outstanding amount of the Tranche B Loans)
plus the then stated amount of L/Cs exceeds the Borrowing Base.
"BUSINESS DAY": Any day (with any references herein to time of day
requirements meaning such times based on Eastern time) other than
(a) a Saturday or Sunday; (b) any day on which banks in Boston,
Massachusetts generally are not open to the general public for
the purpose of conducting commercial banking business; or (c) a
day on which the Agent is not open to the general public to
conduct business.
"BUSINESS PLAN": The Borrowers' business plan annexed hereto as EXHIBIT
5.11(c) and any revision, amendment, or update of such business
plan, provided such revision, amendment or update has been
accepted in writing by the Agent.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities for leaseholds, leasehold improvements, real
property, furniture and equipment, to the extent such
expenditures must be capitalized in accordance with GAAP, and net
of amounts reimbursed by Landlords.
"CAPITAL EXPENDITURE CAP": Defined in Section 5.12(b).
"CAPITAL LEASE": Any lease which must be capitalized in accordance with
GAAP.
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"CASH MANAGEMENT CONDITION": The first to occur of the following:
(a) A Suspension Event has occurred and is continuing
and the Agent has elected to notify the Lead Borrower that a Cash
Management Condition has occurred.
(b) ______ Availability shall have been less than $10
Million for a period of three (3) or more consecutive Business
Days.
(c) September 1, 2001.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) ______ The acquisition, by any group of persons
(within the meaning of the Securities Exchange Act of 1934, as
amended) or by any Person (other than any shareholder currently
holding or controlling 20% or more of the issued and outstanding
capital stock of the Parent, and any members of such
shareholder's immediate family, or any trust or other entity
established by such shareholder or shareholder's family member or
members for estate or tax planning purposes or any group of
Persons of which such shareholder's family members, trust or
other entity has a controlling interest) of beneficial ownership
(within the meaning of Rule 13d-3 of the SEC) of 50% or more of
the issued and outstanding capital stock of the Parent having the
right, under ordinary circumstances, to vote for the election of
directors of the Parent.
(b) ______ More than half of the persons who were
directors of the Parent on the first day of any period consisting
of Twelve (12) consecutive calendar months (the first of such
Twelve (12) month periods commencing with the first day of the
month in which this Agreement was executed) cease (for any reason
other than
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death, disability or retirement) to be directors of the Parent,
and the board of directors as thereafter constituted is not
acceptable to Agent.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"CLOSING DATE": Defined in Article III.
"COLLATERAL": Defined in Section 8.1.
"COLLATERAL REPORTS": Defined in Section 5.5.
"COMMITMENT": Subject to Section 16.1(d) (which provides for Permissible
Overloans) with respect to each Lender of a particular tranche of
Loans (either Tranche A Loans or Tranche B Loans, as the case may
be), such Lender's "DOLLAR Commitment" and "COMMITMENT
PERCENTAGE" of such tranche of Loans as set forth on Schedule B
to this Agreement or assigned to such Lender in accordance with
Section 17.1 (which provides for Assignments and Assumption of
Commitments), and (a) as to the Tranche A Lenders, collectively,
the "Tranche A Commitment" shall be the aggregate amount of the
Tranche A Dollar Commitments of all Tranche A Lenders, the
maximum amount of which shall not exceed $120,000,000.00 and (b)
as to the Tranche B Lender, the "Tranche B Commitment" shall be
the Tranche B Dollar Commitment of $10,000,000.
"CONCENTRATION ACCOUNT": The deposit account established by the Agent
over which the Agent has sole dominion and control and into
which, following the occurrence of a Cash Management Condition,
all contents of the Blocked Accounts shall be transferred on a
daily basis, as provided in Sections 7.3 and 7.4 of this
Agreement.
"CONSENT": Actual consent given by the Lender from whom such consent is
sought; or the passage of seven (7) Business Days from the
10
<PAGE>
receipt by a Lender of written notice from the Agent of a
proposed course of action to be followed by the Agent without the
Agent having received from such Lender written notice of that
Lender's objection to such course of action, provided that the
Agent may rely on such passage of time as consent by a Lender
only if the Agent's notice specifically states that consent will
be deemed to have been given if no objection is received within
such time period.
"CONSOLIDATED": When used to modify a financial term, test, statement,
or report, refers to the application or preparation of such term,
test, statement, or report (as applicable) based upon the
consolidation, in accordance with GAAP, of the financial
condition or operating results of the corporations which
constitute the Parent and its Subsidiaries.
"COST": The lower of
(a) ______ the calculated cost of Inventory purchases, as
determined from invoices received by the Borrowers and reflected
in the Borrowers' Consolidated purchase journal or stock ledger,
based upon the Borrowers' accounting practices in effect on the
date on which this Agreement was executed; and
(b) ______ the cost equivalent of the lowest ticketed or
promoted price at which the subject Inventory is offered to the
public, after all mark-downs (whether or not such price is then
reflected on the Borrowers' accounting system), determined in
accordance with the retail method of accounting and reflecting
the Borrowers' historic business practices.
"Cost" does not include inventory capitalization costs or
other non-purchase price charges (such as outbound freight to the
11
<PAGE>
store location) used in the Borrowers' calculation of cost of
goods sold.
"COSTS OF COLLECTION": Includes, without limitation, all reasonable fees
and reasonable out-of-pocket expenses of the Agent's attorneys,
and all reasonable out-of-pocket costs incurred by the Agent
including, without limitation, reasonable out-of-pocket costs and
expenses associated with travel on behalf of the Agent, which
costs and expenses are directly or indirectly related to or in
respect of the Agent's: administration and management of the
Liabilities; negotiation, documentation, interpretation and
amendment of any Loan Document; or efforts to preserve, protect,
collect, or enforce the Collateral, the Liabilities, and/or any
of the Agent's rights and remedies against or in respect of any
guarantor or other person liable in respect of the Liabilities
(whether or not suit is instituted in connection with such
efforts). Following the occurrence of any Event of Default,
"Costs of Collection" also includes all reasonable fees and
reasonable out-of-pocket expenses of counsel for the Lenders it
being understood that Costs of Collection for the Tranche A
Lenders shall be limited to the reasonable fees of a single
counsel for all Tranche A Lenders but that Costs of Collection
also shall include the reasonable fees and reasonable
out-of-pocket expenses of separate counsel for the Tranche B
Lender.
"CREDIT CARD ADVANCE RATE": Eighty percent (80%).
"CUSTOMS BROKERS AGREEMENT": A tri-party agreement in form satisfactory
to the Agent, among the Lead Borrower or any Borrower, a customs
broker and the Agent, in which the customs broker acknowledges
that the Agent has control over the documents evidencing
ownership of the subject Inventory and agrees, upon notice from
the Agent, to hold and dispose of the subject Inventory solely as
12
<PAGE>
directed by the Agent.
"DDA": Any checking or other demand deposit account maintained by any of
the Borrowers, other than a Local Disbursement Account.
"DELINQUENT TRANCHE A LENDER": Defined in Section 13.3(c).
"DELINQUENT TRANCHE B LENDER" A Tranche B Lender that fails to fund the
Tranche B Loan within one (1) Business Day notice from the Agent
that all conditions precedent to the making of such Tranche B
Loan have been satisfied.
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in Section
1-201(15) of the UCC.
"DOLLAR COMMITMENT": As set forth in the definition of "Commitment"
above.
"EBITDA": The Borrowers' Consolidated earnings (excluding extraordinary
gains and gains from the sale of assets other than in the
ordinary course of business)before interest, taxes, depreciation,
amortization and other non-cash charges, each as determined in
accordance with GAAP.
"ELIGIBLE TRANCHE A ASSIGNEE": A bank, insurance company, or company
engaged in the business of making commercial loans having a
combined capital and surplus in excess of $300,000,000.00, or any
Affiliate of any Tranche A Lender.
"ELIGIBLE TRANCHE B ASSIGNEE": As long as no Event of Default has
occurred and is continuing, any Person that is consented to by
Lead Borrower as provided in Section 17.1(h) or any Affiliate of
any Tranche B Lender and, if an Event of Default has occurred and
is continuing, any Person.
13
<PAGE>
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Any of the following:
(a) ______ Any security ____ interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind (including
any agreement to grant any of the foregoing); the interest of a
lessor under a Capital Lease; a conditional sale or other title
retention agreement; a sale of accounts receivable or chattel
paper; or any other arrangement pursuant to which any Person is
entitled to any preference or priority with respect to the
property, assets, income or profits of another Person or which
constitutes an interest in property to secure an obligation,
regardless of whether consensual or non-consensual or whether
arising by way of agreement, operation of law, legal process or
otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"END DATE": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of all Lenders to make loans
and advances and to provide other financial accommodations to the
Borrowers hereunder shall have been irrevocably terminated.
"ENVIRONMENTAL LAWS": All of the following:
(a) ______ Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in respect
to environmental protection matters, including, without
limitation, Hazardous Materials, as are now or hereafter in
effect.
14
<PAGE>
(b) The common law relating to damage to Persons or
property from Hazardous Materials.
"EQUIPMENT": Includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, dies, molds, store
fixtures, furniture, and other tangible goods, property, and
assets which are used and/or were purchased for use in the
operation or furtherance of the Borrowers' business, and any and
all accessions or additions thereto, and substitutions therefor.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": Any Person that is (i) under common control with the
Borrowers within the meaning of Section 400l of ERISA or (ii) is
part of a group including the Borrowers or the Parent and that
would be treated as a single employer under Section 414(b) or (c)
of the Internal Revenue Code of 1986, as amended.
"EURODOLLAR BUSINESS DAY": Any day that is both a Business Day and a day
on which the principal market in Eurodollars in which Fleet
National Bank or its successors participate is open for dealings
in United States Dollar deposits.
"EURODOLLAR LOAN": Any Revolving Credit Loan bearing interest at a
Eurodollar Rate.
"EURODOLLAR MARGIN": Until a Eurodollar pricing adjustment pursuant to
Section 2.10(e) is applicable: 175 basis points; thereafter as
determined pursuant to the applicable section of the Margin
Pricing Grid.
"EURODOLLAR OFFER RATE": With respect to any Eurodollar Loan, the rate
of interest (rounded upwards, if necessary, to the next 1/100 of
1%) determined by the Agent to be the highest prevailing rate per
annum at which deposits in U.S. Dollars are offered to Fleet
15
<PAGE>
National Bank, by first-class banks in the Eurodollar market in
which Fleet National Bank participates, at or about 10:00 AM
(Boston Time) two (2) Eurodollar Business Days before the first
day of the Interest Period for such Eurodollar Loan, for a
deposit in approximately the amount of such Eurodollar Loan, for
a period of time approximately equal to such Interest Period.
"EURODOLLAR RATE": The rate per annum (calculated on a 360 day year and
actual days elapsed) equal to the Eurodollar Offer Rate plus the
Eurodollar Margin provided that, in the event that it is
determined by the Agent that any Tranche A Lender may be subject
to the Reserve Percentage, the "Eurodollar Rate" shall mean, with
respect to any Eurodollar Loans then outstanding (from the date
on which that Reserve Percentage first became applicable to such
Eurodollar Loans), and with respect to all Eurodollar Loans
thereafter made for as long as the Reserve Percentage shall be
applicable to a Tranche A Lender, an interest rate per annum
equal to the sum of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
Eurodollar Offer Rate
---------------------
1 minus Reserve Percentage
(b) is the applicable Eurodollar Margin.
"EVENTSOF DEFAULT": Defined in Article 10. Each reference herein to an
"Event of Default" is to an Event of Default that has occurred
and is continuing and has not been duly waived by the requisite
Lenders or by the Agent, as applicable (as to which due waiver,
see Section 16.2 through 16.7). In the event of such due waiver,
the so-called Event of Default shall be deemed never to have
16
<PAGE>
occurred (other than with respect to any Costs of Collection for
which the Borrowers are obligated to reimburse the Agent or the
Lenders, unless such reimbursement obligation has also been duly
waived).
"FIXTURES": Has the meaning given that term in the UCC.
"FRF": Fleet Retail Finance Inc. and any successor thereof.
"GAAP":Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to the
accounting period in respect of which reference to GAAP is being
made, provided, however, that in the event of a Material
Accounting Change, unless otherwise specifically agreed to by the
Lenders, (a) the Lead Borrower's compliance with the financial
performance covenant imposed pursuant to Section 5.12 hereof (if
applicable) shall be determined as if such Material Accounting
Change had not taken place and (b) the Lead Borrower shall
include, with its monthly, quarterly and annual financial
statements a schedule, certified by its chief financial officer,
on which the effect of such Material Accounting Change on such
statements shall be described.
"GENERAL DEFAULT": The occurrence of an Event of Default, other than an
Event of Default which constitutes a Borrowing Base Default or a
Tranche B Payment Default.
"GENERAL INTANGIBLES": Includes, without limitation, "general
intangibles" as defined in the UCC; and also all: rights to
payment for credit extended; deposits; amounts due to the
Borrowers; credit memoranda in favor of the Borrowers; warranty
17
<PAGE>
claims; tax refunds and abatements; insurance refunds and premium
rebates; all means and vehicles of investment or hedging,
including, without limitation, options, warrants, and futures
contracts; records; customer lists; telephone numbers; goodwill;
causes of action; judgments; payments under any settlement or
other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of
the Borrowers to enforce the foregoing; permits, certificates of
convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents
pending, and other intellectual property; internet addresses and
domain names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans,
reports, and charts; catalogs; manuals; technical data; computer
software programs (including the source and object codes therefor
and related documentation), computer records, databases, rights
of access to computer record service bureaus, service bureau
computer contracts, ____ and computer data; tapes, disks,
semi-conductor chips and printouts; trade secrets, copyrights,
copyrightable materials, _____ copyright ____ registrations ____
and applications, mask work rights and interests, and derivative
works and interests; user, technical reference, and other manuals
and materials; trade names, trademarks, service marks, and all
goodwill relating thereto; registrations and applications for
registration of the foregoing; letter of credit rights,
including, without limitation the proceeds of letters of credit,
whether or not written; and all other intangible property of the
Borrower in the nature of intellectual property; proposals; cost
18
<PAGE>
estimates, and reproductions on paper, or otherwise, of any and
all concepts or ideas, and any matter related to, or connected
with, the design, development, manufacture, sale, marketing,
leasing, or use of any or all property produced, sold, or leased,
by the Borrowers or credit extended or services performed, by the
Borrowers, whether intended for an individual customer or the
general business of the Borrowers, or used or useful in
connection with research and development by the Borrowers.
"GOODS": Has the meaning given that term in the UCC.
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products that are
defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.
"INDEBTEDNESS": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) ______ Money borrowed (including any indebtedness
which is non-recourse to the credit of such Person but which is
secured by an Encumbrance on any asset of such Person) whether or
not evidenced by a promissory note, bond, debenture or other
written obligation to pay;
(b) ______ Any letter of credit or acceptance transaction,
including, without limitation, the Stated Amount of all
outstanding letters of credit and acceptances issued for the
account of such Person, and (without duplication) any amounts for
which such Person would be obligated to provide reimbursement or
for which such person is liable in connection with a letter of
credit or acceptance transaction;
(c) The provision of recourse in connection with
19
<PAGE>
the sale or discount of accounts receivable or chattel paper of
such Person;
(d) On account of recourse or repayment obligations
with respect to deposits or advances.
(e) As lessee under Capital Leases. "Indebtedness"
also includes:
(x) ____ Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or not
such Indebtedness is assumed by such Person.
(y) ____ Any guaranty, endorsement, suretyship or
other undertaking pursuant to which such Person may be
liable on account of any obligation of another Person.
(z) ____ The Indebtedness of a partnership or joint
venture in which such Person is a general partner or joint
venturer, for which indebtedness such Person is liable.
"INDEMNIFIED PERSON": Defined in Section 19.11.
"INOPERATIVE SUBSIDIARY": A Subsidiary that at all times has no
liabilities of any kind (other than fees or franchise taxes
relating to any such Subsidiary's corporate or entity
subsistance) and no assets other than the right to use in its
corporate name a trademark used by the Borrowers in connection
with the conduct of their business.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
(a) Each Base Margin Loan: the first Business Day of
each month, the Termination Date, and the End Date.
20
<PAGE>
(b) ______ Each Eurodollar Loan: (i) having an Interest
Period of one (1), two (2) or three (3) months, the last day of
the Interest Period relating thereto, the Termination Date and
the End Date; (ii) having an Interest Period of six (6) months,
the last day of the third month of such Interest Period, the last
day of such Interest Period, the Termination Date and the End
Date.
(c) ______ The Tranche B Loan:the first Business Day of
each month, the Termination Date and the End Date.
"INTEREST PERIOD": (a) ______ With respect to each Eurodollar Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of, or conversion to, such
Eurodollar Loan and ending on the day that corresponds
numerically to such date, one (1), two (2), three (3) or six (6)
months thereafter, as the Lead Borrower may elect by notice to
the Agent.
(b) The setting of Interest Periods is in all
instances subject to the following:
(i) _________ Any Interest Period for a
Eurodollar Loan which would otherwise end on a day
that is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business
Day, unless that succeeding Eurodollar Business Day
is in the next calendar month, in which event such
Interest Period shall end on the last Eurodollar
Business Day of the month during which the Interest
Period ends.
(ii) Subject to Subsections (iii) and
(iv) below, any Interest Period applicable to a
21
<PAGE>
Eurodollar Loan that begins on a day for which
there is no numerically corresponding day in the
calendar month during which such Interest Period
ends shall end on the last Eurodollar Business Day
of the month during which that Interest Period
ends.
(iii) _____ Any Interest Period that would
otherwise end after the Termination Date shall end
on the Termination Date.
(iv) No Interest Period applicable to a
Eurodollar Loan may be less than one (1) month.
(v) There shall be no more than six(6)
Interest Periods applicable to Eurodollar Loans in
effect at any one time.
"INVENTORY": Includes, without limitation, "inventory" as defined in the
UCC and also all: packaging, advertising, and shipping materials
related to any of the foregoing, and all names or marks affixed
or to be affixed thereto for identifying or selling the same;
Goods held for sale or lease or furnished or to be furnished
under a contract or contracts of sale or service by the
Borrowers, or used or consumed or to be used or consumed in the
Borrowers' business; Goods in transit; returned, repossessed and
rejected Goods; and all Documents (whether or not negotiable)
which represent any of the foregoing.
"INVENTORY ADVANCE RATE": The following percentages during the periods
of each calendar year indicated in the chart below:
<TABLE>
---------------------------------- -----------------------
Period Percentage
---------------------------------- -----------------------
---------------------------------- -----------------------
<S> <C>
January 1 - August 31 72%
---------------------------------- -----------------------
---------------------------------- -----------------------
September 1 - December 31 78%
---------------------------------- -----------------------
</TABLE>
22
<PAGE>
"INVENTORY APPRAISAL CAP": 85% of the Net Liquidation Value.
"INVENTORY RESERVES": Such reserves as may be established from time to
time by the Agent in the Agent's reasonable discretion (using a
methodology disclosed to and after consultation with, the Lead
Borrower) with respect to the ____ determination of the
merchantability, at Retail, of the Acceptable Inventory, or which
reflect such other factors as affect the market value of the
Acceptable Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited
to) reserves based on the following:
(i) ____ Obsolescence (determined based upon Inventory
on hand beyond a given number of days).
(ii) Seasonality.
(iii) Shrinkage (including any amount required to bring
Inventory in line with Borrowers' historical stock
ledger shrinkage reserve, to the extent that the
Borrowers' stock ledger shrinkage reserve is lower
than its last 12 months historical stock ledger
shrinkage reserve).
(iv) Change in Inventory character.
(v) Change in Inventory composition
(vi) Change in Inventory mix.
(vii) Markdown (both permanent and point of sale).
(viii) Retail markdowns and markups inconsistent with
prior period practice and performance; industry
standards; the Business Plan; or advertising
calendar and planned advertising events.
(ix) Return to Vendors.
23
<PAGE>
(x) Damage.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": The issuer of any L/C.
"LANDLORD STATE": Initially Washington, Virginia, and Pennsylvania,
and such other states in which a landlord's claim for rent has
priority over the Security Interests of the Agent in the
Collateral.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of any Borrower and any acceptance made on
account of such letter of credit.
"L/C LANDING COSTS": To the extent not included in the Stated Amount
of an L/C, customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" the Inventory, the
purchase of which is supported by such L/C.
"LEASE": Any lease or other agreement, no matter how styled or
structured, pursuant to which any Borrower is entitled to the use
or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of the Borrowers as lessee under any
Lease.
"LENDERS": The Tranche A Lenders and the Tranche B Lender collectively
and individually.
"LIABILITIES" (in the singular, "Liability"): All and each of' the
following arising under the Loan Documents, whether now existing
or hereafter arising:
(a) ______ Any and all direct and indirect liabilities,
debts, and obligations of the Borrowers to the Agent or to any
Lender, of every kind, nature, and description.
24
<PAGE>
(b) ______ Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrowers to the Agent or any Lender
(including all future advances whether or not made pursuant to a
commitment by the Agent or any Lender), whether or not any of
such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any
other type, nature, or description, or by reason of' any cause of
action which the Agent or any Lender may hold against the
Borrowers.
(c) ______ All notes and other obligations of the
Borrowers now or hereafter assigned to or held by the Agent or
any Lender, of every kind, nature, and description.
(d) ______ All interest, fees, and charges and other
amounts which may be charged by the Agent or any Lender to the
Borrowers and/or which may be due from the Borrowers to the Agent
or any Lender from time to time.
(e) ______ All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
Borrowers and the Agent or any Lender or instrument furnished by
the Borrowers to the Agent or any Lender (including, without
limitation, Costs of Collection, reasonable attorneys' fees, and
all court and litigation costs and expenses).
(f) ______ Any and all covenants of the Borrowers to or
with the Agent or any Lender and any and all obligations of the
Borrowers to act or to refrain from acting in accordance with any
agreement between the Borrowers and the Agent or any Lender or
instrument furnished by the Borrowers to the Agent or any Lender.
25
<PAGE>
(g) Each of the foregoing as if each reference to the
"Agent" therein were to each Affiliate of the Agent.
"LINE (UNUSED) FEE": Defined in Section 2.13.
"LIQUIDATION": The exercise, by the Agent, of those rights accorded to
the Agent under the Loan Documents as a creditor of the Borrowers
following and on account of Acceleration looking towards the
realization of the Collateral. Derivations of the word
"Liquidation" (such as "Liquidate") are used with like meaning in
this Agreement.
"LOAN": Any Revolving Credit Loan, Swingline Loan or Tranche B Loan
made hereunder.
"LOAN ACCOUNT": Defined in Section 2.7.
"LOAN CEILING": The aggregate amount of the Tranche A Dollar
Commitments and the Tranche B Dollar Commitment.
"LOAN DOCUMENTS": This Agreement, each instrument and document executed
and/or delivered as contemplated by Article 3, below, and each
other instrument or document from time to time executed and/or
delivered in connection with the arrangements contemplated hereby
with the Agent or any Lender or any Affiliate of the Agent,
including, without limitation, any transaction which arises out
of any cash management (including any ACH transfer arrangements),
depository, investment, letter of credit, interest rate
protection provided by the Agent or any Affiliate of the Agent in
connection with the arrangements contemplated hereby, or in
connection with any transaction of the Borrowers or any Borrower
with the Agent or any Affiliate of the Agent, as each may be
amended from time to time.
26
<PAGE>
"LOAN TO COLLATERAL RESERVES": Reserves set so that the amount made
available under the Borrowing Base on account of Acceptable
Inventory does not exceed in the aggregate the Net Liquidation
Value multiplied by 85%.
"LOCAL DISBURSEMENT ACCOUNT": A deposit account maintained by a
Borrower, into which amounts may be transferred from the
Operating Account for use solely (i) as a source of petty cash;
(ii) to make payroll payments; or (iii) to make other
disbursements that are identified on EXHIBIT 1 hereto.
"MAJORITY LENDERS": Lenders (other than Delinquent Tranche A Lenders and
Delinquent Tranche B Lender) holding 51% or more of the aggregate
of the Dollar Commitments of the Tranche A Lenders and Tranche B
Lender (other than Dollar Commitments held by Delinquent Tranche
A Lenders and Delinquent Tranche B Lender) and, to the extent
that the Dollar Commitments of the Lenders are no longer in
effect, based upon the outstanding Liabilities held by such
Lenders.
"MARGIN PRICING GRID": Provides for monthly adjustment to the interest
rate to be charged on Revolving Credit Loans based on
Availability and is shown in Section 2.10(e).
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' fiscal year most
recently completed prior to the execution of this Agreement, if
such change has a material effect on the Borrowers' financial
condition or operating results, as reflected on financial
statements and reports prepared by or for the Borrowers, when
compared with such condition or results as if such change had not
taken place, or where preparation of the Borrowers' statements
27
<PAGE>
and reports in compliance with such change results in the breach
of a financial performance covenant imposed pursuant to Section
5.12 (if applicable), where such a breach would not have occurred
if such change had not taken place or visa versa.
"MATERIAL ADVERSE CHANGE": Any event, fact, circumstance, change in, or
effect on, the business of any Borrower, which individually or in
the aggregate or on a cumulative basis with any other events,
facts, circumstances, changes in, or effects on, the Borrowers or
the Collateral, taken as a whole, which:
(a) ______ Would reasonably be expected to materially
adversely affect the ability of the Borrowers taken as a whole to
(i) operate or conduct their business in the aggregate in all
material respects in the manner in which such business is
currently operated or conducted or in which such business
(meaning primarily the retail sale of housewares, and items for
the home and related concepts) might be viably conducted by
expansion into additional, or by transition into other, venues or
mediums, or (ii) to perform their obligations under the Loan
Documents.
(b) Would reasonably be expected to have a material
adverse effect on the value, enforceability, or collectability of
the Collateral.
"MATERIAL ADVERSE EFFECT": A result, consequence, or outcome which
constitutes a Material Adverse Change.
"MATURITY DATE": November 30, 2003, or if such day is not a Business
Day, the next succeeding Business Day.
"NET LIQUIDATION VALUE": The product of (a) the Cost of Acceptable
Inventory (net of Inventory Reserves) multiplied by (b) the
28
<PAGE>
percentage of such Cost estimated to be realizable in a
Liquidation thereof, as determined by the then most recent
appraisal of the Borrowers' Inventory undertaken at the request
of the Agent.
"NOMINEE": A business entity (such as a corporation or limited
partnership) formed by the Agent to own or manage any Post
Foreclosure Asset.
"NONCONSENTING LENDER": Defined in Section 16.9(a).
"NOTES": The Revolving Credit Notes, the Tranche B Note and the
SwingLine Note.
"OPERATING ACCOUNT": Defined in Section 7.3(a)(iii).
"OVERALL INVENTORY ADVANCE RATE": The following percentages during the
periods indicated on the chart below:
<TABLE>
---------------------------------- -----------------------
Period Percentage
---------------------------------- -----------------------
---------------------------------- -----------------------
<S> <C>
December 16 - March 31 79%
---------------------------------- -----------------------
---------------------------------- -----------------------
April 1 - August 31 82%
---------------------------------- -----------------------
---------------------------------- -----------------------
September 1 - December 15 85%
---------------------------------- -----------------------
</TABLE>
"OVERALL INVENTORY APPRAISAL CAP": 90% of the Net Liquidation Value.
"PARTICIPANT": Defined in Section 19.14, hereof.
"PERMISSIBLE OVERLOANS": Revolving Credit Loans hereunder which
aggregate not more than 5% of the Tranche A Loan Ceiling in
effect on the date of this Agreement, where such loans are either
(a) Protective Advances or (b) made when Availability equals zero
(0) and are not extant for more than sixty (60) days absent the
consent of Super Majority Lenders pursuant to Section 16.3 hereof
and of the Tranche B Lender pursuant to Section 16.6 hereof;
provided however, in no event shall the making of any Permissible
Overloan cause the Tranche A Loan Ceiling to be exceeded.
"PERMITTED ENCUMBRANCES": The following:
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<PAGE>
(a) Encumbrances in favor of the Agent.
(b) Those Encumbrances (if any)listed on EXHIBIT 4.7,
annexed hereto.
(c) ______ Liens securing the payment of taxes, either not
yet overdue or the validity of which is being contested as
permitted by Section 4.15(d); non-consensual statutory liens
(other than liens securing the payment of taxes) arising in the
ordinary course of Borrowers' business to the extent such liens
secure (i) indebtedness that is not overdue, (ii) indebtedness
relating to claims or liabilities which are fully insured and
being defended at the sole cost and expense and at the sole risk
of the insurer or are being contested by the Borrowers in good
faith by appropriate proceedings diligently pursued, in each
instance prior to the commencement of foreclosure or other
similar proceedings and provided that adequate reserves therefor
have been set aside on the Borrowers' books (provided, however,
that the inclusion of any of the foregoing as "Permitted
Encumbrances" shall not affect their respective relative
priorities vis a vis the security interests created herein), or
(iii) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of real property.
(d) ______ Deposits _____ under ____ workmen's _____
compensation, unemployment insurance and social security laws, or
to secure the performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, or to secure
statutory Obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds arising in the
ordinary course of business.
(e) Landlord's liens arising by operation law where
30
<PAGE>
waivers have not been obtained.
(f) ______ Purchase money security interests or
capitalized equipment leases on any property acquired or held by
the Borrowers in the ordinary course of business and securing
indebtedness incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such property; provided
however that (i) any such Encumbrance attaches to such property
concurrently with or within twenty (20) days after the
acquisition thereof, (ii) such Encumbrance attaches solely to the
property so acquired in such transaction and (iii) the principal
amount of the Indebtedness secured thereby does not exceed 100%
of the cost of such property.
"PERMITTED INVESTMENT": An investment which fulfills any of the
following numbered criteria:
(1) ______ Debt entitled to the full faith and
credit of the United States with maturities not to exceed
one hundred and eighty-one (181) days.
(2) ______ Banker's acceptances accepted, savings
accounts made available, repurchase agreements entered
into, and certificates of deposit issued by Fleet National
Bank or any bank whose most senior debt has been assigned
an investment grade credit rating by a nationally
recognized credit rating service.
(3) Commercial paper rated A-l/P-1.
(4) Money market accounts or funds within the
meaning of Rule 2a-7 of the Investment Company Act of
1940, in effect as of the date of this Agreement.
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<PAGE>
(5) Such other investments as may be approved
in writing by Agent in its discretion.
"PERMITTED REPURCHASES OR DEBT RETIREMENT": Defined in Section 4.20(b).
"PERSON": Any natural person, corporation, limited liability company,
trust, partnership, joint venture, or other enterprise or entity.
"POST FORECLOSURE ASSET": All or any part of the Collateral, ownership
of which has been acquired by the Agent or a Nominee on account
of the Agent "bidding in" on behalf of the Lenders at a
foreclosure of Collateral as part of a Liquidation.
"PRO-RATA": With respect to any Lender, a fraction (expressed as a
percentage), the numerator of which shall be the amount of such
Lender's Dollar Commitment and the denominator of which shall be
the aggregate amount of all of the Lenders' Dollar Commitments,
as adjusted from time to time in accordance with the provisions
of Section 11.13 hereof, provided that, if the Commitments have
been terminated, the numerator shall be the unpaid amount of such
Lender's Loans and its interest in L/C exposure and the
denominator shall be the aggregate amount of all unpaid Loans and
L/C exposure.
"PROCEEDS": Includes, without limitation, "proceeds" as defined in the
UCC, and proceeds of all Collateral.
"PROTECTIVE ADVANCES": The aggregate of Revolving Credit Loans and
expenditures and incurrence of obligations by the Agent which are
made or undertaken in the Agent's reasonable discretion to
protect or preserve the Collateral and the Agent's rights upon
default or otherwise, or which the Agent determines in its
reasonable discretion are appropriate to facilitate a
Liquidation.
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<PAGE>
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips
and receipts arising from the sale of the Collateral.
"RECEIVABLES COLLATERAL": Any rights to payment with respect to any of
the Collateral.
"REGISTER": Defined in Section 17.1(f).
"RELATED ENTITY": Any Person (other than a natural person) which is a
parent, Subsidiary, or Affiliate of any Borrower; could have such
enterprise's tax returns or financial statements consolidated
with any Borrower's; could be a member of the same controlled
group of corporations (within the meaning of Section 1563(a)(1),
(2) and (3) of the Internal Revenue Code of 1986, as amended from
time to time) of which any Borrower is a member or controls or is
controlled by any Borrower or by any Affiliate of any Borrower.
"REQUIREMENT OF LAW": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims jurisdiction
over such Person, or any property of such Person, or of any other
Person for whose conduct such Person would be responsible.
(b) Such Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and
(c) ______ Such Person's by-laws ____ and/or other
instruments which deal with corporate or similar governance, as
applicable.
33
<PAGE>
"RESERVE PERCENTAGE": The decimal equivalent of that rate applicable to
a Tranche A Lender under regulations issued from time to time by
the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Tranche A
Lender with respect to "Eurocurrency liabilities" as defined in
such regulations. The Reserve Percentage applicable to a
particular Eurodollar Loan shall be based upon that in effect
during the subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to take
effect (and to consequently change any interest rate determined
with reference to the Reserve Percentage) if and when such change
is applicable to such loans.
"RESERVES": All Availability Reserves and Inventory Reserves, if any.
"RETAIL": The current ticket price aggregated by SKU of a Borrower's
Acceptable Inventory, ____ as reflected in the Borrowers'
Consolidated stock ledger, except that to the extent that
Acceptable Inventory is not reflected in the stock ledger,
"Retail" shall be determined using such non stock ledger
inventory systems of the Borrowers as the Agent shall deem
adequate for such purpose in its reasonable discretion.
"REVOLVING CREDIT": Defined in Section 2.1.
"REVOLVING CREDIT LOAN": A particular loan or advance made or continued
by a Tranche A Lender pursuant to the Revolving Credit.
"REVOLVING CREDIT NOTE": Defined in Section 2.8.
"SEC": The United States Securities and Exchange Commission, or any
successor thereto.
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<PAGE>
"STANDSTILL PERIOD": A period initiated by written notice by the Tranche
B Lender to the Agent in accordance with Section 14.2, which
period is 15 days for a Borrowing Base Default or Tranche B
Payment Default or 30 days for a General Default.
"STATED AMOUNT": The maximum amount for which an L/C may be honored,
less any amounts already drawn thereunder.
"SUBSIDIARY" or "SUBSIDIARIES": (a) Any corporation or limited liability
company of which more than fifty percent (50%) of the issued and
outstanding securities having ordinary voting power for the
election of directors or membership interests is owned or
controlled, directly or indirectly, by a Person and/or by one or
more of its Subsidiaries, and (b) any partnership in which a
Person and/or one or more Subsidiaries of such Person shall have
a general partnership interest or any other interest (whether in
the form of voting or participation in profits or capital
contribution), in each case, of more than fifty percent (50%).
"SUPERMAJORITY LENDERS": Lenders (other than Delinquent Tranche A
Lenders or Delinquent Tranche B Lender) holding 66-2/3% or more
of the aggregate of the Dollar Commitments of the Tranche A
Lenders and Tranche B Lender (other than Dollar Commitments held
by a Delinquent Tranche A Lender or Delinquent Tranche B Lender)
and, to the extent that the Dollar Commitments of the Lenders are
no longer in effect, based upon the outstanding Liabilities held
by such Lenders.
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) except in the case of
the events described in Sections 10.4 and 10.7, would become an
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<PAGE>
Event of Default if any requisite notice were given by the Agent
and/or any requisite period of time were to run and such
occurrence, circumstance, or state of facts were not absolutely
cured within any applicable grace period.
"SWINGLINE": The facility described in Section 2.6 pursuant to which the
SwingLine Lender may advance SwingLine Loans to the Borrowers
aggregating up to the SwingLine Loan Ceiling.
"SWINGLINE LENDER": FRF.
"SWINGLINE LOAN CEILING": Ten Million Dollars ($10,000,000.00).
"SWINGLINE LOANS": Revolving Credit Loans advanced under the SwingLine
by the SwingLine Lender and defined in Section 2.6(a).
"SWINGLINE NOTE": As defined in Section 2.6(c).
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10.11 hereof; or (c)
the date set as the Termination Date in a notice by the Agent to
the Lead Borrower on account of the occurrence of any Event of
Default other than as described in Section 10.11 hereof.
"TRANCHE A CONSENT": The Consent of all Tranche A Lenders other than the
Delinquent Tranche A Lenders.
"TRANCHE A COMMITMENT": With respect to each Tranche A Lender, that
respective Tranche A Lender's Tranche A Dollar Commitment.
"TRANCHE A DEBT": The aggregate of the Borrowers' Liabilities,
obligations and indebtedness of any character to the Tranche A
Lenders that arise from or are related to the Tranche A Loans,
other than Tranche A Fees.
"TRANCHE A DOLLAR COMMITMENT": As set forth on Schedule B annexed hereto
36
<PAGE>
(as such amounts may change in accordance with the provisions of
this Agreement), for each Tranche A Lender, provided that the
aggregate of the Tranche A Dollar Commitments shall not exceed
One Hundred Twenty Million Dollars ($120,000,000.00).
"TRANCHE A EARLY TERMINATION FEE": As defined in Section 2.14(a).
"TRANCHE A FEES" All fees (such as a fee on account of the execution of
an amendment of the Loan Agreement) payable by the Borrowers in
respect of the Tranche A Loans, other than any fee payable as
provided in the Agent Fee Letter, and any amount payable to an
Agent as reimbursement for any cost or expense incurred by that
Agent on account of the discharge of that Agent's duties under
this Agreement or the other Loan Documents.
"TRANCHE A LENDERS": Each Tranche A Lender to which reference is made in
the Preamble of this Agreement and any other Person who becomes a
"Tranche A Lender" in accordance with the provisions of this
Agreement.
"TRANCHE A LOAN CEILING": The aggregate amount of the Tranche A
Commitments of all Tranche A Lenders which shall not exceed One
Hundred Twenty Million Dollars ($120,000,000.00).
"TRANCHE A OBLIGATIONS": The aggregate of Tranche A Debt and Tranche A
Fees.
"TRANCHE A PERCENTAGE COMMITMENT": As set forth on Schedule B, annexed
hereto reflecting, with respect to any Tranche A Lender, the
ratio of (i) the amount of the Tranche A Dollar Commitment of
such Tranche A Lender to (ii) the aggregate amount of the Tranche
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<PAGE>
A Dollar Commitments of all Tranche A Lenders (as such percentage
may change in accordance with the provisions of this Agreement).
"TRANCHE A PRO-RATA": With respect to any Tranche A Lender, a fraction
(expressed as a percentage), the numerator of which shall be the
amount of such Tranche A Lender's Tranche A Dollar Commitment and
the denominator of which shall be the aggregate amount of all of
the Tranche A Lenders' Tranche A Dollar Commitments, as adjusted
from time to time in accordance with the provisions of Section
17.1 hereof, provided that, if the Tranche A Commitments have
been terminated, the numerator shall be the unpaid amount of such
Tranche A Lender's Loans and its interest in L/C exposure and the
denominator shall be the aggregate amount of all unpaid Revolving
Credit Loans and L/C exposure.
"TRANCHE A TERMINATION DATE": The earliest of (a) the Maturity Date; or
(b) the occurrence of any event described in Sections 10.10 or
10.11, below; or (c) the date set as the Termination Date in a
notice by the Agent to the Lead Borrower on account of the
occurrence of any Event of Default other than as described in
Sections 10.10 or 10.11, below; or (d) the Tranche B Termination
Date.
"TRANCHE B BORROWING AVAILABILITY": The sum at any time of (i)
Availability less (ii) the aggregate amount of all trade
payables, accrued expenses and rents of Borrowers that are
overdue or beyond agreed upon terms (and that are not reflected
in previously established Availability Reserves); plus (iii) all
cash and Permitted Investments of Borrowers valued at the lesser
of cost or market, as determined by the Agent.
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<PAGE>
"TRANCHE B COMMITMENT": With respect to each Tranche B Lender, that
respective Tranche B Lender's Tranche B Dollar Commitment.
"TRANCHE B COMMITMENT FEE": Defined in Section 2.12(b).
"TRANCHE B COMMITMENT PERIOD": The period commencing on the Closing Date
and ending on the 180th day following the Closing Date (or if
that date is not a Business Day that Business Day that
immediately precedes the 180th day after the Closing).
"TRANCHE B DEBT": The aggregate of the Borrowers' Liabilities,
obligations, and indebtedness of any character to the Tranche B
Lender arising from or related to the Tranche B Loan, other than
Tranche B Fees.
"TRANCHE B DEBT PAYMENT": Any payment of principal, interest (whether
payable in cash or otherwise), fees, premium, or otherwise on
account of the Tranche B Debt.
"TRANCHE B DEFERRED INTEREST": Defined in Section 2.10(f)(i).
"TRANCHE B DOLLAR COMMITMENT": As set forth on Schedule B annexed hereto
(as such amounts may change in accordance with the provisions of
this Agreement) for each Tranche B Lender, provided that the
aggregate amount of the Tranche B Dollar Commitments shall not
exceed Ten Million Dollars ($10,000,000.00).
"TRANCHE B EARLY TERMINATION FEE": Defined in Section 2.14(b).
"TRANCHE B FEES" All fees (such as Tranche B Commitment Fee, Tranche B
Early Termination Fee and any fee on account of the execution of
an amendment of the Loan Agreement) payable by the Borrowers in
respect of the Tranche B Loan, other than any amount payable to
the Agent as reimbursement for any cost or expense incurred by
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<PAGE>
the Agent on account of the discharge of the Agent's duties under
this Agreement or the other Loan Documents.
"TRANCHE B FEE LETTER": That certain letter of even date by and between
the Lead Borrower and the Tranche B Lender.
"TRANCHE B FUNDING DATE": The date that the Tranche B Loan is advanced
to the Lead Borrower.
"TRANCHE B FUNDED AMOUNT": The principal amount of the Tranche B Loan
on the Tranche B Funding Date.
"TRANCHE B INTEREST": Defined in Section 2.10(f)(i).
"TRANCHE B LENDER": Defined in the Preamble, together with its
successors and assigns.
"TRANCHE B LOAN": Defined in Section 2.1(b).
"TRANCHE B LOAN CEILING": $10,000,000.00.
"TRANCHE B MATURITY DATE": The Maturity Date.
"TRANCHE B MINIMUM LOAN": $7,000,000.00.
"TRANCHE B NOTE": Defined in Section 2.8(b).
"TRANCHE B OBLIGATIONS": The aggregate of Tranche B Debt and Tranche B
Fees.
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<PAGE>
"TRANCHE B PAYMENT DEFAULT" The failure of the Borrowers to have made
any Tranche B Debt Payment prior to the expiry of any grace
period applicable to such payment.
"TRANCHE B TERMINATION DATE": The earliest of (a) the Maturity Date; or
(b) the occurrence of any event described in Sections 10.10 or
10.11, below; or (c) the date set as the Termination Date in a
notice by the Agent to the Lead Borrower on account of the
occurrence of any Event of Default other than as described in
Sections 10.10 or 10.11, below; or (d) the Tranche A Termination
Date.
"TRANSFER": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve
Board, or as otherwise may be agreed to from time to time by the
Agent making such Transfer and the respective Lender.
Transfers by the Agent to all Lenders or to any Person who
becomes a Lender pursuant to Section 17.1, shall be effected
pursuant to wire instructions given by the respective Lenders or
by such Person to, and agreed to by, the Agent or as otherwise
mutually agreed.
Wire transfers to the Agent shall be in accordance with
the following wire instructions:
Fleet National Bank
ABA No. 01100390
Acct Name: Fleet Retail Finance Inc.
Acct No.: 53039952
Reference: Lechters, Inc.
Wire instructions may be changed in the same manner that Notice
Addresses may be changed, except that no change of the wire
instructions for Transfers to any Lender shall be effective
without the Consent of the Agent.
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<PAGE>
"UCC": The Uniform Commercial Code, as presently in effect in the State
of New York as used herein in the context of any definitions;
otherwise, as in effect from time to time in the State of New
York.
"UNANIMOUS CONSENT": The Consent of all Lenders other than Delinquent
Tranche A Lenders.
"UNANIMOUS TRANCHE A CONSENT": The Consent of all Tranche A Lenders
other than Delinquent Tranche A Lenders.
"UNDERWRITING FEE": Defined in Section 2.12.
ARTICLE II - THE REVOLVING CREDIT AND TRANCHE B LOAN FACILITY:
2.1 Establishment of Revolving Credit and Tranche B Loan Facility.
-------------------------------------------------------------
(a) ____ The Tranche A Lenders hereby establish a revolving line of
credit the "Revolving Credit") in the Borrowers' favor pursuant to which each
Tranche A Lender, subject to, and in accordance with, this Agreement, acting
through the Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrowers as provided herein, in
each instance equal to that Tranche A Lender's Commitment Percentage of
Availability, up to the maximum amount of that Tranche A Lender's Dollar
Commitment. The amount available for borrowing under the Revolving Credit shall
be determined by the Agent by reference to Availability, as determined by the
Agent from time to time.
(b) ____ The Tranche B Lender agrees, subject to, and in accordance with
this Agreement, acting through the Agent, to make a loan (the "Tranche B Loan")
to the Borrowers in a single drawing made during the Tranche B Commitment
Period, in such amount as may be requested by Lead Borrower pursuant to a timely
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<PAGE>
notice pursuant to Section 2.4(g) hereof, which amount shall be not less than
the Tranche B Minimum Loan nor more than the Tranche B Loan Ceiling; provided
that on the date of such request and on the Tranche B Funding Date: (i) no
Borrower is in default under any Indebtedness in excess of $10,000,000.00; (ii)
no event or condition described in Sections 10.10 or 10.11 has occurred and is
continuing with respect to any Borrower (without giving effect to the sixty (60)
day cure period with respect to any complaint, application or petition filed
against any Borrower under the Bankruptcy Code or any other insolvency statute
or procedure); (iii) Borrowers shall have satisfied on the Tranche B Funding
Date each of the conditions set forth in Section 2.4(f) hereof; (iv) the Agent
and Tranche B Lender shall have received evidence, in form and substance
satisfactory to each of them, that the Agent, on behalf of the Lenders,
continues to have valid perfected, first priority security interests and liens
upon the Collateral, subject only to Permitted Encumbrances; and (v) after
giving effect to the funding of the Tranche B Loan and all Permitted Repurchases
or Debt Retirements made between the Closing Date and the Tranche B Funding
Date, the Tranche B Borrowing Availability equals or exceeds the following
amounts for the Tranche B Funding Date occurring during the following specified
periods:
<TABLE>
---------------------------------------------- -----------------------
Period Tranche B Borrowing
Availability
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
<S> <C>
Closing Date - November 30, 2000 $66,000,000
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
December 1, 2000 - December 31, 2000 $101,000,000
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
January 1, 2001 - January 31, 2001 $82,000,000
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
February 1, 2001 - February 28, 2001 $77,000,000
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
March 1, 2001 - March 31, 2001 $75,000,000
---------------------------------------------- -----------------------
---------------------------------------------- -----------------------
April 1, 2001 - April 30, 2001 $67,000,000
---------------------------------------------- -----------------------
</TABLE>
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<PAGE>
There shall be only one borrowing under the Tranche B Loan Facility and
in the event that a request for the Tranche B Loan is not timely made during the
Tranche B Commitment Period, the Tranche B Lender's commitment to make the
Tranche B Loan shall terminate at the close of business on the last date of the
Tranche B Commitment Period.
(c) As used herein, the following terms have the following meanings:
(i) "AVAILABILITY" refers at any time to the result of applying
the following formula:
(A) Borrowing Base.
Minus
(B) ____ The then unpaid principal balance of the Loan
Account (excluding the outstanding amount of the
Tranche B Loans).
Minus
(C) The then Stated Amount of all L/C's.
(ii) "BORROWING BASE" refers at any time to the lesser of
2.1(c)(ii)(A), 2.1 (c)(ii)(B) or 2.1(c)(ii)(C), where:
(A) is the Tranche A Loan Ceiling.
(B) is the result of applying the following formula:
(I) ____ The product of the Credit Card Advance
Rate multiplied by the aggregate face amount
of Acceptable Credit Card Receivables.
Plus
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(II) The product of the Inventory Advance Rate
multiplied by the Cost of Acceptable
Inventory (Net of Inventory Reserves), not
to exceed the Inventory Appraisal Cap.
Plus
(III) The product of Ninety-Five percent (95%)
multiplied by Acceptable Cash Collateral.
Minus
(IV) The then aggregate of the Availability
Reserves.
(C) is the result of applying the following formula:
(I) The product of the Credit Card Advance Rate
multiplied by the aggregate face amount of
Acceptable Credit Card Receivables.
Plus
(II) The product of the Overall Inventory Advance
Rate multiplied by the Cost of Acceptable
Inventory (Net of Inventory Reserves), not
to exceed the Overall Inventory Appraisal
Cap.
Plus
(III) The product of Ninety-Five percent (95%)
multiplied by Acceptable Cash Collateral.
Minus
(IV) The then aggregate of the Availability
Reserves.
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<PAGE>
Minus
(V) ____ The unpaid principal balance of all
outstanding Tranche B Loans and all accrued
and unpaid Tranche B Deferred Interest.
(d) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 5.4 hereof.
(e) The proceeds of borrowings under the Revolving
Credit and of the Tranche B Loan shall be used
(i) for on-going working capital requirements of
Borrowers;
(ii) for Permitted Repurchases and Debt Retirement;
and
(iii)for general corporate purposes,
and in all cases to the extent permitted by this Agreement.
2.2 Advances in Excess of Borrowing Base.
------------------------------------
(a) ______ No Tranche A Lender has any obligation to make any
loan or advance, or otherwise to provide any credit for the benefit of the
Borrowers to the extent that the balance of the Loan Account (excluding the
outstanding amount of the Tranche B Loan) plus the then stated amount of all
L/Cs would as a result thereof exceed the Borrowing Base.
(b) ______ The Tranche A Lenders' obligations among themselves
are subject to Section 13.3(a) (which relates to each Tranche A Lender's making
amounts available to the Agent) and to Sections 16.1(d) and 16.3(a) (which
relate to Permissible Overloans).
(c) ______ The Tranche A Lenders' providing of credit in excess
of their obligations under this Agreement on any one occasion does not affect
the Liabilities of the Borrowers hereunder nor shall it obligate the Tranche A
Lenders to do so on any other occasion.
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<PAGE>
2.3 Risks of Value of Collateral.
------------------------------
The Agent's reference to a given asset in connection with the
making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit and/or the monitoring of compliance
with the provisions hereof shall not be deemed a determination by the Agent or
any Lender relative to the actual value of the asset in question. All risks
concerning the collectability of the Receivables Collateral and the
merchantability of the Borrowers' Inventory are and remain the Borrowers'. All
Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Agent or by any Lender in
connection with the making of loans, credits, and advances and the providing of
financial accommodations under the Revolving Credit.
2.4 Loan Requests.
-------------
(a) ______ Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, provided that:
(i) The Borrowing Base shall not be exceeded; and
(ii) The Revolving Credit has not been suspended as
provided in Section 2.4 (h).
(b) ______ Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan by giving the Agent written or
telephone notice (confirmed in writing) in the form of EXHIBIT 2.4(B) as
follows:
(i) If such Revolving Credit Loan is to be a Base
Margin Loan (which shall include the conversion of a Eurodollar Loan):
By 11:30 A.M. on the Business Day on which such Revolving Credit Loan is
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<PAGE>
to be made. Base Margin Loans requested by the Lead Borrower, other than
those resulting from the conversion of a Eurodollar Loan, shall not be
less than $10,000.00.
(ii) If such Revolving Credit Loan is to be Eurodollar
Loan (which shall include the continuation of, or the conversion of a
Base Margin Loan to, a Eurodollar Loan): By 1:00 P.M. on the third
Eurodollar Business Day prior to the first day of the Interest Period
being requested. Eurodollar Loans shall each be not less than $1,000,000
and in increments of $500,000 in excess of such minimum.
(iii) Any Eurodollar Loan which matures while an Event of
Default is extant may be converted, at the option of the Agent, to a
Base Margin Loan notwithstanding any notice from the Borrower that such
loan is to be continued as a Eurodollar Loan.
(c) ______ Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the next Business Day or Eurodollar Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Agent.
(d) ______ The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of a Borrower as provided in Section 2.17.
(e) ______ The Agent may rely on any request for a loan or
advance or other financial accommodation under the Revolving Credit which the
Agent, in good faith, believes to have been made by a Person duly authorized to
act on behalf of the Lead Borrower and may decline to make any such requested
loan or
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<PAGE>
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that Person's
authority to act as may be reasonably satisfactory to the Agent.
(f) ______ A request by the Lead Borrower for a loan or advance
or other financial accommodation under the Revolving Credit or for the Tranche B
Loan shall be irrevocable and shall constitute certification by each Borrower
that as of the date of such request, each of the following is true and correct:
(i) ____ There has been no Material Adverse Change in the
Borrowers' Consolidated financial condition from the most recent
financial information furnished Agent pursuant to this Agreement;
(ii) All or a portion of any loan or advance so requested
will be set aside or adequate reserves will otherwise be established by
the Borrowers to the extent necessary to pay when due all of the
Borrowers' obligations for sales tax on account of sales since the then
most recent borrowing pursuant to this Agreement;
(iii) Each representation which is made herein or in any
of the other Loan Documents is then true and complete in all material
respects as of the date of such request (unless such representation
relates to an earlier date, in which event such representation shall be
true as of such earlier date, or such representation relates to a
changed condition which change is permitted under the covenants set
forth in this Agreement); and
(iv) No Suspension Event is then continuing.
(g) Subject to the provisions of this Agreement, during the
Tranche B Commitment Period the Lead Borrower may request the Tranche B Loan by
giving the Agent not less than thirty (30) days prior written notice thereof in
the form of EXHIBIT 2.4(G).
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(h) ______ During the continuance of any Suspension Event,
neither the Agent on behalf of the Tranche A Lenders, the Tranche A Lenders, the
Swingline Lender nor the Tranche B Lender shall be obligated to make any loans
or advances, to provide any financial accommodation hereunder, to issue any L/C,
or to accept any request of the Lead Borrower that any Eurodollar Loan be made
or any Base Margin Loan be converted to a Eurodollar Loan.
2.5 Making of Loans .
----------------
(a) ______ A loan or advance under this Agreement shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Lead Borrower.
(b) ______ A loan or advance shall be deemed to have been made
under this Agreement (and the Borrowers shall be indebted to the Lenders for the
amount thereof immediately) upon the Agent's initiation of the transfer of the
proceeds of such loan or advance in accordance with the Lead Borrower's
instructions or the charging of the amount of such loan to the Loan Account (in
all other circumstances).
(c) ______ There shall not be any recourse to or liability of the
Agent or any Lender (except to the extent caused by the gross negligence or
willful misconduct of the Agent or any Lender as determined by a court of
competent jurisdiction), on account of:
(i) Any delay in the making of any loan or advance
requested under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan or advance
constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of funds
which constitute a loan or advance under the Revolving Credit,
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the wire transfer of which was properly initiated by the Agent in
accordance with wire instructions provided to the Agent by the
Lead Borrower.
2.6 SwingLine Loans.
---------------
(a) ______ For ease of administration, Base Margin Loans may be
made by the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in
accordance with the procedures set forth in this Agreement for the making of
loans and advances under the Revolving Credit. The unpaid principal balance of
the SwingLine Loans shall not at any one time be in excess of the SwingLine Loan
Ceiling (which SwingLine Loan Ceiling is subject to amendments from time to
time, by reasonable advance written notice by the Agent to the Lead Borrower).
(b) ______ The aggregate unpaid principal balance of SwingLine
Loans shall bear interest as if the same were loans and advances under the
Revolving Credit.
(c) ______ The obligation to repay SwingLine Loans shall be
evidenced by a Note (the "SWINGLINE NOTE") in the form of EXHIBIT 2.6(C),
annexed hereto, executed by the Lead Borrower on behalf of itself and the other
Borrowers and payable to the SwingLine Lender. Neither the original nor a copy
of the SwingLine Note shall be required, however, to establish or prove any
Liability with respect to the SwingLine Loans. Upon the Lead Borrower being
provided with an affidavit (which shall include an indemnity reasonably
satisfactory to the Lead Borrower) from the Agent to the effect that the
SwingLine Note has been lost, mutilated, or destroyed, the Lead Borrower shall
on behalf of itself and the other Borrowers execute a replacement thereof and
deliver such replacement to the SwingLine Lender.
(d) ______ For all purposes of this Loan Agreement, the SwingLine
Loans and the Lead Borrower's obligations to the SwingLine Lender constitute
Revolving Credit Loans and are secured as "Liabilities".
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(e) ______ SwingLine Loans may be subject to periodic settlement
with the Lenders as provided in Section 13.2 of this Loan Agreement.
2.7 The Loan Account.
----------------
(a) ______ An account ("LOAN ACCOUNT") shall be opened on the
books of the Agent. A record may be kept in the Loan Account of all Loans made
under or pursuant to this Agreement and of all payments thereon.
(b) ______ The Agent may also keep a record (either in the Loan
Account or elsewhere, as the Agent may from time to time elect) of all interest,
fees, service charges, costs, expenses, and any other amounts owed the Agent,
the SwingLine Lender and each Lender on account of the Liabilities and of all
credits against all such amounts so owed.
(c) ______ All credits against the Liabilities shall be
conditional upon receipt of final payment to the Agent for the Account of each
Lender of the amounts so credited. The amount of any item credited against the
Liabilities which is charged back against Agent or any Lender for any reason or
is not finally paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) ______ Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrowers are obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments which will be due
and payable between the date of such determination and the first day of the then
next succeeding month as having been advanced under the Revolving Credit,
whether or not such amounts are then due and payable.
(e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
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payment to which the Agent or any Lender is entitled from the Borrowers pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in the Borrowing Base being exceeded. Such action
on the part of the Agent shall not constitute a waiver of the Agent's rights or
the Borrowers' obligations under Section 2.9(b). Any amount which is added to
the principal balance of the Loan Account as provided in this Section 2.7(e)
shall bear interest, subject to Section 2.10(d), at the Base Margin Rate.
(f) ______ Any statement rendered by the Agent or any Lender to
the Borrowers concerning the Liabilities shall, in the absence of manifest
error, be considered correct and accepted by the Borrowers and shall be
conclusively binding upon the Borrowers unless the Lead Borrower provides the
Agent with written objection thereto within thirty (30) days from the mailing of
such statement, which written objection shall indicate, with particularity, the
reason for such objection. In the absence of manifest error, the Loan Account
and the Agent's books and records concerning the loan arrangement contemplated
herein and the Liabilities shall be prima facie evidence of the items described
therein.
2.8 Notes.
-----
(a) ______ The obligation to repay the Revolving Credit Loans,
with interest as provided herein, shall be evidenced by Notes (each, a
"REVOLVING CREDIT NOTE") in the form of EXHIBIT 2.8, annexed hereto, executed by
the Lead Borrower on behalf of itself and the other Borrowers, one payable to
each Tranche A Lender. Neither the original nor a copy of any Revolving Credit
Note shall be required, however, to establish or prove any Liability. In the
event that any Revolving Credit Note is ever lost, mutilated, or destroyed, the
Lead Borrower shall execute a replacement thereof on behalf of itself and the
other Borrowers and deliver such replacement to the Agent.
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(b) ______ The Borrowers' obligation to repay the Tranche B Loan,
with interest as provided herein, shall be evidenced by a Note (a "TRANCHE B
NOTE") in the form of EXHIBIT 2.8(B), annexed hereto, executed by the Lead
Borrower on behalf of itself and the other Borrowers, payable to the Tranche B
Lender. Neither the original nor a copy of the Tranche B Note shall be required,
however, to establish or prove any Liability. In the event that the Tranche B
Note is lost, mutilated, or destroyed, the Lead Borrower on behalf of itself and
the other Borrowers shall execute and deliver a replacement thereto to the
Tranche B Lender.
2.9 Payment of Loans.
----------------
(a) ______ The Borrowers may repay all or any portion of the
principal balance of the Loan Account with respect to the Revolving Credit Loans
from time to time until the Termination Date. Such payments when made in respect
of Revolving Credit Loans shall be applied first to Base Margin Loans and only
then to Eurodollar Loans.
(b) ______ The Borrowers, upon notice or demand from the Agent or
any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base. Such payments shall be applied first to Base Margin Loans and
only then to Eurodollar Loans.
(c) ______ Unless otherwise instructed by the Lead Borrower, the
Agent shall endeavor to cause those application of payments (if any), pursuant
to Sections 2.9(a) and 2.9(b) against Eurodollar Loans then outstanding in such
manner as results in the least cost to the Borrowers, but shall not have any
affirmative obligation to do so nor any liability on account of its failure to
do so. The Lead Borrower may request the Agent to defer the application of a
payment to a Eurodollar Loan until the end of the applicable Eurodollar Interest
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<PAGE>
Period and to hold the funds allocated for such payment as interim cash
collateral. In no event shall action or inaction by the Agent excuse the
Borrowers from any indemnification obligation under Section 2.9(e) unless such
action or inaction resulted from the Agent's gross negligence or willful
misconduct.
(d) ____ The Borrowers shall repay the then entire unpaid balance of the
Loan Account and all other Liabilities on the Termination Date.
(e) ____ Upon the written request of the Agent, the Borrowers shall
indemnify each Tranche A Lender and hold each Tranche A Lender harmless from and
against any loss, cost or expense (including loss of anticipated profits) which
such Tranche A Lender may sustain or incur (including, without limitation, by
virtue of acceleration after the occurrence of any Event of Default) as a
consequence of the following:
(i) Default by the Borrowers in payment of the principal amount
of or any interest on any Eurodollar Loan as and when due and payable,
including any such loss or expense arising from interest or fees payable
by such Tranche A Lender to lenders of funds obtained by it in order to
maintain its Eurodollar Loans.
(ii) Default by the Borrowers in making a borrowing or
conversion after the Lead Borrower has given (or is deemed to have
given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Eurodollar Loan or
the conversion of any such Eurodollar Loan to a Base Margin 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 Eurodollar
Lender to lenders of funds obtained by it in order to maintain any such
Loans as "breakage fees".
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(f) ______ Upon thirty (30) days prior written notice by the Lead
Borrower to the Tranche B Lender, the principal balance of the Tranche B Debt
may be prepaid in whole or in part at any time as follows:
(i) ____ With the net proceeds of the sale of equity
securities, the issuance of which is otherwise permitted in this
Agreement.
(ii) With proceeds of Revolving Credit Loans.
2.10 Interest Rates.
--------------
(a) ______ Each Revolving Credit Loan shall bear interest at the
Base Margin Rate (determined based on a 360 day year and actual days elapsed)
unless it is made as, or is converted to, a Eurodollar Loan pursuant to Section
2.4 hereof.
(b) ______ Each Revolving Credit Loan which consists of a
Eurodollar Loan shall bear interest at the applicable Eurodollar Rate
(determined based on a 360 day year and actual days elapsed), as adjusted
pursuant to Section 2.10(e), below.
(c) ______ The Lead Borrower shall not select, renew, or convert
any interest rate for a Revolving Credit Loan such that, in addition to interest
at the Base Margin Rate, there are more than Six (6) Eurodollar Rates applicable
to the Revolving Credit Loans at any one time.
(d) ______ The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears on the applicable Interest Payment Date
therefor. Following the occurrence of any Event of Default (and whether or not
the Agent exercises the Agent's rights on account thereof), all Revolving Credit
Loans shall bear interest, at the option of the Agent or at the direction of the
SuperMajority Lenders, at a rate which is the aggregate, in the case of Base
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Margin Loans, of the then applicable Base Margin Rate plus two percent (2%) per
annum, and in the case of Eurodollar Loans, the then applicable Eurodollar Rate
plus two percent (2%) per annum.
(e) ______ The Eurodollar Margin and the Base Margin shall be
reset monthly, on the first day of each month, based upon the Margin Pricing
Grid set forth below. If during any thirty (30) day period ending with the last
day of a given month, Availability on any five (5) consecutive Business Days
falls, in the case of Tier III Loans, below $35 Million ($35,000,000.00), or in
the case of Tier II Loans, below $15 Million ($15,000,000.00), the Eurodollar
Margin and the Base Margin shall be adjusted downward commencing the first day
of the following month. The Eurodollar Margin and the Base Margin shall be reset
upward on the first day of a given month only if during the immediately
preceding thirty (30) day period, in the case of Loans priced at Tier II,
Availability is $35 Million ($35,000,000.00) or more, and in the case of Loans
priced at Tier I, Availability is $15 Million ($15,000,000.00) or more.
MARGIN PRICING GRID
<TABLE>
--------------------------------------------------------------------------------
<S> <C> <C> <C>
TIER MINIMUM AVAILABILITY, FOR EURODOLLAR MARGIN BASE MARGIN
PRECEDING MONTH (BASIS POINTS) (PERCENTAGE)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
I $15 Million or less 225 0.50
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
II More than $15 Million, but 200 0.25
less than $35 Million
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
III $35 Million or more 175 0
--------------------------------------------------------------------------------
</TABLE>
(f) Tranche B Loan.
(i) ____ Subject to Section 2.10(f)(iii) hereof, the
Tranche B Loan shall bear interest (computed on the basis of the
actual number of days elapsed over year of 360 days) at a rate
per annum equal to Fifteen and One-Quarter Percent (15.25%) (the
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"TRANCHE B INTEREST"). Subject to Section 2.10(f)(iii) hereof,
Borrowers shall have the option to pay all or a portion of the
interest payable on the Tranche B Loan in excess of Thirteen
Percent (13.00%) per annum by adding such excess amount to the
principal amount outstanding under the Tranche B Note on the
first Business Day of each calendar month (the "TRANCHE B
DEFERRED INTEREST"). The Lead Borrower shall give the Agent and
the Tranche B Lender an irrevocable notice that it will exercise
such right at least three (3) Business Days prior to any Interest
Payment Date as to which such right is exercised.
(ii) Subject to Section 2.10(f)(iii) hereof, accrued
Interest on the Tranche B Loan, other than that portion of
interest on the Tranche B Loan which the Borrowers' elect to add
to the principal amount of the Tranche B Note as Tranche B
Deferred Interest in accordance with Section 2.10(f)(i), shall be
payable in arrears on the first Business Day of each calendar
month and on the Tranche B Maturity Date. Accrued interest on the
Tranche B Loan which Borrowers elect to add to the principal
amount of the Tranche B Note in accordance with Section
2.10(f)(i) hereof shall be payable as provided in Section
2.10(f)(i).
(iii) Effective upon the occurrence and at all times
during the continuance of any Event of Default (and whether or
not the Agent exercises the Agent's rights on account thereof),
the Tranche B Loan shall accrue interest the rate of 18.25% per
annum (computed in the basis of the actual number of days elapsed
over a year of 360 days) and such interest shall be payable in
cash on demand.
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2.11 Agent's Fee.
------------
In addition to any other fee or expense paid by the Borrowers on
account of the Revolving Credit, the Borrowers shall pay the Agent an AGENT'S
FEE and an UNDERWRITING FEE as provided in a separate AGENT FEE LETTER, dated
November 30, 1999, as amended by the amendment thereto dated as of the date
hereof, from the Agent to the Borrowers (the "Agent Fee Letter").
2.12 Amendment Fee; Tranche B Commitment Fee.
---------------------------------------
(a) ______ In addition to any other fee or expense paid by the
Borrowers on account of the Revolving Credit, the Borrowers shall pay the Agent
for the Tranche A Pro-Rata benefit of the Tranche A Lenders an AMENDMENT FEE as
provided in the Tranche A Fee Letter dated as of the date hereof (the "Tranche A
Fee Letter").
(b) ______ In addition to any other fee or expense paid by the
Borrowers on account of the Tranche B Loan facility, the Borrowers shall pay the
Agent for the account of Tranche B Lender a TRANCHE B COMMITMENT FEE as provided
in the Tranche B Fee Letter.
2.13 Line (Unused) Fee; Annual Facility Fee.
-------------------------------------------
(a) In addition to any other fee or expense paid by the Borrowers
on account of the Revolving Credit, the Borrowers shall pay the Agent for the
Pro-Rata benefit of the Tranche A Lenders a LINE (UNUSED) FEE in arrears, on the
first Business Day of each calendar quarter (and on the Termination Date). The
Line (Unused) Fee shall be equal to four tenths of one percent (0.40%) per annum
of the average difference, during the quarter just ended (or such shorter period
as may pertain to the first such payment and to the payment being made on the
Termination Date as to which no Line (Unused) Fee shall previously have been
paid, between:
(i) the Tranche A Loan Ceiling
and
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(ii) the aggregate of
(A) the unpaid principal balance of the Revolving
Credit Loans.
Plus
(B) the Stated Amount of all then outstanding L/C's.
(b) In addition to any other fee or expense paid by the
Borrowers on account of the Tranche B Loan facility, the Borrowers shall pay the
Agent for the account of the Tranche B Lender an ANNUAL FACILITY FEE as provided
in the Tranche B Fee Letter.
(c) ______ In addition to any other fee or expense paid by the
Borrowers on account of the Tranche B Loan facility the Borrowers shall pay the
Agent for the account of Tranche B Lender a TRANCHE B COLLATERAL MONITORING FEE
as provided in the Tranche B Fee Letter.
2.14 Early Termination Fees.
------------------------
(a) ______ In the event that the Tranche A Termination Date
occurs, for any reason, prior to November 30, 2000, the Borrower shall pay the
Agent, for the Pro-Rata benefit of the Tranche A Lenders, as a TRANCHE A EARLY
TERMINATION FEE an amount equal to one half of one percent (0.5%) of the Tranche
A Loan Ceiling in effect as of the date of this Agreement.
(b) ______ In the event the Tranche B Termination Date occurs,
for any reason, prior to the second anniversary of the Closing Date, the
Borrower shall pay the Agent, for the account of the Tranche B Lender, as a
TRANCHE B EARLY TERMINATION FEE as provided in the Tranche B Fee Letter.
2.15 Concerning Fees.
---------------
The Borrowers shall not be entitled to any credit, rebate or
repayment of the Agent's Fee, Underwriting Fee, Tranche B Commitment Fee, Line
(Unused) Fee, Tranche B Annual Facility Fee, Tranche B Collateral Monitoring
Fee, Tranche A Early Termination Fee, Tranche B Early Termination Fee or other
fee previously earned by the Agent or any Lender pursuant to this Agreement,
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notwithstanding any termination of this Agreement or suspension or termination
of the Agent's and any Lender's respective obligation to make loans and advances
hereunder.
2.16 Agent's and Lenders' Discretion.
-------------------------------
(a) ______ Each reference in the Loan Documents to the exercise
of discretion or the like by the Agent or any Lender shall be to that Person's
reasonable exercise of its judgment, in good faith (which shall be rebuttably
presumed), based upon that Person's consideration of any such factor as that
Person, taking into account information of which that Person then has actual
knowledge, believes:
(i) ____ Would reasonably be expected to affect the value
of the Collateral, the enforceability of the Agent's security and
collateral interests therein, or the amount which the Agent would likely
realize therefrom (taking into account delays which may possibly be
encountered in the Agent's realizing upon the Collateral and likely
Costs of Collection);
(ii) Indicates that any report or financial information
delivered to the Agent or any Lender by or on behalf of the Borrowers is
incomplete, inaccurate, or misleading in any material manner or was not
prepared in accordance with the requirements of this Agreement;
(iii) Reasonably suggests that the Borrowers will become
the subject of a bankruptcy or insolvency proceeding; or
(iv) Constitutes a Suspension Event.
(b) In the exercise of such judgment, the Agent also may
take into account any of the following factors:
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(i) ____ Those included in, or tested by, the definitions
of "Acceptable Inventory," "Acceptable L/C Inventory," "Acceptable
In-Transit Inventory," "Retail," and "Cost";
(ii) Changes to the current financial and business climate
of the industry in which the Borrowers compete (having regard for the
Borrowers' position in that industry);
(iii) Changes to general macroeconomic conditions which
have a material effect on the Borrowers' cost structure;
(iv) Changes reflecting seasonality with respect to the
Borrowers' Inventory and patterns of retail sales; and
(v) ____ Changes in such other factors as the Agent
determines to have a material bearing on credit risks associated with
the providing of loans and financial accommodations to the Borrowers.
(c) ______ The burden of establishing the failure of the Agent or
any Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers'.
2.17 Procedures For Issuance of L/C's.
--------------------------------
(a) ______ The Lead Borrower on behalf of itself and the other
Borrowers may request that the Agent cause the issuance of L/C's for the account
of the Borrowers. Each such request shall be made in such a manner as may from
time to time be acceptable to the Agent.
(b) ______ The Agent will endeavor to cause the issuance of any
L/C so requested by the Lead Borrower, provided that, at the time that the
request is made, the Revolving Credit has not been suspended as provided in
Section 2.4(g) and,
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(i) ______ The aggregate Stated Amount of all L/C's then
outstanding (giving effect to the L/C whose issuance is requested), does
not exceed Thirty Million Dollars ($30,000,000.00);
(ii) The expiry of the requested L/C is not later than the
earlier of thirty (30) days prior to the Maturity Date or the following:
(A) ____ For standby L/C's: One (1) year from
initial issuance.
(B) For documentary L/C's: One hundred eighty
180) days from issuance;
and
(iii) ____ The Borrowing Base would not be exceeded upon
the issuance of the requested L/C.
(c) ______ The Lead Borrower shall execute such documentation to
apply for and support the issuance of a L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of,
the Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue a L/C;
or
(ii) _____ Any action or inaction of an Issuer on account
of or in respect to, any L/C unless the Issuer is the Agent or a Tranche
A Lender and such action or inaction is determined by a court of
competent jurisdiction to constitute gross negligence or willful
misconduct.
(e) ______ The Borrowers shall reimburse the Issuer for the
amount of any drawing honored under a L/C on the same day on which such drawing
is honored. The Agent, without the request of the Lead Borrower, may advance
under the Revolving Credit (and charge to the Loan Account) the amount of any
draws
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honored under any L/C and any other amount for which the Lead Borrower, the
Issuer, or any Tranche A Lender becomes obligated on account of, or in respect
to, any L/C, other than any such amounts incurred as a result of the gross
negligence or willful misconduct of the Issuer or such Tranche A Lender, as the
case may be. Such advance shall be made whether or not a Suspension Event is
then continuing or such advance would result in Borrowing Base's being exceeded.
Such action shall not constitute a waiver of the Agent's rights under section
2.9(b) hereof.
2.18 Fees For L/C's.
--------------
(a) ______ The Lead Borrower on behalf of itself and the other
Borrowers shall pay to the Agent for the account of the Tranche A Lenders, on
account of each L/C procured by the Agent, a fee, as follows:
(i) ______ For each standby L/C: The then applicable
Eurodollar Margin less twenty-five (25) basis points, per annum, of the
Stated Amount of such standby L/C, payable quarterly in arrears, on the
first day of each of the Lead Borrower's fiscal quarters.
(ii) _____ For each documentary L/C's: One and one-quarter
percent (1.25%) per annum of the weighted average of the Stated Amount
of such documentary L/C outstanding at any time during the period since
the then most recent payment of such fee, payable quarterly in arrears,
on the first day of each of the Lead Borrower's fiscal quarters, and on
the End Date.
(iii) ____ Notwithstanding Subsections (i) and (ii),
above, following the occurrence of any Event of Default (and whether or
not the Agent exercises the Agent's rights on account thereof), the
above fees, at the option of the Agent or the direction of the
SuperMajority Lenders, shall be two percent (2%) per annum above the
applicable rates above.
(b) ______ In addition to the fees to be paid as provided in
Subsection 2.18(a), above, the Lead Borrower shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, all issuance, processing,
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negotiation, amendment, and administrative fees and other amounts charged by the
Issuer on account of, or in respect to, any L/C.
2.19 Concerning L/C's.
----------------
(a) ______ None of the Issuer, the Issuer's correspondents, or
any advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to any Borrower.
(ii) _____ The form, sufficiency, correctness,
genuineness, authority of any person signing, the falsification, or the
legal effect of, any documents called for under any L/C if such
documents appear to be in order.
(b) ______ The Issuer may honor, as complying with the terms of
any L/C and of any drawing thereunder, any drafts or other documents otherwise
in order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.
(c) ______ Unless the Lead Borrower on behalf of itself and the
other Borrowers otherwise instructs any Issuer, in the particular instance, the
Lead Borrower hereby authorizes such Issuer to:
(i) Select an advising bank;
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(ii) Select a paying bank; and
(iii) Select a negotiating bank.
(d) ______ All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrowers. The Issuer shall have
discharged the Issuer's obligations under any L/C or drawing thereunder which
includes payment instructions if the Issuer initiates the method of payment
called for thereby (or initiates any other commercially reasonable and
comparable method). None of the Agent, any Tranche A Lender, or the Issuer shall
have any responsibility for any inaccuracy, interruption, error, or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation, to the extent not caused by them.
(e) ______ The Agent's, each Tranche A Lender's, and the Issuer's
rights, powers, privileges and immunities specified in or arising under this
Agreement are in addition to any heretofore or at any time hereafter otherwise
created or arising, whether by statute or rule of law or contract.
(f) ______ Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrowers, the L/C will
be governed by either, at the election of the Issuer, the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce, Publication
No. 500, and any subsequent revisions thereof or the International Standby
Practices - ISP 98, International Chamber of Commerce Publication, No. 590, and
any subsequent revisions thereof.
(g) ______ If any change in any law, executive order or
regulation, or any directive of any administrative or governmental authority
(whether or not having the force of law), or in the interpretation thereof by
any court or administrative or governmental authority charged with the
administration thereof, shall either:
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(i) ______ impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Agent, any Tranche A Lender or any Issuer has an obligation to lend
or to fund drawings under any L/C; or
(ii) _____ impose on any Issuer any other condition or
requirements relating to any such letters of credit; and the result of
any event referred to in Section 2.19(g)(i) or 2.19(g)(ii), above, shall
be to increase the cost to any Issuer of issuing or maintaining any L/C
(which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the
aggregate of such cost increases resulting from such events), then, upon
demand by the Agent and delivery by the Agent to the Lead Borrower of a
certificate of an officer of such Issuer describing such change in law,
executive order, regulation, directive, or interpretation thereof, its
effect on such Issuer, and the basis for determining such increased
costs and their allocation, the Lead Borrower shall immediately pay to
the Agent, from time to time as specified by the Agent, such amounts as
shall be sufficient to compensate such Issuer for such increased cost.
Any Issuer's determination of costs incurred under Section 2.19(g)(i) or
2.19(g)(ii), above, and the allocation, if any, of such costs among the
Lead Borrower and other letter of credit customers of such Issuer, if
done in good faith and made on an equitable basis and in accordance with
such officer's certificate, shall, in the absence of manifest error, be
conclusive and binding on the Borrowers.
(h) The obligations of the Lead Borrower on behalf of itself
and the other Borrowers under this Agreement with respect to L/C's are absolute,
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unconditional, and irrevocable and shall be performed strictly in accordance
with the terms hereof under all circumstances whatsoever including, without
limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement,
any L/C, or any other agreement or instrument relating thereto;
(ii) Any amendment or waiver of, or consent to the
departure from, any L/C;
(iii) ____ The existence of any claim, set-off, defense,
or other right which the Lead Borrower may have at any time against the
beneficiary of any L/C; and
(iv) _____ Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
2.20 Changed Circumstances.
---------------------
(a) The Agent may give the Lead Borrower notice that:
(i) The Agent shall have determined in good faith
(which determination shall be final and conclusive) on any day on which
the Eurodollar rate would otherwise be set, that by reason of changes
arising after the date of this Agreement affecting the principal market
in Eurodollars in which Fleet National Bank participates, adequate and
fair means do not exist for ascertaining such rate; or
(ii) _____ The Agent shall have determined in good faith
which determination shall be final and conclusive) that:
(A) The continuation of, or conversion of any
Revolving Credit Loan to, a Eurodollar Loan has been made
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impracticable or unlawful by the occurrence of a contingency that
materially and adversely affects the applicable market or
compliance by the Agent or any Tranche A Lender in good faith
with any applicable law or governmental regulation, guideline or
order or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental
authority (whether or not having the force of law); or
(B) ______ The indices on which the interest rates
for Eurodollar Loans are based shall no longer represent the
effective cost to the Agent or any Tranche A Lender for U.S.
dollar deposits in the interbank market for deposits in which it
regularly participates.
(b) ______ In the event that the Agent gives the Lead Borrower
notice of an occurrence described in Section 2.20(a), then, until the Agent
notifies the Lead Borrower that the circumstances giving rise to such notice no
longer apply:
(i) ______ The obligation of the Agent and of each Tranche
A Lender to make Eurodollar Loans of the type affected by such changed
circumstances or to permit the Lead Borrower to select the affected
interest rate as otherwise applicable to any Revolving Credit Loans
shall be suspended.
(ii) _____ Any notice which the Lead Borrower shall have
given the Agent with respect to any Eurodollar Loan, the time for action
with respect to which has not occurred prior to the Agent's having given
notice pursuant to Section 2.20(a), shall be deemed at the option of the
Agent not to have been given.
(iii) ____ Subject to the provisions of Section 2.9(e),
the Lead Borrower may (and, with respect to any event described in
Section 2.20(a)(ii), shall)
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(A) cancel the relevant borrowing or
conversion notice on the same date the Lead Borrower was notified
of such event; and
(B) ______ prepay or cause to be prepaid any then
affected Eurodollar Loans.
2.21 Increased Costs/Taxes.
---------------------
(a) ______ If, as a result of any changes, arising after the date
of this Agreement, in any requirement of law, or of the interpretation or
application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:
(i) ______ subjects any Lender to any taxes or changes the
basis of taxation, or increases any existing taxes, on payments of
principal, interest or other amounts payable by the Borrowers to the
Agent or any Lender under this Agreement except for taxes on the Agent
or any Lender's overall net income or capital imposed by the
jurisdiction in which the Agent or that Lender's principal or lending
offices are located, or subjects any Lender to any stamp or documentary
taxes and any other excise or property taxes or charges or similar
levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document;
(ii) _____ imposes, modifies or deems applicable any
reserve cash margin, special deposit or similar requirements against
assets held by, or deposits in or for the account of or loans by or any
other acquisition of funds by the relevant funding office of any Lender;
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(iii) imposes on any Lender any other condition with
respect to any Loan Document; or
(iv) imposes on any Lender a requirement to maintain
or allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in such Lender's reasonable opinion, is
to increase the cost to that Lender of making or maintaining any loan, advance
or financial accommodation or to reduce the income receivable by such Lender in
respect of any loan, advance or financial accommodation by an amount which such
Lender deems to be material, then upon the Agent's giving written notice
thereof, from time to time, to the Lead Borrower (such notice to set out in
reasonable detail the facts giving rise to and a summary calculation of such
increased cost or reduced income), the Lead Borrower on behalf of itself and the
other Borrowers shall forthwith pay to the Agent, for the benefit of such
Lender, upon receipt of such notice, that amount which shall compensate the
subject Lender for such additional cost or reduction in income. Each Lender
agrees, with respect to the provisions of this Section 2.21, to treat the
Borrowers in a manner substantially similar to its other similarly situated
customers
(b) ______ Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender in the case of
each other Lender, and from time to time thereafter if requested in writing by
the Lead Borrower or the Agent (but only so long as such Lender remains lawfully
able to do so), shall provide the Lead Borrower and the Agent with (i) Internal
Revenue Service Form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such Lender is
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entitled to benefits under an income tax treaty to which the United States is a
party that reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States, (ii)
Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other form or
certificate required by any governmental authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Loan Documents.
(c) ______ For any period with respect to which a Lender has
failed to provide the Borrowers and the Agent with the appropriate form pursuant
to Section 2.21(b) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 2.21(a) with respect to taxes imposed by or within the United
States; provided, however, that should a Lender that is otherwise exempt from or
subject to a reduced rate of withholding tax become subject to taxes because of
its failure to deliver a form required hereunder, the Borrowers shall take such
steps as such Lender shall reasonably request to assist such Lender to recover
such taxes.
(d) ______ If the Borrowers are required to pay additional
amounts to or for the account of any Lender or Agent pursuant to Section 2.2
l(a), then such Lender or the Agent will agree to use reasonable efforts to
change the jurisdiction of its applicable lending office (meaning the office by
which Revolving Credit Loans from such Lender are made and maintained) so as to
eliminate or reduce any such additional payment which may thereafter accrue.
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2.22 Lenders' Commitments.
--------------------
(a) ______ The obligations of each Tranche A Lender are several
and not joint. As between the Tranche A Lenders and the Tranche B Lender, the
obligations are several and not joint. No Tranche A Lender shall have any
obligation to the Borrowers to make any loan or advance under the Revolving
Credit in excess of the lesser of:
(i) that Tranche A Lender's Tranche A Commitment
Percentage of the subject loan or advance or of Availability; and
(ii) that Tranche A Lender's unused Tranche A Dollar
Commitment
(b) No Tranche A Lender shall have any liability to any
Borrower on account of the failure of any other Tranche A Lender to provide any
loan or advance under the Revolving Credit nor any obligation to make up any
shortfall which may be created by such failure.
(c) ______ The Tranche A Dollar Commitments, Tranche A Commitment
Percentages, and identities of the Tranche A Lenders (but not the overall
Tranche A Commitment) may be changed, from time to time by the reallocation or
assignment of Tranche A Dollar Commitments and Tranche A Commitment Percentages
amongst the Tranche A Lenders or with other Persons who determine to become
"Tranche A Lenders", provided, however,
(i) ______ Unless an Event of Default has occurred (in
which event, no consent of the Lead Borrower is required) any assignment
to a Person not then a Tranche A Lender shall be in an amount not less
than $10,000,000 and shall be subject to the prior consent of the Lead
Borrower (not to be unreasonably withheld), which consent will be deemed
given unless the Lead Borrower provides the Agent with written objection
not more than five (5) Business Days after the Agent shall have given
the Lead Borrower written notice of such proposed assignment.
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(ii) _____ Any such assignment or reallocation shall be on
a pro-rata basis such that the ratio (expressed as a percentage) of the
Dollar Commitment reallocated or assigned to any Person to the overall
Dollar Commitments equals the Commitment Percentage assigned or
reallocated to such Person.
(d) ______ Upon written notice given to the Lead Borrower from
time to time by the Agent, of any assignment or allocation referenced in Section
2.22(c):
(i) ______ The Lead Borrower, on behalf of itself and the
other Borrowers, shall execute one or more replacement Revolving Credit
Notes to reflect such changed Dollar Commitments, Commitment
Percentages, and Tranche A Lenders and shall deliver such replacement
Revolving Credit Notes to the Agent (which promptly thereafter shall
cancel and deliver to the Lead Borrower the Revolving Credit Notes so
replaced), provided however, that in the event a Revolving Credit Note
is to be exchanged following its acceleration or the entry of an order
for relief under the Bankruptcy Code with respect to the Borrowers, the
Agent, in lieu of causing the Lead Borrower, on behalf of itself and the
other Borrowers, to execute one or more new Revolving Credit Notes, may
issue a certificate confirming the resulting Tranche A Dollar
Commitments and Tranche A Commitment Percentages.
(ii) _____ Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Tranche A Lender shall have all rights and privileges of a Tranche A
Lender hereunder thereafter as if such Person had been a signatory to
this Agreement and any other Loan Document to which the Tranche A
Lenders are signatories and any person removed as a Lender shall
thereafter be relieved of any obligations or responsibilities of a
Tranche A Lender hereunder and thereunder.
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2.23 Concerning Joint and Several Liability of the Borrowers.
-------------------------------------------------------
(a) ______ Each Borrower is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement
and the Loan Documents, for the mutual benefit, directly and indirectly, of each
Borrower and in consideration o f the undertakings of each other Borrower to
accept joint and several liability for the Liabilities.
(b) ______ Each Borrower, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but as a
co-debtor, joint and several liability with the other Borrowers, with respect to
the payment and performance of all Liabilities, it being the intention of the
parties that all the Liabilities shall be the joint and several Liabilities of
each of the Borrowers without preferences or distinction. In addition to and
without in any way limiting the foregoing, each Borrower jointly and severally
absolutely and unconditionally guarantees to Agent and the Lenders the payment
and performance of all the Liabilities and agrees to be liable for the full and
indefeasible payment and performance of all the Liabilities. This guarantee is a
continuing guarantee, and shall not be terminated or terminable when any of the
Liabilities or Commitments are outstanding and shall apply to all Liabilities
whenever arising.
(c) ______ If and to the extent that any of the Borrowers fail to
make any payment with respect to any of the Liabilities as and when due or to
perform any of the Liabilities in accordance with the terms thereof, then in
each such event the other Borrowers will make such payment with respect to, or
perform, such Liability.
(d) The Liabilities of each Borrower under this Agreement
constitute full recourse Liabilities of such Borrowers enforceable against such
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Borrowers to the full extent of its properties and assets, irrespective of the
validity, regularity, or enforceability of this Agreement or any other
circumstance whatsoever.
(e) ______ Except as otherwise expressly provided in this
Agreement, each Borrower other than the Lead Borrower hereby (without prejudice
to its status as Borrower and for the purposes of providing for the eventuality
that, contrary to the terms of this Agreement, it is held by a court or
arbitrator to be a guarantor) waives notice of acceptance of its joint and
several liability, notice of any Revolving Credit Loans or Tranche B Loan made
under this Agreement, notice of any action at any time taken or omitted by the
Agent or the Lenders under or in respect of any of the Liabilities, and
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement.
(f) ______ Each Borrower other than the Lead Borrower hereby
(without prejudice to its status as Borrower and for the purposes of providing
for the eventuality that, contrary to the terms of this Agreement, it is held by
a court or arbitrator to be a guarantor) assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Liabilities,
the acceptance of any payment of any of the Liabilities, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
the Agent or the Lenders at any time or times in respect of any default by any
other Borrower in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by the Agent or the Lenders in respect of any of the Liabilities, and
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Liabilities or the addition,
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substitution or release, in whole or in part, of any Borrower. Without limiting
the generality of the foregoing, each Borrower other than the Lead Borrower
(without prejudice to its status as Borrower and for the purposes of providing
for the eventuality that, contrary to the terms of this Agreement, it is held by
a court or arbitrator to be a guarantor) assents to any other action or delay in
acting or failure to act on the part of the Agent or the Lenders with respect to
the failure by the other Borrowers to comply with any of its respective
Liabilities, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might afford grounds for terminating,
discharging or relieving any Borrower, in whole or in part, from any of its
Liabilities. Each Borrower waives notice of acceptance, the making of loans and
providing other financial accommodations to the other Borrowers and presentment,
demand, protest, notice of protest, notice of nonpayment or default and all
other notices to which any Borrower or a guarantor is entitled (except as
explicitly provided in this Agreement). Each Borrower hereby further waives and
relinquishes any and all other defenses or rights that it might assert as a
surety or guarantor of the Liabilities.
(g) ______ It is the intention of each Borrower that, so long as
any of the Liabilities hereunder remain unsatisfied, the Liabilities of the
Borrowers shall not be discharged except by performance and then only to the
extent of such performance. The Liabilities of any Borrower under this Agreement
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, re-construction or similar proceeding
with respect to any other Borrower. The joint and several liability of the
Borrowers hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any of the Borrowers, the
Agent or any Lender. No invalidity, irregularity or unenforceability of all or
any part of the Liabilities shall affect, impair or be a defense to the
obligations of the Borrowers hereunder, nor shall any other circumstance which
might otherwise constitute a defense available or legal or equitable discharge
of the Lead Borrower or any other Borrower discharge any other Borrower in
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respect of the Liabilities or such Borrowers in respect of their obligations
hereunder or otherwise affect, impair or be a defense to such obligations.
(h) ______ The provisions of this Section are made for the
benefit of the Agent and the Lenders and their successors and assigns, and may
be enforced in good faith by them from time to time against any or all of the
Borrowers as often as occasion therefor may arise and without requirement on the
part of the Agent or the Lenders first to marshal any of their claims or to
exercise any of their rights against any other Borrower or to exhaust any
remedies available to them against any other Borrower or to resort to any other
source or means of obtaining payment of any of the Liabilities hereunder or to
elect any other remedy. The provisions of this Section shall remain in effect
until all of the Liabilities shall have been paid in full or otherwise fully
satisfied. Without prejudice to the status of any Borrower as Borrower, and for
the purposes of providing for the eventuality that, contrary to the terms of
this Agreement, it is held by a court or arbitrator that any Borrower other than
the Lead Borrower is a guarantor, each Borrower, other than the Lead Borrower,
hereby agrees that, if at any time, any payment, or any part thereof, made in
respect of any of the Liabilities, is rescinded or must otherwise be restored or
returned by the Agent or any Lenders upon the insolvency, bankruptcy or
reorganization, of any of the Borrowers, or otherwise, the provisions of this
Section will forthwith be reinstated in effect, as though such payment had not
been made.
2.24 Lechters, Inc. as Lead Borrower.
-------------------------------
The Borrowers for their convenience have appointed the Lead
Borrower as their agent for the purposes of entering into the loan arrangements
contemplated hereby, requesting advances, making representations, warranties and
certifications, and distributing proceeds of loans and generally taking such
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other action as is reasonably necessary to administer the Revolving Credit and
Tranche B Loan on behalf of the Borrowers. Each Borrower authorizes the Lead
Borrower to execute and deliver, on each Borrower's behalf and stead, the
Revolving Credit Notes to each Tranche A Lender, the SwingLine Note to the
SwingLine Lender, the Tranche B Note to the Tranche B Lender, this Agreement and
the other Loan Documents to evidence the Liabilities of the Borrowers to the
Lenders and to the Agent, as well as to execute such additional documents as the
Agent may require to further evidence the Revolving Credit and Tranche B Loan or
the granting of security interests in the Collateral as contemplated by this
Agreement, and for such purposes, each Borrower appoints the Lead Borrower as
its attorney-in-fact to do all things consistent with the foregoing. Any
document executed by the Lead Borrower in connection herewith or in furtherance
of the Borrowers' undertakings hereunder, shall be binding upon each Borrower as
if such Borrower had executed such document, and neither the Agent northe
Lenders shall have any responsibility to inquire as to the Lead Borrower's
authority to act on behalf of the other Borrowers. The authority of the Lead
Borrower to act on behalf of and to bind each Borrower, shall continue unless
and until the Agent's actual receipt of written notice of the termination of
such authority, which notice is signed by the respective President or other
appropriate corporate officer of any of the Borrowers revoking such authority,
and which notice shall be effective only as to loans, advances or other
accommodations made more than thirty (30) days following the Agent's receipt of
such notice. In recognition of the role of the Lead Borrower, he Agent and the
Lenders agree to communicate with, and send notices to, only the Lead Borrower
in connection with or relating to the Loan Documents.
ARTICLE III - CONDITIONS PRECEDENT
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As a condition to the effectiveness of this Agreement, the establishment
of the Revolving Credit and the making of the Tranche B Loan, each of the
documents respectively described in Sections 3.1 through and including 3.4 (each
in form and substance satisfactory to the Agent, the Tranche A Lenders and the
Tranche B Lender) shall have been delivered to the Agent, and the conditions
respectively described in Sections 3.5 through and including 3.10, shall have
been satisfied (the "Closing Date"):
3.1. Corporate Due Diligence.
-----------------------
(a) ______ A Certificate of corporate good standing with respect
to each Borrower issued by the Secretary of State of the State in which that
Borrower was organized.
(b) ______ Certificates of qualification to do business as a
foreign corporation for any Borrowers issued by the Secretary of State of each
State in which such Borrower's conduct of business or ownership of assets
requires such qualification.
(c) ______ A certificate of each Borrower's respective Secretary
as to the due adoption and continued effectiveness of, each corporate resolution
adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents, such certificate
to set forth the text of each such resolution in an attachment thereto.
3.2. Opinion.
-------
An opinion of counsel to the Borrowers in form and substance
satisfactory to the Agent and Tranche B Lender.
3.3. Additional Documents.
--------------------
Such additional instruments and documents as the Agent, Tranche B
Lender or their respective counsel reasonably may require or request, including
the following:
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(a) ______ Those documents required to be provided pursuant to
Section 7.1 (which relates to deposit accounts) and 7.2 (which relates to credit
card accounts).
(b) ______ Pledges by each of the Borrowers of the capital stock
of any other Borrower which the pledgor Borrower holds, including a pledge by
the Parent of the stock it holds in all of its Subsidiaries, in the form of
Exhibit 3.3(1).
(c) ______ Revolving Credit Notes, payable to each Tranche A
Lender in the amount of such Lender's Dollar Commitment, and the SwingLine Note,
payable to the SwingLine Lender, in the amount of the SwingLine Loan Ceiling.
(d) Tranche B Note, payable to the Tranche B Lender in the
amount of the Tranche B Loan Ceiling.
3.4. Officers' Certificates.
-----------------------
Certificates executed by the President, Chief Executive Officer
or the Chief Financial Officer of the Lead Borrower and stating that the
representations and warranties made by the Borrowers to the Agent and the
Lenders in the Loan Documents are true and complete as of the date of such
certificate, and that no event has occurred which is or which, solely with the
giving of notice or passage of time (or both), would be an Event of Default.
3.5. Representations and Warranties.
------------------------------
Each of the representations made by or on behalf of the Borrowers
in this Agreement or in any of the other Loan Documents or in any other report,
statement, document, or paper provided by or on behalf of the Borrowers shall be
true and complete as of the date as of which such representation or warranty was
made.
3.6. Minimum Excess Availability.
---------------------------
After giving effect to the first loan under the Revolving Credit,
any charges to the Loan Account made in connection with the establishment of the
credit facility contemplated hereby, and L/C's to be issued at, or immediately
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subsequent to, such establishment, Availability shall be not less than $65
Million ($65,000,000.00), which amount shall include for the purposes of this
Section 3.6, cash and marketable securities.
3.7. All Fees and Expenses Paid.
--------------------------
All fees due at or immediately after the first loan under the
Revolving Credit and all costs and expenses incurred by the Agent in connection
with the establishment of the credit facility contemplated hereby (including the
fees and expenses of counsel to the Agent) shall have been paid. All fees due on
the Closing Date with respect to the Tranche B Loan and all costs and expenses
incurred by the Tranche B Lender in connection with the Tranche B Loan
(including fees and expenses of counsel to the Tranche B Lender) shall have been
paid in full.
3.8. No Event of Default.
-------------------
No Event of Default shall then be continuing.
3.9. No Adverse Change.
-----------------
No event shall have occurred or failed to occur, which occurrence
or failure has had or would have a Materially Adverse Effect upon the Borrower's
financial condition when compared with such financial condition at July 31,
2000. No document shall be deemed delivered to the Agent or any Tranche A Lender
until received and accepted by the Agent at its head office in Boston,
Massachusetts, except for such documents as are executed and delivered to the
Agent at the closing of the transaction contemplated hereby. Under no
circumstances will this Agreement take effect until executed and accepted by the
Agent and Tranche B Lender at their respective head offices.
3.10. Delivery of Notices.
-------------------
The (Borrowers) shall have complied with the provisions of
Sections 7.1(b) and 7.2(b), below.
ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
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under this Agreement (each of which loans shall be deemed to have been made in
reliance thereupon) the Borrowers, in addition to all other representations,
warranties, and covenants made by the Borrowers in any other Loan Document,
represent, warrant, and covenant as follows:
4.1. Payment and Performance of Liabilities.
--------------------------------------
The Borrowers shall, and hereby authorize the Lead Borrower on
their behalf to pay each Liability when due (or when demanded if payable on
demand) and shall promptly, punctually, and faithfully perform each other
Liability.
4.2. Due Organization - Corporate Authorization - No Conflicts.
---------------------------------------------------------
(a) ______ Each Borrower presently is and shall (except as
otherwise permitted by this Agreement in connection with (i) permitted store
closings, (ii) restructurings of the manner in which the Borrowers carry on
their business, and (iii) mergers between or among Related Entities) hereafter
remain in good standing as a corporation organized under the laws of the State
of its incorporation indicated in EXHIBIT 4.2 to this Agreement and shall
hereafter remain duly qualified and in good standing in every other State in
which, by reason of the nature or location of that Borrower's assets or
operation of that Borrower's business, such qualification is necessary.
(b) ______ Each Related Entity is listed on EXHIBIT 4.2, annexed
hereto. Each Related Entity is and shall (except as otherwise permitted by
Agreement (i) in connection with permitted store closings, (ii) restructurings
of the manner in which they carry on their business, and (iii) mergers between
or among Related Entities) hereafter remain in good standing in the State in
which incorporated and is and shall hereafter remain duly qualified as a foreign
corporation in every other State in which, by reason of that entity's assets or
the operation of such entity's business, such qualification is necessary. The
Lead Borrower shall provide the Agent with prior written notice of any entity's
becoming or ceasing to be a Related Entity.
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(c) No Borrower shall change its State of incorporation
without prior notification to Agent.
(d) ______ Each Borrower has all requisite corporate power to
execute and deliver all Loan Documents to which it is a party and has and will
hereafter, subject to Section 4.2(a), retain all requisite corporate power to
perform all Liabilities.
(e) ______ The execution and delivery of each Loan Document by
each Borrower, or by the Lead Borrower on behalf of each Borrower that is a
party thereto, such Borrower's consummation of the transactions contemplated by
such Loan Document (including, without limitation, the creation of security
interests by such Borrower as contemplated hereby), such Borrower's performance
under such Loan Document, the borrowings hereunder, and the use of the proceeds
thereof.
(i) Have been duly authorized by all necessary
corporate action on the part of such Borrower;
(ii) Do not, and will not, contravene in any material
respect with any Requirement of Law or obligation of such Borrower; and
(iii) Will not result in the creation or imposition of,
or the obligation to create or impose, any Encumbrance upon any assets of such
Borrower pursuant to any Requirement of Law or obligation of such Borrower,
except pursuant to the Loan Documents.
(f) ______ The Loan Documents have been duly executed and
delivered by the Lead Borrower on behalf of itself and the other Borrowers and
are the legal, valid and binding obligations of the Borrowers, enforceable
against the Borrowers in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, or other laws relating
to or affecting generally the enforcement of creditors' rights or by general
principles of
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equity (regardless of whether such principles are considered in a proceeding at
law or in equity).
4.3. Trade Names.
-----------
(a) EXHIBIT 4.3, annexed hereto, is a listing of:
(i) All names under which each Borrower has ever
conducted its business and
(ii) All entities and/or persons with whom each
Borrower ever consolidated or merged, or from whom each Borrower ever acquired
in a single transaction or in a series of related transactions substantially all
of such entity's or person's assets.
(b) ______ No Borrower will change its name or conduct its
business under any name not listed on EXHIBIT 4.3 or conduct its business in a
state in which that Borrower does not presently conduct its business except:
(i) upon not less than ten (10) days subsequent
written notice (with reasonable particularity) to the Agent; and
(ii) in compliance with all other provisions of this
Agreement.
4.4. Infrastructure.
--------------
(a) ______ The Borrowers have and will maintain a sufficient
infrastructure to conduct their business, without experiencing a Material
Adverse Effect.
(b) ______ Each Borrower owns and possesses, or has the right to
use (and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrowers' conduct of the Borrowers' business, except where the failure to
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possess such intellectual or proprietary information will not have a Material
Adverse Effect.
(c) ______ The conduct by the Borrowers of the Borrowers'
business does not presently infringe (nor will the Borrowers conduct its
business in the future so as to infringe) the patents, industrial designs,
trademarks, trade names, trade styles, brand names, service marks, logos,
copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person, except where such
infringement does not have a Material Adverse Effect.
4.5. Intentionally Omitted
---------------------
4.6. Locations.
---------
(a) ______ The Collateral, and the books, records, and papers of
Borrowers pertaining thereto, are kept and maintained solely at the Borrowers'
chief executive offices and those locations which are listed on EXHIBIT 4.6(A),
which EXHIBIT includes, with respect to each such location, the name and address
of the landlord on the Lease which covers such location (or an indication that
the Borrowers own the subject location) and of all service bureaus with which
any such records are maintained.
(b) ______ The Borrowers shall not remove any of the Collateral
from such chief executive office or locations listed on EXHIBIT 4.6(A) except
to:
(i) accomplish sales, returns, and transfers of
Inventory in the ordinary course of business; or
(ii) move Inventory from one such location to another
such location;
(iii) utilize such of the Collateral as is removed from
such locations in the ordinary course of business (such as motor vehicles); or
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(iv) close or open any store as permitted by Section
4.6(d) (ii) or (iii), respectively.
(c) ______ the Borrowers shall use their reasonable efforts to
provide the Agent with Landlord's Waivers or subordinations, in substantially
the form annexed hereto as Exhibit 4.6(c)(1) for each of the Borrower's
locations in any of the Landlord States, provided that no Borrower shall be
obligated to pay any amount or to grant any concession to a landlord in order to
obtain such Waiver or subordination. The Agent may establish an Availability
Reserve for each of such locations as to which such a waiver is not so
delivered, which Availability Reserve shall be reduced or eliminated upon
delivery of a Waiver for such a location.
(d) The Borrowers will not:
(i) ______ Alter, modify, or amend any Lease in any
material respect in any manner which would have a Material Adverse
Effect upon the liquidation of Inventory.
(ii) _____ Close any location at which any Borrower
maintains, offers for sale, or stores any of the Collateral, provided,
that the Borrowers may make the closures contemplated by the Business
Plan, plus up to thirty (30) additional closures per fiscal year.
(iii) Commit to open or open any new location except
(A) in connection with the relocation of a
retail location of a Borrower; or
(B) ______ the opening of new retail locations;
provided, that each of the following requirements is
satisfied:
(I) _______ the Agent shall be provided not
less than ten (10) days prior written notice (with
reasonable detail) of the proposed opening;
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(II) ______ Immediately prior to the
earliest day on which the respective Borrower becomes
legally obligated on account of its leasing of the
respective new location, no Event of Default shall occur
by reason of such Borrower's so becoming obligated.
(III) Either:
(1) _____ Such opening is
contemplated by the Business Plan, provided,
however, up to ten (10) additional store
openings not contemplated by the Business
Plan shall be permitted in any fiscal year;
or
(2) ____ Availability for the
ninety (90) days prior to such opening was
not and immediately after such opening is
not less than $15 Million ($15,000,000.00)
and on a pro-forma going forward basis for
the twelve (12) month period following such
opening, as reflected in a projection
provided to the Agent no later than seven
(7) days prior to such opening (and prepared
based on the same methodology and with the
same assumptions as those used in the
preparation of the Business Plan) will not
be less than $15 Million ($15,000,000.00).
(IV) If the location is in a State
listed on EXHIBIT 4.6(c), the Lead Borrower shall
use its best efforts to provide the Agent with a
Landlord's Waiver or subordination (in the form
described in Section 4.6(c)) for such location.
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(V) _______ The Borrowers shall be ____ in
compliance with Section 4.25 and shall have
executed such additional financing statements, on
account of the subject new location, as may then be
required by Agent.
(e) ______ Except as otherwise disclosed pursuant to, or
permitted by, this Section 4.6 and except for goods in the control of a customs
broker who has entered into a Customs Brokers Agreement, no tangible personal
property of the Borrowers having a cost in excess of $1 Million ($1,000,000.00)
in the aggregate is in the care or custody of, or stored or entrusted with, a
bailee or other third party and none having a cost in excess of $1 Million
($1,000,000.00) shall hereafter be placed under such care, custody, storage, or
entrustment.
4.7. Title to Assets.
---------------
(a) ______ The Borrowers are, and shall hereafter remain, the
owners of the Collateral free and clear of all Encumbrances other than Permitted
Encumbrances.
(b) ______ The Borrowers do not and shall not have possession of
any property on consignment to the Borrowers having a value in excess of $5
Million ($5,000,000.00) in the aggregate, at any one time, other than pursuant
to a consignment in respect of which either:
(i) ______ no financing statement has been filed by
consignor or other action taken by consignor under the UCC to perfect or
protect its interest in the consigned goods against the claims of third
party secured creditors; or
(ii) an intercreditor agreement (in a form reasonably
satisfactory to the Agent) between the consignor and the Agent has been
executed.
4.8 Indebtedness.
------------
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(a) The Borrowers do not and shall not hereafter have any
Indebtedness with the exceptions of:
(i) Any Indebtedness to the Lenders;
(ii) The Indebtedness (if any) listed on EXHIBIT 4.8;
(iii) Indebtedness secured by purchase money security
interests not otherwise described in this Section 4.8 and Capital Leases
for the acquisition of Equipment not exceeding $10 Million
($10,000,000.00) outstanding at any one time;
(iv) _____ The 5.00% Notes and any Indebtedness in
connection with the refinancing of the 5.00% Notes as permitted
by Section 4.9, plus, in the event such refinancing is for an
amount greater than such Indebtedness up to an additional $35
Million ($35,000,000.00);
(v) Indebtedness, not to exceed $5,000,000 at any one
time outstanding, which is not otherwise described in this
Section 4.8(a) and is not otherwise prohibited by this Agreement;
and
(vi) Letters of credit issued by Persons other than the
Lenders secured by Inventory purchased with such letters of
credit (which Inventory shall not constitute Acceptable Inventory
so long as any reimbursement obligation remains with respect to
such letters of credit).
(b) ______ The Borrowers shall not permit more than 20% of that
portion of the aggregate of their Indebtedness for the purchase of goods or
services which is not the subject of reasonable dispute to remain unpaid more
than forty-five (45) days beyond then current trade terms provided to the
subject Borrower by the supplier of such goods and services.
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4.9 Repayment of 5.00% Notes.
------------------------
No later than sixty (60) days prior to the stated maturity of the
5.00% Notes, the Parent shall furnish the Agent with either a pro forma balance
sheet showing compliance with Section 4.20 hereof or a commitment or a plan to
repay such Notes by refinancing as of the stated maturity thereof pursuant to
terms which are satisfactory to the Agent in its reasonable discretion with
respect to tenor and lien and payment subordination with respect to all of the
Liabilities, as evidenced by its written consents thereto.
4.10. Insurance Policies.
------------------
(a) ______ EXHIBIT 4.10 is a schedule of all insurance policies
owned by the Borrowers or under which the Borrowers are the named insured. Each
of such policies that is material is in full force and effect. Neither the
issuer of any such policy nor the Borrowers are in default or violation of any
material policy.
(b) ______ The Borrowers shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be reasonable given
the nature and magnitude of the Borrower's business and customary practices in
such business. The Agent and the Lenders acknowledge that the coverage reflected
on EXHIBIT 4.10 presently satisfies the foregoing requirements, it being
recognized by the Borrowers, the Agent and the Lenders, however, that such
requirements may change hereafter to reflect changing circumstances. All
insurance carried by the Borrowers shall provide for a minimum of thirty (30)
days' written notice of cancellation to the Agent and all such insurance which
covers the Collateral shall include an endorsement in favor of the Agent, which
endorsement shall provide that the insurance, to the extent of the Agent's
interest therein, shall not be impaired or invalidated, in whole or in part, by
reason of any act or neglect of the Borrowers or by the failure of the Borrowers
to comply with any warranty or condition of the policy. In the event of the
failure by the Borrowers to maintain insurance as required herein, the Agent, at
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its option, may obtain such insurance, provided, however, the Agent's obtaining
of such insurance shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrowers' failure to have maintained such insurance. The Lead
Borrower shall furnish to the Agent certificates or other evidence satisfactory
to the Agent regarding the insurance maintained by the Borrowers.
(c) ______ The Lead Borrower shall advise the Agent of each claim
in excess of $500,000.00 made by any Borrower or group of Borrowers under any
policy of insurance which covers the Collateral and following the occurrence of
an Event of Default will permit the Agent, at the Agent's option in each
instance, to the exclusion of the Borrowers, to conduct the adjustment of each
such claim. The Borrowers hereby appoint the Agent, effective following the
occurrence of an Event of Default, as the Borrowers' attorney in fact to obtain,
adjust, settle, and cancel any insurance described in this Section 4.10 and to
endorse in favor of the Agent any and all drafts and other instruments with
respect to such insurance. The within appointment, being coupled with an
interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Agent. The Agent shall
not be liable on account of any exercise of such power of attorney except for
any exercise that constitutes gross negligence or willful misconduct. Prior to
the occurrence of an Event of Default the Borrowers may use the proceeds of such
insurance to purchase Inventory or in the case of insurance proceeds from fixed
assets, to purchase replacement fixed assets or to retire related purchase money
Indebtedness. Following the occurrence of an Event of Default or in the event
that the Borrowers do not use the proceeds for the above purposes, the Agent may
apply any proceeds of such insurance against the Liabilities, whether or not
such have matured, in the order of application provided for herein.
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4.11. Licenses.
--------
Each license, distributorship, franchise, and similar agreement
issued to any of the Borrowers, or to which any of the Borrowers is a party, and
which is material to the business of the Borrowers, taken as a whole, is in full
force and effect. No Borrower nor, to the Parent's knowledge, any other party to
any such license or agreement is in default or violation thereof, where such
violation would have a Material Adverse Effect. No Borrower has received any
notice or threat of cancellation of any such license or agreement where such
cancellation would have a Material Adverse Effect.
4.12. Leases.
------
EXHIBIT 4.12 is a schedule of all presently effective Capital
Leases. EXHIBIT 4.6(A) includes a list of all other presently effective Leases.
Each of such Leases and Capital Leases is in full force and effect. Neither the
Borrowers nor, to the Parent's knowledge, any other party to any such Leases or
Capital Leases is in default or violation of any ten (10) or more such Leases or
Capital Leases and neither the Parent nor the Borrowers have received any
currently pending notice or threats of cancellation of more than ten (10) such
Leases or Capital Leases (or such lesser number where such default or violation
would have a Material Adverse Effect). The Borrowers hereby authorize the Agent
at any time and from time to time to contact any of the Borrowers' landlords in
order to confirm the continued compliance by any Borrower with the terms and
conditions of the Lease(s) between such Borrower and the relevant landlords and
to discuss such issues, concerning such Borrower's occupancy under such
Lease(s), as the Agent may determine.
4.13. Requirements of Law.
-------------------
The Borrowers are in compliance with, and shall hereafter comply
with and use their respective assets in compliance, with all material
Requirements of Law. No Borrower has received any notice of any material
violation of any Requirement of Law, other than any such violations that have
been cured or otherwise remedied.
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4.14. Maintain Collateral.
-------------------
Each Borrower shall:
(a) Keep the Collateral under its control in good order and
repair (ordinary reasonable wear and tear and insured casualty excepted);
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral
(c) Not use any of the Collateral in violation of any policy
of insurance thereon; and
(d) Subject to Section 4.14(e), below, not sell, lease, or
otherwise dispose of any of the Collateral, except for:
(i) The sale of Inventory in the ordinary course of
business;
(ii) The turning over to the Agent of all Receipts
following the occurrence of a Cash Management Condition, as provided
herein; and
(iii) The sale, rollover, reinvestment, or liquidation
of Permitted Investments.
(e) The Borrowers may dispose of Collateral outside of the
ordinary course of business as follows:
(i) ______ The disposal of store related Collateral
consisting of Inventory Equipment, and Fixtures in connection with store
closures permitted pursuant to Section 4.6(d)(ii); and
(ii) _____ The disposal of up to $10 Million Dollars
($10,000,000.00) of obsolete, duplicate or other Inventory (at Cost) and
Equipment and Fixtures (net of accumulated depreciation) in the
aggregate during each calendar year during the term of the Agreement,
that is not necessary or required for the operation of the Borrowers'
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business, taken as a whole, exclusive of such amounts referenced in
Section 4.14(e)(i), above.
4.15. Pay Taxes.
---------
(a) ______ As of the date of this Agreement, the Borrowers have
received written notice from the Internal Revenue Service that the Internal
Revenue Service has completed its examination of the Borrowers' federal income
tax returns for all tax years through and including the Borrowers' taxable year
referenced on EXHIBIT 4.15, and that all deficiencies, assessments, and other
amounts asserted as a result of such examinations have been fully paid, settled
or otherwise resolved. No agreement is extant which waives or extends any
statute of limitations applicable to the right of the Internal Revenue Service
to assert a deficiency or make any other claim for or in respect to federal
income taxes. Except as set forth on EXHIBIT 4.15, no issue has been raised in
any such examination which, by application of similar principles, reasonably
could be expected to result in the assertion of a deficiency for any fiscal year
open for examination, assessment, or claim by the Internal Revenue Service.
(b) ______ As of the date of this Agreement, the Borrowers have
paid all state and local income, excise, sales, and other taxes which are due
and for which the Borrowers are liable except, as referenced on EXHIBIT 4.15,
and have filed all returns required with respect to such taxes.
(c) ______ Except as disclosed on EXHIBIT 4.15, there are no
examinations of or with respect to the Borrower presently being conducted by the
Internal Revenue Service or any other taxing authority.
(d) The Borrowers have, and hereafter shall: pay, as they
become due and payable, all taxes and unemployment contributions and other
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charges of any kind or nature levied, assessed or claimed against any Borrower
or the Collateral by any person or entity whose claim could result in an
Encumbrance upon any asset of any Borrower or by any governmental authority;
properly exercise any trust responsibilities imposed upon the Borrowers by
reason of withholding from employees' pay or by reason Borrower's receipt of
sales tax or other funds for the account of any third party; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by the Borrowers; and timely file all
tax and other returns and other reports with each governmental authority with
which the Borrowers are obligated to file, provided, however, any Borrower may
timely contest in good faith and by appropriate proceedings any amount of the
type described in this Section 4.15(d) which it is alleged to be obligated to
pay, but only if and for so long as no lien is filed on any of the Collateral
with respect to such taxes, and adequate cash reserves have been set aside for
the payment thereof.
(e) ______ At its option, the Agent may, but shall not be
obligated to, pay any taxes, unemployment contributions, and any and all other
charges levied or assessed upon the Borrowers or the Collateral by any person or
entity or governmental authority, and make any contributions or other payments
on account of any Employee Benefit Plan maintained by the Borrowers as the
Agent, in the Agent's discretion, may deem necessary or desirable to protect,
maintain, preserve, collect, or realize upon any or all of the Collateral or the
value thereof or any right or remedy pertaining thereto, provided, however, the
Agent's making of any such payment shall not constitute a cure or waiver of any
Event of Default occasioned by the Borrowers' failure to have made such payment.
4.16. No Margin Stock.
---------------
The Borrowers are not engaged in the business of extending credit
for the purpose of purchasing or carrying any margin stock (within the meaning
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of Regulations U, T, and X of the Board of Governors of the Federal Reserve
System of the United States). No part of the proceeds of any borrowing hereunder
will be used at any time to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin stock
other than stock of the Parent, or any Related Entity or as otherwise expressly
permitted in Section 4.20.
4.17. ERISA.
-----
Neither the Borrowers nor any ERISA Affiliate shall in any manner
such as would have a Material Adverse Effect, or could result in a lien being
imposed upon any material assets of the Borrowers:
(a) Violate or fail to be in compliance with any Employee
Benefit Plan maintained by the Borrowers,
(b) Fail to timely file all reports and filings required by
ERISA to be filed by the Borrowers;
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA);
(d) Engage in, or commit, any act that would permit the
imposition of a tax or penalty upon the Borrowers pursuant to ERISA;.
(e) Accumulate any material funding deficiency within the
meaning of ERISA;
(f) Terminate any Employee Benefit Plan in a manner that
would permit a lien to be imposed upon any assets of the Borrowers on account
thereof pursuant to ERISA; or
(g) ______ Incur withdrawal liability under Title IV of ERISA in
connection with any E mployee Benefit Plan which is a multiemployer plan within
the meaning of Section 4001(a) of ERISA.
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4.18. Hazardous Materials.
-------------------
(a) The Borrowers have never:
(i) ______ Been legally responsible for any release or
threat of release of any Hazardous Material where such legal
responsibility would have a Material Adverse Effect.
(ii) _____ Received notification of any release or threat
of release of any Hazardous Material from any site or vessel occupied or
operated by the Borrowers and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel, to the extent such release or incurrence would have a
Material Adverse Effect.
(b) ______ Unless their failure to act as set forth in (i) and
(ii) below would not have a Material Adverse Effect, the Borrowers shall (and in
any event shall use their best efforts to):
(i) Dispose of any Hazardous Material only in
compliance with all Environmental Laws; and
(ii) _____ Not store any Hazardous Material on any site or
vessel occupied or operated by the Borrowers and not transport or
arrange for the transport of any Hazardous Material, unless such storage
or transport is in the ordinary course of the Borrowers' business and is in
compliance with all Environmental Laws.
(c) ______ The Lead Borrower shall provide the Agent with written
notice upon obtaining knowledge that any governmental authority or other Person
has incurred any expense or suffered any loss for which the Borrowers would be
liable in connection with the assessment, containment, or removal of any
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Hazardous Material, if Borrowers' liability for such expense or loss would have
a Material Adverse Effect.
4.19. Litigation.
----------
Except as described in EXHIBIT 4.19, there is not presently
pending or threatened against any Borrower any suit, action, proceeding, or
investigation which, if determined adversely to such Borrower or the Borrowers,
would have a Material Adverse Effect.
4.20. Dividends, Investments, Repurchases and Debt Retirement.
-------------------------------------------------------
(a) The Borrowers shall not:
(i) ______ Pay any cash dividend or make any other
distribution in respect of any class of the Borrowers' capital stock
other than dividends by the Subsidiaries to the Parent and scheduled
payments of preferred dividends by the Parent.
(ii) _____ Except for Permitted Repurchases, redeem,
retire, purchase, or acquire any of the Parent's capital stock, or any
of the Parent's securities.
(iii) ____ Invest in or purchase any stock or securities
or rights to purchase any stock or securities of any corporation or
other entity other than Permitted Investments, provided that, the
Borrower may invest in Internet and other ventures that may provide
opportunities to expand or improve the Borrowers' business so long as in
the case of such investments:
(A) ______ The Borrowers total investment (which
term shall include loans) in such corporations or other entities
does not exceed $5 Million ($5,000,000.00) in the aggregate over
the term of this Agreement, subject to the same conditions (with
respect to such investment) as are applicable to Permitted
Repurchases or Debt Retirement below in 4.20(b)(i) (A), (B), and
(C).
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(B) ______ Any stock issued to the Borrowers by
reason of such investment is pledged to the Agent for the ratable
benefit of the Lenders.
(C) ______ No Inventory of the Borrowers is
commingled with any Inventory of such corporations or entities,
and to the extent that the Borrowers sell any Inventory to such
corporations or entities, such sale or sales are (i) to fulfill
actual customer orders received by such corporation or entities,
(ii) on no more than sixty (60) day payment terms or ninety (90)
day seasonal terms (during the period October 1 through December
31) as the Agent may agree in its sole discretion, (iii) on
arms-length terms and for fair value; (iv) in the aggregate at
any time no more than $2 Million ($2,000,000.00) on an open
account basis, unless the Agent in its sole discretion approves
or authorizes a greater amount, not to exceed $5 Million
($5,000,000.00); and (v) excluded from the Borrowing Base, so
that the Inventory shipped to such corporations or entities,
shall not be deemed Acceptable Inventory. (iv) Merge or
consolidate or be merged or consolidated with
or into any other corporation or other entity (other than with any other
Borrower, in which case thirty (30) days prior notice shall be given to Agent).
(v) ______ Consolidate any of the Borrowers' operations with
those of any other corporation or other entity (other than with any other
Borrower).
(vi) _____ Organize or create any Related Entity, without the
prior written consent of the Agent, which consent shall not be unreasonably
withheld; provided that the Parent may establish additional Inoperative
Subsidiaries to preserve the rights to trade names in certain jurisdictions and
may establish
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additional Subsidiaries to own and operate store locations and make additional
investments in Subsidiaries, so long as each such Subsidiary becomes a Borrower
or guarantor of the Liabilities and the other conditions set forth below in
clauses (A)-(C) below, are complied with:
(A) The capital stock of such Subsidiary is pledged
to the Agent for the ratable benefit of the Lenders as additional
Collateral for the Liabilities;
(B) Such Subsidiary executes and delivers a guaranty
of the Liabilities or becomes a Borrower; and
(C) ______ Such Subsidiary executes and delivers such
documentation as the Agent may require to grant security and mortgage
interests in such Subsidiary's assets to secure the Subsidiary's
guaranty of (or obligation as a Borrower for) the Liabilities
and provided, further, if such Subsidiary is and remains an Inoperative
Subsidiary, the Borrowers shall have complied only with clause (A) above.
(b) ______ Subject to the satisfaction of each of the conditions
included in this Section 4.20(b), the Parent may repurchase its capital stock
(such capital stock purchases not to exceed in the aggregate $2.5 Million for
the term of this Agreement) and replace, refinance or retire in full or in part
the 5.00% Notes (which transactions are referred to herein, as applicable, as
"PERMITTED REPURCHASE OR DEBT RETIREMENT"):
(i) On the date on which such Permitted Repurchase or
Debt Retirement is to be effected:
(A) ______ No Event of Default shall have occurred
and none will occur by reason of the subject Permitted Repurchase
or Debt Retirement;
(B) Availability, net of any Permitted
Repurchases or Debt Repayments from the Closing Date to the date
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of such Permitted Repurchase or Debt Retirement and after giving
effect to the amount of such proposed Permitted Repurchase or
Debt Retirement, at all times during the period of the lesser of
the number of days since the date of this Agreement or ninety
(90) days immediately prior to such Permitted Repurchase or Debt
Retirement was not, and shall not be less than $40 Million
($40,000,000.00);
(C) ______ Availability, on a pro forma going
forward basis at all times during the twelve (12) months
following such Permitted Repurchase or Debt Retirement, as
reflected on a projection provided to the Agent no later than
seven (7) days prior to such Permitted Repurchase or Debt
Retirement (and prepared based on the same methodology and with
the same assumptions as those used in the preparation of the
Business Plan) shall not be less than $10 Million
($10,000,000.00);
(D) Any replacement security for the 5.00%
Notes shall be subordinated and junior to the Liabilities on
terms reasonably satisfactory to the Agent;
(E) ______ The ____ terms ____ and conditions of
any replacement security for the 5.00% Notes are reasonably
satisfactory to the Agent.
(c) ______ The Borrowers shall not subordinate any debts or
obligations owed to the Borrowers by any third party to any other debts owed by
such third party to any other Person.
(d) ______ Except as contemplated by this Agreement, the
Borrowers shall not acquire any assets other than in the ordinary course of the
Borrowers' business as conducted at the execution of this Agreement.
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4.21. Loans.
-----
The Borrowers shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, that the foregoing
does not prohibit any of the following:
(a) Advance payments made to the Borrowers' suppliers in the
ordinary course;
(b) ______ Advances to or on behalf of the Borrowers' officers,
with unsecured advances not to exceed in the aggregate at any one time $1
Million ($1,000,000.00); and with secured advances (on such security as may be
reasonably satisfactory to the Agent) not to exceed in the aggregate at any one
time $2 Million ($2,000,000.00) provided that Agent's approval of such security
shall not be required where an independent appraisal confirms the fair market of
the collateral to be equal or greater than the amount of such advances.
(c) ______ Advances to or on behalf of the Borrowers' employees,
and salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrowers, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrowers;
(d) ______ Loans to any Related Entity, Affiliate or other
venture permitted pursuant to Section 4.20 (a)(iii) which is not a Borrower, not
to exceed $1 Million ($1,000,000.00) in the aggregate when combined with any
other loans or investments permitted pursuant to Section 4.20 (a)(iii)
outstanding at any one time, not otherwise expressly prohibited herein, provided
that no Event of Default shall have occurred and none will occur by reason of
such loan.
4.22. Protection of Assets.
--------------------
The Agent may in its discretion from time to time discharge any
tax or Encumbrance on any of the Collateral, or take any other action that the
Agent may deem necessary or desirable to repair, insure, maintain, preserve,
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collect, or realize upon any of the Collateral. The Agent shall not have any
obligation to undertake any of the foregoing and shall have no liability on
account of any action so undertaken except where there is a specific finding in
a judicial proceeding (in which the Agent has had an opportunity to be heard),
from which finding no further appeal is available, that the Agent has acted in
bad faith or in a grossly negligent manner or has engaged in willful misconduct.
The Borrowers shall pay to the Agent, on demand, or the Agent, in its
discretion, may add to the Loan Account, all amounts paid or incurred by the
Agent pursuant to this section. The obligation of the Borrowers to pay such
amounts is a Liability.
4.23. Line of Business.
----------------
The Borrowers shall not engage in any business other than the
business in which they are currently engaged or a business reasonably related
thereto (the conduct of which reasonably related business is reflected in the
Business Plan or otherwise permitted by this Agreement).
4.24. Affiliate Transactions.
-----------------------
Except as otherwise permitted hereunder, the Borrowers shall not
make any payment, nor give any value to any Related Entity except in the
ordinary course of business or consistent with practices in effect on August 31,
2000 and not otherwise prohibited under the Loan Documents, provided that no
Event of Default shall have occurred and none will occur by reason thereof.
4.25. Additional Assurances.
---------------------
(a) ______ Except as set forth in Exhibit 4.25, the Borrowers are
not the owner of, nor have they any interest in, any property or asset material
or necessary to their business, which immediately upon the satisfaction of the
conditions precedent to the effectiveness of the credit facility contemplated
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hereby (Article 3) will not be subject to a perfected security interest or other
collateral interest in favor of the Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.
(b) ______ The Borrowers will not hereafter acquire any asset or
any interest in personal property which (if a security interest in such asset or
interest may be perfected by filing under Article 9 of the UCC), is not,
immediately upon such acquisition, subject to such a perfected security or other
collateral interest in favor of the Agent to secure the Liabilities (subject
only to Permitted Encumbrances).
(c) ______ The Borrowers shall execute and deliver to the Agent
such instruments, documents, and papers, and shall do all such things from time
to time hereafter as the Agent may reasonably request: to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; to comply with all applicable statutes and
laws; and to facilitate the collection of the Receivables Collateral. The
Borrowers shall execute all such instruments as may be reasonably required by
the Agent with respect to the recordation and/or perfection of the security
interests created herein.
(d) ______ The Borrowers hereby designate the Agent as and for
the Borrowers' true and lawful attorney, with full power of substitution, to
sign and file, where permitted by law any financing statements in order to
perfect or protect the Agent's security interest and other collateral interests
in the Collateral.
(e) ______ A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4.25 shall be sufficient for filing to perfect the security
interests granted herein, where permitted by law.
4.26. Adequacy of Disclosure.
----------------------
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(a) ______ All quarterly and annual financial statements
furnished to the Agent and each Lender by the Borrowers have been prepared in
accordance with GAAP consistently applied (and in the case of monthly management
statements, consistent with GAAP methodology and substantially in accordance
with GAAP) and present fairly in all material respects the Consolidated
condition of the Parent and its Subsidiaries at the date(s) thereof and the
Consolidated results of operations and cash flows of the Parent and its
Subsidiaries for the period(s) covered. There has been no change in the
financial condition, results of operations, or cash flows of the Borrowers since
the date(s) of such financial statements, other than changes in the ordinary
course of business, which changes have not been materially adverse, either
individually or in the aggregate.
(b) ______ The Borrowers do not have any contingent obligations
or obligations under any Lease or Capital Lease which are not noted in the
Parent's Consolidated financial statements and the notes thereto furnished to
the Agent and each Lender prior to the execution of this Agreement.
(c) ______ No document, instrument, agreement, or paper now or
hereafter given the Agent or any Lender by or on behalf of the Borrowers or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agent and each Lender contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Borrowers which has, or which, in the foreseeable future would reasonably be
expected to have, a Material Adverse Effect.
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4.27 No Restrictions on Liabilities. No Borrower shall enter into or
become subject to, directly or indirectly, any agreement prohibiting or
restricting in any manner (including, without limitation, by way of covenant,
representation or event of default) any of the following:
(a) The incurrence, creation or assumption of the
Liabilities or any Encumbrances in favor of the Agent on any property of any
Borrower.
(b) The granting of a security interest, pledge, or
Encumbrance in favor of the Agent and the Lenders on any asset of any Borrower.
4.28 Other Covenants. No Borrower shall indirectly do or cause to be
done any act which, if done directly by such Borrower or Borrowers, would breach
any covenant contained in this Agreement.
ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5.1. Maintain Records. The Borrowers shall:
----------------
(a) ______ At all times, keep proper books of account, in which
full, true, and accurate entries shall be made of all of the Borrowers'
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the financial condition of the Borrowers at the close
of, and the results of their operations for, the fiscal periods in question.
(b) ______ Timely provide the Agent with those financial reports,
statements, and schedules required by this Article V or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrowers at the close of, and the
results of their operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
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sales records of their Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) ______ At all times, retain independent certified public
accountants who are reasonably satisfactory to the Agent and who are of
nationally recognized standing and request such accountants to fully cooperate
with, and be available to, the Agent to discuss the Borrowers' financial
performance, financial condition, operating results, controls, and such other
matters within the scope of the retention of such accountants as may be raised
by the Agent.
(e) ______ Not change their respective fiscal years or taxpayer
identification numbers without giving twenty (20) days notice.
5.2. Access to Records.
-----------------
(a) ______ The Borrowers shall accord the Agent and the Agent's
representatives access from time to time as the Agent and such representatives
may reasonably require to all properties owned by or over which any Borrower has
control. The Agent and the Agent's representatives shall have the right, and the
Borrowers will permit the Agent and such representatives from time to time as
the Agent and such representatives reasonably may request (in the absence of an
Event of Default, upon reasonable notice and during normal business hours), to
examine, inspect, copy, and make extracts from any and all of the Borrowers'
books, records, electronically stored data, papers, and files. The Borrowers
shall make sufficient copying facilities available to the Agent.
(b) The Borrowers hereby authorize the Agent and the Agent's
representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
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computer or electronically stored information or data which relates to
the Borrowers, and agree to direct any service bureau, contractor,
accountant, or other person who maintains such information for the
Borrowers fully to cooperate with the Agent and the Agent's
representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrowers' computer billing companies, collection agencies, and
accountants and to sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Collateral.
5.3. Immediate Notice to Agent.
-------------------------
(a) ______ The Lead Borrower shall provide the Agent with written
notice immediately upon the occurrence of any of the following events, which
written notice shall be reasonably particular as to the facts and circumstances
in respect of which such notice is being given:
(i) Any change in the Parent's Chief Executive Officer or
Chief Financial Officer.
(ii) _____ The completion of any physical count of all or a
material portion of the Borrowers' Inventory (together with a copy of
the results thereof certified by the Lead Borrower).
(iii) ____ Any cessation by the Borrowers of their making payment
to their creditors generally as the Borrowers' debts become due.
(iv) _____ Any failure by the Borrowers to pay rent at any thirty
(30) of the Borrowers' locations at any one time, if such failure
continues for more than fifteen (15) days after any grace period and if
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(A) notice of rent default, to the extent required under any relevant
lease, has been received by the Borrowers, and (B) the rent not paid is
not the subject of reasonable dispute as to whether it is owed.
(v) Any Material Adverse Change in the business, operations,
or financial affairs of the Borrowers.
(vi) The occurrence of any Suspension Event.
(vii) Any intention on the part of the Parent to discharge the
Parent's present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in such
capacity.
(viii ____ Any litigation which, if determined adversely to the
Borrowers, would reasonably be expected to have a Material Adverse
Effect.
(ix) _____ The occurrence of an event or circumstance with
respect to any Employee Benefit Plan which would reasonably be expected
to have Material Adverse Effect.
(b) The Lead Borrower shall:
(i) ______ Provide the Agent, when so distributed, with
copies of any materials distributed to the shareholders of the Parent
(qua such shareholders).
(ii) Provide the Agent:
(A) When filed, copies of all filings by the
Parent with the SEC.
(B) When received, copies of all
correspondence from the SEC, other than routine non-substantive general
communications from the SEC.
(iii) Add the Agent as an addressee on all mailing
lists maintained by or for the Borrowers which Agent may request.
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(iv) _____ At the request of the Agent, from time to time,
provide the Agent with copies of all advertising (including copies of
all print advertising and duplicate tapes of all video and radio
advertising).
(v) Provide the Agent, when received by the
Borrowers, with a copy of any management letter or similar
communications from any accountant of the Borrowers.
5.4. Borrowing Base Certificate.
----------------------------
The Lead Borrower shall provide the Agent a Borrowing Base
Certificate (in the form of EXHIBIT 5.4, as such form maybe revised by agreement
of the Lead Borrower and the Agent), reflecting the Borrowers' condition on the
last Business Day of the reporting period immediately prior to the date when
furnished, at the following times:
(a) Within ten (10) Business Days following the end of the
Borrowers' fiscal month.
(b) ______ On the Thursday (or the next Business Day, if that
Thursday is not a Business Day) following any week (Sunday to Saturday) during
which average Availability for the prior week has been less than $25 Million
($25,000,000.00) and weekly thereafter on the Thursday of each week (or the next
Business Day, if any Thursday is not a Business Day), for the prior week. Such
Borrowing Base Certificate may be sent to the Agent by facsimile transmission,
provided that the original thereof is forwarded to the Agent on the date of such
transmission.
(c) ______ For so long as the Tranche B Loan is outstanding and
if the Borrowers remain on a frequency of providing Borrowing Base Certificates
once a month, on December 20th (or the next Business Day, if December 20th is
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not a Business Day) as of December 15th (or the next Business Day, if December
15th is not a Business Day) to be prepared based upon the information then
available to the Borrowers.
5.5. Monthly Collateral Reports.
--------------------------
Monthly, within thirty (30) days of the end of the previous
fiscal month, the Lead Borrower shall provide the Agent with such Collateral
Reports (in the form acceptable to Agent) as are identified on EXHIBIT 5.5. For
the purposes of this Section, the first "previous month" shall be November,
1999.
5.6 Monthly Financial Reports.
-------------------------
Monthly, within thirty (30) days of the end of the previous
fiscal month, the Lead Borrower shall provide the Agent, in such form as the
Agent and the Lead Borrower may agree, original counterparts of an internally
prepared statement of the Borrowers' Consolidated financial condition for the
period ending with the end of the subject month, which financial statement shall
include, at a minimum, a balance sheet, income statement (on a Consolidated
basis), cash flow statement and comparison of same store sales for the
corresponding month of the prior year, as well as comparisons to the Business
Plan.
5.7 Quarterly Financial Reports.
---------------------------
Quarterly, within forty-five (45) days following the end of each
of its first three (3) fiscal quarters in each fiscal year, the Lead Borrower
shall provide the Agent a copy of its Report on Form 10-Q filed with the SEC.
5.8 Annual Reports.
--------------
Annually, within ninety (90) days following the end of its Fiscal
Year, the Lead Borrower shall furnish the Agent with a copy of its Report on
Form 10-K filed with the SEC, and within thirty (30) days of delivery by
Borrower's independent accountants, any so-called management letters.
5.9 Officers' Certificates.
----------------------
The Lead Borrower shall cause its Chief Executive Officer, Chief
Financial Officer or Vice President of Finance to certify in connection with the
monthly, quarterly, and annual statements to be furnished pursuant to this
Agreement that:
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(a) ______ Such statements (other than the monthly statements)
were prepared in accordance with GAAP consistently applied and present fairly
the financial condition of the Borrowers at the close of, and the results of the
Borrowers' operations and cash flows for, the period(s) covered, subject,
however to the following:
(i) usual year end adjustments (this exception shall
not be included in the certificate which accompanies the annual
statement).
(ii) _____ Material Accounting Changes (in which event,
such certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in determining satisfaction of the
financial performance covenant imposed by Section 5.12.
(b) ______ No Suspension Event has occurred or, if such an event
has occurred shall describe, its nature (in reasonable detail) and the steps (if
any) being taken or contemplated by the Borrower to be taken on account thereof.
(c) ______ The Borrowers were in compliance (or had failed to
comply) as of the date of the applicable statement with each of the financial
performance covenants included in Section 5.12 hereof, such certification to be
accompanied by calculations demonstrating such compliance or failure to comply.
5.10 Inventories, Appraisals, and Audits.
-----------------------------------
(a) ______ The Agent may, at the expense of the Borrowers,
participate in and/or observe, each physical count and/or inventory of so much
of the Collateral as consists of Inventory which is undertaken on behalf of the
Borrowers.
(b) ______ The Borrowers, at their own expense, shall cause each
store location to have not less than one (1) physical inventory in each fiscal
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year to be undertaken on a generally annual basis, consistent with current
practice, while this Agreement is in effect (the scheduling of which shall be
subject to the Agent's reasonable discretion), conducted by such inventory
takers as are satisfactory to the Agent and following such methodology as may be
satisfactory to the Agent.
(i) ______ The Lead Borrower shall provide the Agent with
a copy of the preliminary results of each such inventory (as well as of
any other physical inventory undertaken by the Borrowers) within thirty
(30) days following its completion.
(ii) _____ The Lead Borrower shall provide the Agent with
a reconciliation of the results of each such inventory (as well as of
any other physical inventory reconciliation undertaken by the Borrowers)
to the Borrowers' books and records within thirty (30) days following
the completion of such inventory.
(iii) ____ Following the occurrence of an Event of
Default, the Agent may, in its discretion, cause such additional
inventories to be taken as the Agent determines (each at the expense of
the Borrowers).
(c) ______ Upon the Agent's request from time to time, the
Borrowers shall permit the Agent to arrange for Inventory appraisals (at the
Borrower's expense) conducted by such appraisers as are satisfactory to the
Agent. Prior to the occurrence of any Event of Default the Agent shall have the
right to obtain (at the Borrower's expense) up to three (3) appraisals in each
twelve (12) month period during which this Agreement is in effect (the spacing
of the scheduling of which appraisals shall be subject to the Agent's
discretion) provided that the appraisal conducted pursuant to clause (f) below
shall be counted as one of the three (3) appraisals to be conducted in the year
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in which such appraisal occurs. The Agent, in its discretion, following the
occurrence of an Event of Default, may cause such additional appraisals to be
taken as the Agent determines (each, at the expense of the Borrowers).
(d) ______ The Agent contemplates conducting up to three (3)
commercial finance audits (at the Borrowers' expense) of the Borrowers' books
and records during any twelve (12) month period during which this Agreement is
in effect. The Agent, in its discretion, following the occurrence of an Event of
Default, may cause such additional audits to be taken as the Agent determines
(at the expense of the Borrowers).
(e) ______ The Agent contemplates causing not more than two (2)
(so-called) "mystery shopping" visits to all or any of the Borrowers' business
premises during any 12-month period during which this Agreement is in effect,
but following the occurrence of an Event of Default, may cause additional such
visits to be undertaken (in each event, at the Borrowers' expense). The Agent
shall provide the Borrowers with a copy of any non-confidential results of such
mystery shopping.
(f) ______ In addition to and without limitation of the
foregoing, upon the Tranche B Lender's request made during the thirty (30) day
notice period required under Section 2.4(g) for the borrowing of the Tranche B
Loan, the Borrowers shall permit the Agent, at the request of the Tranche B
Lender, to arrange for an Inventory Appraisal (at Borrowers' expense) conducted
by an appraiser satisfactory to Tranche B Lender and the Borrowers acknowledge
and agree that the Agent, at the request of the Tranche B Lender, in its
discretion, may conduct a commercial finance audit of Borrower's books and
records (at Borrowers' expense) during such period as well.
5.11. Additional Financial Information.
--------------------------------
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(a) ______ In addition to all other information required to be
provided pursuant to this Article V, the Lead Borrower promptly shall provide
the Agent (and any guarantor of the Liabilities), such other and additional
information concerning the Borrowers, the Collateral, the operation of the
Borrowers' business, and the Borrowers' financial condition, including financial
reports and statements (including supporting schedules), as the Agent may from
time to time reasonably request from the Lead Borrower.
(b) ______ The Lead Borrower may provide the Agent, from time to
time hereafter, with updated projections of the Borrowers' anticipated
performance and operating results.
(c) ______ The Lead Borrower shall, no later than thirty (30)
days following the end of each of the Borrowers' fiscal years, furnish the Agent
with an updated and extended projection which shall extend at least through the
end of the then current fiscal year, as well as with any modifications to the
Business Plan, the initial version of which is annexed hereto as EXHIBIT
5.11(C).
(d) ______ Such updated and extended projections shall be
prepared pursuant to such methodology and shall include such assumptions as are
satisfactory to the Agent.
(e) ______ Upon the request of the Tranche B Lender made from
time to time, the Agent will provide to the Tranche B Lender (at Borrowers'
expense) copies of such reports, notices, statements and other information that
the Borrowers furnish to the Agent hereunder.
5.12. Financial Performance Covenants.
-------------------------------
The Borrowers shall at all times comply with the financial
performance covenants described below. Compliance with such financial
performance covenants shall be determined as if no Material Accounting Changes
had been made since the date of this Agreement (other than any Material
Accounting Changes specifically taken into account in the setting of such
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covenants). The Agent may determine the Borrowers' compliance with such
covenants by using financial reports and statements provided by the Lead
Borrower to the Agent or any Lender (whether or not such financial reports and
statements are required to be furnished pursuant to this Agreement) as well as
by reference to interim financial information provided to, or developed by, the
Agent. These covenants are as follows:
(a) ______ EBITDA: Following the occurrence and during the
continuance of an event described in conditions (a) or (b) in the definition of
Cash Management Condition, the Borrowers shall comply with the following EBITDA
covenant: Commencing on the first Business Day of October, 2000, and continuing
on the first Business Day of each month thereafter, the Borrowers shall not
permit their EBITDA, calculated on a rolling historical twelve (12) month basis,
to be less than zero (0) for any twelve month period up to and including the
Maturity Date.
(b) ______ Capital Expenditures. At no time shall the Borrowers
permit their annual aggregate Capital Expenditures to exceed the Capital
Expenditure Cap of $25 Million ($25,000,000.00) through the Borrowers' fiscal
year ending January 31, 2001 and $20 Million ($20,000,000.00) in any fiscal year
thereafter. The Borrowers shall have the right to carryover to the next
immediately succeeding fiscal year up to $5 Million ($5,000,000.00) of unused
amounts within the Capital Expenditure Cap with the carryover unused amounts
under the Capital Expenditure Cap to be deemed to be spent last in each year.
ARTICLE VI - USE AND COLLECTION OF COLLATERAL:
6.1. Use of Inventory Collateral.
---------------------------
(a) The Borrowers shall not engage in any sale of the Inventory
other than for fair consideration in the conduct of the Borrowers' business in
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the ordinary course (including but not limited to seasonal and promotional
sales) and shall not engage in sales or other dispositions to creditors, sales
or other dispositions in bulk other than going out of business sales performed
in connection with store closures that are permitted pursuant to Section
4.14(e).
(b) ____ No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrowers'
customary return policy applicable to the return of Inventory purchased by the
Borrowers' retail customers in the ordinary course, such Inventory may be
returned to the Borrowers without the consent of the Agent.
6.2. Inventory Quality.
-----------------
All Inventory now owned or hereafter acquired by the Borrowers
are and will be of good and merchantable quality and free from defects (other
than within customary trade tolerances).
6.3. Adjustments and Allowances.
--------------------------
The Borrowers may grant such allowances or other adjustments to
the Borrowers' Account Debtors as the Borrowers may reasonably deem to accord
with sound business practice and consistent with the Borrowers' past practice,
provided, however, the authority granted the Borrowers pursuant to this Section
6.3 may be limited or terminated by the Agent during the continuation of an
Event of Default.
6.4. Validity of Accounts.
--------------------
(a) ______ The amount of each Account shown on the books,
records, and invoices of the Borrowers represented as owing by each Account
Debtor is and will be the correct amount actually owing by such Account Debtor
and shall have been fully earned by performance by the Borrowers.
(b) ______ The Borrowers have no knowledge of any material
impairment of the validity or collectability of any of the Accounts and shall
cause the Lead Borrower to notify the Agent of any such fact immediately after
any Borrower becomes aware of any such impairment.
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6.5. Notification to Account Debtors.
-------------------------------
The Agent shall have the right at any time following the
occurrence of a Cash Management Condition (and an Event of Default has occurred)
to notify any of the Borrowers' Account Debtors to make payment directly to the
Agent and to collect all amounts due on account of the Collateral.
ARTICLE VII - CASH MANAGEMENT; PAYMENT OF LIABILITIES:
7.1. Depository Accounts.
-------------------
(a) Annexed hereto as EXHIBIT 7.1 is a Schedule of all
present DDA's, which Schedule includes, with respect to each depository
(i) the name and address of that depository;
(ii) the account number(s) of the account(s)
maintained with such depository;
(iii) a contact person at such depository; and
(iv) the Borrower and such Borrower's store locations
utilizing such DDA.
(b) The Lead Borrower shall deliver to the Agent, as a
condition to the effectiveness of this Agreement the following
(i) ______ Notification, executed on behalf of the
Borrowers, to each depository institution with which any DDA is
maintained (other than the Operating Account or any Local Disbursement
Account), in form satisfactory to the Agent, of the Agent's interest in
such DDA, which notice provides that the contents of such DDA shall,
prior to the occurrence of a Cash Management Condition, be directed to
the Blocked Account and following the occurrence of a Cash Management
Condition, be directed to the Concentration Account.
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(ii) A Blocked Account Agreement with any depository
institution at which a Blocked Account is maintained.
(c) ______ No Borrower will establish any DDA hereafter (other
than a Local Disbursement Account) unless within ten (10) days after such
establishment, the Lead Borrower provides a notification, as required by Section
7.1 (b)(i) above, that the contents of such DDA are to be directed into the
Blocked Account and, upon the occurrence of a Cash Management Condition, the
Concentration Account.
7.2. Credit Card Receipts.
--------------------
(a) ______ Annexed hereto as EXHIBIT 7.2 is a Schedule which
describes all arrangements to which the Borrowers are parties with respect to
the payment to the Borrowers of the proceeds of all credit card charges for
sales by the Borrowers.
(b) ______ The Borrowers shall deliver to the Agent as a
condition to the effectiveness of this Agreement, notification, executed on
behalf of the Borrowers, to each of the Borrowers' credit card clearinghouses
and processors (in form satisfactory to the Agent), which notification provides
that payment of all credit card charges submitted by the Borrowers to that
clearinghouse or other processor and any other amount payable to the Borrowers
by such clearinghouse or other processor shall, prior to the occurrence of a
Cash Management Condition, be directed to the Blocked Account and, following the
occurrence of a Cash Management Condition, shall be directed to the
Concentration Account or as otherwise designated from time to time by the Agent.
The Borrowers shall not change such direction or designation except upon and
with the prior written consent of the Agent.
7.3. The Concentration, Blocked, and Operating Accounts.
--------------------------------------------------
(a) The following deposit accounts shall be established (and
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are so referred to herein):
(i) The CONCENTRATION ACCOUNT: At the Agent's
election, either the Blocked Account or an account established by the
Agent with Fleet National Bank
(ii) _____ The OPERATING ACCOUNT: Established by the
Borrowers with Fleet National Bank, from which only disbursements may be
made and into which only advances under the Revolving Credit and
proceeds of the Tranche B Loan and (prior to the occurrence of a Cash
Management Condition) proceeds from the DDAs, may be deposited.
(b) ______ The contents of each DDA (other than the Operating
Account) constitute Collateral and Proceeds of Collateral. Funds in the
Concentration Account constitute a payment of Liabilities when collected to the
extent of Liabilities.
(c) Intentionally Omitted.
(d) ______ The Borrowers shall pay all fees and charges of, and
maintain such minimum balances as may be required by the Agent or by any bank in
which any account is opened as required hereby (even if such account is opened
by the Agent).
7.4. Proceeds and Collection of Accounts.
-----------------------------------
(a) ______ All Receipts constitute Collateral and Proceeds of
Collateral and (other than Receipts from the sale of Investment Property or
Permitted Investments) shall be held in trust by the Borrowers for the Agent,
shall not be commingled with any of the Borrowers' other funds and shall be
deposited and/or transferred prior to the occurrence of a Cash Management
Condition, only to the Operating Account. Following the occurrence of a Cash
Management Condition, all Receipts shall be deposited or transferred only to the
Concentration Account.
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(b) ______ The Borrowers shall cause the ACH or wire transfer to
the Operating Account , no less frequently than each Business Day (and whether
or not there is then an outstanding balance in the Loan Account) of the
following:
(i) ______ The contents of each DDA (other than (A) any
Local Disbursement Account and (B) the Operating Account). Each such
transfer shall be net of any minimum balance, not to exceed the balances
set forth in EXHIBIT 7.4(B)(I) for each DDA, as may be required to be
maintained in the subject DDA by the bank at which such DDA is
maintained.
(ii) The proceeds of all credit card charges not
otherwise provided for pursuant hereto.
(c) ______ At any time following the occurrence of a Cash
Management Condition and whether or not any Liabilities are then outstanding,
the Borrowers shall undertake the following (and the Agent may give notice to
the bank at which the Blocked Account is maintained to undertake the following):
(i) ______ Cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of the contents of
each DDA, net of such minimum balance, as may be required to be
maintained in the DDAs by the bank at which a DDA is maintained.
(ii) Cause to be transferred to the Agent's control, or to
an intermediary subject to a control agreement with the Agent, all cash
(other than on deposit in the Local Disbursement Accounts), Investment
Property and other Permitted Investments. In the event that,
notwithstanding the provisions of this Section 7.4(c), any of the
Borrowers receives or otherwise has dominion and control of any
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Receipts, or any proceeds or collections of any Collateral, such
Receipts, proceeds, and collections shall be held in trust by the
Borrowers for the Agent and shall not be commingled with any of the
Borrowers' other funds or deposited in any account of the Borrowers
other than as instructed by the Agent.
7.5. Payment of Liabilities.
----------------------
(a) ______ On each Business Day following the occurrence and
during the continuance of a Cash Management Condition, the Agent shall apply,
towards the unpaid balance of the Loan Account in respect of the Tranche A
Loans, the then collected balance of the Concentration Account (net of fees
charged, and of such minimum balances as may be required by the bank at which
the Concentration Account is maintained).
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) ______ Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which deposited,
provided that such deposit is received by the Agent by 2:00 PM on that
Business Day.
(ii) _____ Funds paid to the Agent, other than by deposit
to the Concentration Account, shall be deemed to have been received on
the Business Day when they are good and collected funds, provided that
such payment is received by the Agent by 2:00 PM on that Business Day.
(iii) If a deposit to the Concentration Account (Section
7.5(b)(i)) or payment (Section 7.5(b)(ii)) is not received by the Agent
until after 2:00 PM on a Business Day, such deposit or payment shall be
deemed to have been made at 9:00 AM on the next succeeding Business Day.
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(iv) All deposits to the Concentration Account and
other payments to the Agent are subject to clearance and collection.
(c) ______ The Agent shall transfer to the Operating Account any
surplus in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7.5(a) (less those amounts which are to be
netted out, as provided therein) provided, however, in the event that both (i) a
Suspension Event has occurred and (ii) one or more L/C's are then outstanding,
the Agent may establish a funded reserve of up to 105% of the aggregate Stated
Amounts of such L/C's.
7.6. The Operating Account.
---------------------
Except as otherwise specifically provided in, r permitted by,
this Agreement, all checks shall be drawn by the Borrowers upon, and other
disbursements shall be made by the Borrowers solely from, the Operating Account
and the Local Disbursement Accounts.
ARTICLE VIII - GRANT OF SECURITY INTEREST:
8.1. Grant of Security Interest.
----------------------------
To secure the Borrowers' prompt, punctual, and faithful
performance and payment of all and each of the Liabilities, each Borrower hereby
grants to the Agent, for the ratable benefit of the Lenders, a continuing
security interest in and to, and assigns to the Agent, for the ratable benefit
of the Lenders, the following, and each item thereof, whether now owned or now
due, or in which that Borrower has an interest, or hereafter acquired, arising,
or to become due, or in which that Borrower obtains an interest, and all
products, Proceeds, substitutions, and accessions of or to any of the following
(all of which, together with any other property in which the Agent may in the
future be granted a security interest, is referred to herein as the
"COLLATERAL"):
<TABLE>
<S> ____ <C> (a) All Accounts.
</TABLE>
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<TABLE>
<S> <C>
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
</TABLE>
(h) ____ All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information, and all property in which such
books, records, and information are stored, recorded, and maintained.
(i) ____ All Investment Property, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.
(j) ____ All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit insurance, whether
any of such proceeds, refunds, and premium rebates arise out of any of the
foregoing (8.1 (a) through 8.1 (i)) or otherwise.
(k) ____ All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8.1 (a) through 8.l(j), including the right
of stoppage in transit.
8.2. Extent and Duration of Security Interest.
-----------------------------------------
The security interest created and granted herein is in addition
to, and supplemental of, any security interest previously granted by the
Borrowers to the Agent and shall continue in full force and effect until all
Liabilities have been paid and/or satisfied in full, no more Commitments exist
and the security interest granted herein is specifically terminated in
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writing by a duly authorized officer of the Agent, which termination shall not
unreasonably be withheld.
8.3 Delivery of Instruments, etc.
----------------------------
(a) ______ Pursuant to the terms hereof, the Borrowers have
endorsed, assigned and delivered to the Agent all negotiable or non-negotiable
instruments, certificated securities and chattel paper pledged by them
hereunder, together with instruments of transfer or assignment duly executed in
blank as the Agent may have specified. In the event that any Borrower shall,
after the date of this Agreement, acquire any other negotiable or non-negotiable
instruments, certificated securities or chattel paper to be pledged by it
hereunder, such Borrower shall forthwith endorse, assign and deliver the same to
the Agent, accompanied by such instruments of transfer or assignment duly
executed in blank as the Agent may from time to time specify.
(b) ______ To the extent that any securities now or hereafter
acquired by any Borrower are uncertificated and are issued to a Borrower or its
nominee directly by the issuer thereof, that Borrower shall cause the issuer to
note on its books the security interest of the Agent in such securities and
shall cause the issuer, pursuant to an agreement in form and substance
reasonably satisfactory to the Agent, to agree to comply with instructions from
the Agent as to such securities, without further consent of such Borrower or
such nominee. To the extent that any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired by any
Borrower are held by a Borrower or its nominee through a securities intermediary
or commodity intermediary, that Borrower shall, at the request of the Agent,
cause such securities intermediary or (as the cause may be) commodity
intermediary, pursuant to an agreement in form and substance reasonably
satisfactory to the Agent, to agree to comply with entitlement orders or other
instructions from the Agent to such securities intermediary as to such
securities or other investment property, or (as the case may be) to apply any
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value distributed on account of any commodity contract as directed by the Agent
to such commodity intermediary, without further consent of such Borrower or such
nominee.
(c) ______ To the extent that any Borrower is a beneficiary under
any written letter of credit now or hereafter issued in favor of a Borrower,
that Borrower shall deliver such letter of credit to the Agent. The Agent shall
from time to time, at the request and expense of the Borrowers, make such
arrangements with the Borrowers as are in the Agent's discretion necessary and
appropriate so that the Borrowers may make any drawing to which the Borrowers
are entitled under such letter of credit, without impairment of the Agent's
perfected security interest in the Borrowers' rights to proceeds of such letter
of credit or in the actual proceeds of such drawing. At the Agent's request, the
Borrowers shall, for any letter of credit, whether or not written, now or
hereafter issued in favor of a Borrower as beneficiary, execute and delivery to
the issuer and any confirmer of such letter of credit an assignment of proceeds
form, in the favor of the Agent and satisfactory to the Agent and such issuer or
(as the case may be) such confirmer, requiring the proceeds of any drawing under
such letter of credit to be paid directly to the Agent for application as
provided in this Agreement.
8.4 Concerning Revised Article 9 of the Uniform Commercial Code.
--------------------------------------------------------------
The parties acknowledge and agree to the following provisions of
this Agreement in anticipation of the possible application, in one or more
jurisdictions to the transactions contemplated hereby, of the revised Article 9
of the Uniform Commercial code in the form or substantially in the form approved
by the American Law Institute and the National Conference of Commissioners on
Uniform State Law and contained in the 1999 official test of Revised Article 9
("Revised Article 9").
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(a) ______ Attachment. In applying the law of any jurisdiction in
which Revised Article 9 is in effect, the Collateral is all assets of the
Borrowers, whether or not within the scope of Revised Article 9. The Collateral
shall include, without limitation, the following categories of assets as defined
in Revised Article 9: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper (whether tangible
or electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all proceeds of
any thereof, wherever located, whether now owned or hereafter acquired. If any
Borrower shall at any time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, acquire a commercial tort claim, as defined in Revised
Article 9, that Borrower shall immediately notify the Agent in a writing signed
by such Borrower of the brief details thereof and grant to the Agent in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.
(b) ______ Perfection by Filing. The Agent may at any time and
from time to time, pursuant to the provisions of Section 9.1, file financing
statements, continuation statements and amendments thereto that describe the
Collateral as all assets of the Borrowers or words of similar effect and which
contain any other information required by Part 5 of Revised Article 9 for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including whether a Borrower is an organization, the
type of organization and any organization identification number issued to such
Borrower. The Borrowers agree to furnish any such information to the Agent
promptly upon request. Any such financing statements, continuation statements or
amendments may upon notice to Lead Borrower and the failure of the applicable
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Borrower to sign such financing statements within seven (7) days of such notice
(or, if an Event of Default has occurred, without such notice) be signed by the
Agent on behalf of the Borrowers, as provided in this Agreement, and may be
filed at any time in any jurisdiction whether or not Revised Article 9 is then
in effect in that jurisdiction.
(c) ______ Other Perfection, etc. The Borrowers shall at any time
and from time to time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, take such steps as the Agent may reasonably request for
the Agent (a) to obtain an acknowledgement, in form and substance reasonably
satisfactory to the Agent, of any bailee having possession of any of the
Collateral that the bailee holds such Collateral for the Agent, (b) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper (as such terms are defined in Revised Article 9 with
corresponding provisions in Rev. ss.ss.9-104, 9-105, 9-106 and 9-107 relating to
what constitutes "control" for such items of Collateral), with any agreements
establishing control to be in form and substance satisfactory to the Agent, and
(c) otherwise to insure the continued perfection and priority of the Agent's
security interest in any of the Collateral and of the preservation of its rights
therein, whether in anticipation and following the effectiveness of Revised
Article 9 in any jurisdiction.
(d) ______ Savings Clause. Nothing contained in his Section 8.4
shall be construed to narrow the scope of the Agent's security interest in any
of the Collateral or the perfection or priority thereof or to impair otherwise
limit any of the rights, powers, privileges or remedies of the Agent or any
Lender hereunder except (and then only to the extent) mandated by Revised
Article 9 to the extent then applicable.
ARTICLE IX - AGENT AS BORROWERS' ATTORNEY-IN-FACT:
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9.1. Appointment as Attorney-In-Fact.
--------------------------------
The Borrowers hereby irrevocably constitutes and appoints the
Agent as the Borrowers' true and lawful attorney, with full power of
substitution, effective following Acceleration to convert the Collateral into
cash at the sole risk, cost, and expense of the Borrower, but for the ratable
benefit of the Agent and the Lenders. The rights and powers granted the Agent by
the within appointment include but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) ______ Sign change of address forms to change the address to
which the Borrowers' mail is to be sent to such address as the Agent shall
designate; receive and open the Borrowers' mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrowers or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrowers, or other legal
representative of the Borrowers whom the Agent determines to be the appropriate
person to whom to so turn over such mail.
(c) ______ Endorse the name of the Borrowers in favor of the
Agent upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral
(with copies of the foregoing to be made available by Agent to the Lead
Borrower).
(d) Sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
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the Borrowers' name on any proof of claim in bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) ______ Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the
Borrowers are a beneficiary.
(f) ______ Repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any customer of the Borrowers.
(g) Use, license or transfer any or all General Intangibles
of the Borrower.
9.2. No Obligation to Act.
--------------------
The Agent shall not be obligated to do any of the acts or to
exercise any of the powers authorized by Section 9.1 herein, but if the Agent
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of the reasonable
exercise of such power, and shall not be responsible to the Borrowers for any
act or omission to act except for any act or omission to act as to which there
is a final determination made in a judicial proceeding (in which proceeding the
Agent has had an opportunity to be heard) which determination includes a
specific finding that the subject act or omission to act had been grossly
negligent, actual bad faith, constituted willful misconduct or was commercially
unreasonable.
ARTICLE X - EVENTS OF DEFAULT:
The occurrence of any event described in this Article X shall, upon the
passage of any applicable grace or cure period, constitute an "EVENT OF
DEFAULT". Upon the occurrence of any Event of Default described in Section
10.11, any and all Liabilities shall become due and payable without any further
act on the part of the Agent or any Lender. Upon the occurrence of any other
Event of Default, any and all Liabilities shall become immediately due and
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payable, at the option of the Agent or at the direction of the requisite Lenders
(as provided in Article XVI) and upon notice or demand to the Lead Borrower. The
occurrence of any Event of Default shall also constitute, without notice or
demand, a default under all other agreements between the Agent or any Lender and
the Borrowers and instruments, whether such agreements now exist or hereafter
arise.
10.1. Failure to Pay Revolving Credit or Tranche B Loan.
-------------------------------------------------
The failure by the Borrowers to pay (i) any principal amount when
due and (ii) any interest or fees within three (3) Business Days of when due,
under the Revolving Credit or the Tranche B Loan.
10.2. Failure To Make Other Payments.
-------------------------------
The failure by the Borrowers to pay within five (5) Business Days
of when due (or upon demand, if payable on demand) any payment Liability other
than under the Revolving Credit or the Tranche B Loan.
10.3. Failure to Perform Covenant or Liability (No Grace Period).
-----------------------------------------------------------
The failure by the Borrowers to promptly, punctually, faithfully
and timely perform, discharge, or comply with any covenant or Liability not
otherwise described in Section 10.1 or Section 10.2 hereof, and included in any
of the following pr ovisions hereof:
Section Relates to
------- ----------
<TABLE>
<S> <C>
4.3(b) Notice of Name Change
4.6 Location of Collateral
4.7 Title to Assets
4.8 Indebtedness
4.10 Insurance Policies
4.15 Pay taxes
4.20 Dividends, Investments,
Repurchases and Debt Retirement
4.25 Additional Assurances
5.1 Maintain Records
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.2 Access to Records
5.3 Immediate Notice to Agent
5.4 Borrowing Base Certificate
5.10 Inventories, Appraisals, and
Audits
5.11 Additional Financial Information
5.12 Financial Performance Covenants
6.1 Use of Collateral
Article VII Cash Management
</TABLE>
provided, however, that in the case of a breach of any covenant set forth in
Sections 4.3, 4.6, 4.7, 4.15 and 4.25, no such occurrence (either singly or in
the aggregate) shall be an Event of Default unless it (i) has a Material Adverse
Effect, (ii) results in an impairment, loss or diminution of Collateral of $5
Million ($5,000,000.00) or more or (iii) is not cured within ten (10) days
written notice from the Agent as provided in Section 10.4; provided further,
however, in the case of Section 5.4, no such occurrence shall be an Event of
Default if cured within three (3) Business Days.
10.4. Failure to Perform Covenant or Liability (Grace Period).
-----------------------------------------------------------
The failure by the Borrowers, upon ten (10) days written notice
by the Agent to the Lead Borrower, to cure the Borrowers' failure to promptly,
punctually and faithfully perform, discharge, or comply with any covenant or
Liability not described in any of Sections 10.1, 10.2, or 10.3 hereof.
10.5. Misrepresentation.
-----------------
The reasonable determination by the Agent, made in good faith
that any material representation or warranty at any time made by the Borrowers
to the Agent or any Lender, was not true or complete in all material respects
when given.
10.6. Acceleration of Other Debt; Breach of Lease.
-------------------------------------------
The occurrence of any event such that any Indebtedness of the
Borrowers in excess of $5 Million ($5,000,000.00) to any creditor other than
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the Agent or any Lender has been accelerated or, without the consent of such
Borrowers twenty (20) Leases are terminated at any given time.
10.7. Default Under Other Agreements.
-------------------------------
The occurrence of any breach or default under any agreement
between the Agent and the Borrowers (and which does not constitute a Loan
Document), whether such agreement now exists or hereafter ____ arises
(notwithstanding that the Agent may not have exercised its rights upon default
under any such other agreement, instrument or paper), which breach has not been
cured within twenty (20) days or (if more) any applicable cure period.
10.8. Uninsured Casualty Loss.
-----------------------
The occurrence of any uninsured loss, theft, damage, or
destruction of or to any material portion of the Collateral, in excess of $5
Million ($5,000,000.00) during any calendar year while this Agreement is in
effect.
10.9. Judgment; Restraint of Business.
-------------------------------
(a) ______ The service of process upon the Agent or any Lender or
any Participant seeking to attach, by trustee, means, or other process, any of a
Borrower's funds on deposit with, or assets of such Borrower in the possession
of, the Agent or any Lender or such Participant, which is not timely contested
in good faith by such Borrower by appropriate proceedings, or if so contested,
is not dismissed within the applicable appeals period.
(b) ______ The entry of any judgments against any Borrower or
group of Borrowers in excess of $5 Million ($5,000,000.00) in the aggregate,
which judgment(s) are not satisfied (if a money judgment), bonded or appealed
from (with execution or similar process stayed) within the applicable appeal
period.
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(c) ______ The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Borrower of its business in the ordinary course
which would result in a Material Adverse Effect.
10.10. Business Failure.
-----------------
Any act by, against, or relating to any Borrower, or its property
or assets, which act constitutes the application for, consent to, or sufferance
of the appointment of a receiver, trustee, or other person, pursuant to court
action or otherwise, over all, or any part of such Borrower's property, and
which, if commenced against such Borrower, is not timely contested in good faith
by such Borrower by appropriate proceedings, or if so contested, is not
dismissed within sixty (60) days of when filed; the granting of any trust
mortgage or execution of an assignment for the benefit of the creditors of any
Borrower, or the occurrence of any other voluntary or involuntary liquidation or
extension of debt agreement for such Borrower; the offering by or entering into
by any Borrower of any composition, extension, or any other arrangement seeking
relief from or extension of the debts of such Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including any
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of any Borrower of the
liquidation or winding up of all or any part of such Borrower's business or
operations.
10.11. Bankruptcy.
----------
The failure by any Borrower to generally pay its debts as they
mature; adjudication of bankruptcy or insolvency relative to any Borrower; the
entry of an order for relief or similar order with respect to any Borrower in
any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy
law; the filing of any complaint, application, or petition by any Borrower
initiating any matter in which such Borrower is or may be granted any relief
from the debts of that Borrower pursuant to the Bankruptcy Code or any other
insolvency statute or procedure; the filing of any complaint, application, or
petition against any Borrower initiating any matter in which that Borrower is
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or may be granted any relief from the debts of such Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure, if such complaint,
application, or petition is not timely contested in good faith by such Borrower
by appropriate proceedings or, if so contested, is not dismissed within sixty
(60) days of when filed.
10.12. Indictment; Forfeiture.
-----------------------
The indictment of, or institution of any legal process or
proceeding against, any Borrower, under any federal, state, municipal, and other
civil or criminal statute, rule, regulation, order, or other requirement having
the force of law where the relief, penalties, or remedies sought or available
include the forfeiture of any property of any Borrower and/or the imposition of
any stay or other order, to the extent such relief, penalties, remedies, stay or
other order would reasonably be expected to have a Material Adverse Effect.
10.13 Foreign Proceeding.
-------------------
There occurs in relation to any Borrower in any country or
territory in which it carries on business or, to the jurisdiction of whose
courts any of its assets is subject, any event which, in the reasonable opinion
of the Agent, appears to correspond to or to have an effect equivalent or
substantially similar to any of those referenced in Sections 10.9 through and
including 10.12 or any Borrower becomes subject (other than as a creditor or
claimant) in any such country or territory to the operation of any law relating
to bankruptcy, insolvency, or liquidation, to the extent such event or such
Borrower becoming subject to such a law would result in a Material Adverse
Effect.
10.14. Challenge to Loan Documents.
---------------------------
(a) Any challenge in writing by or on behalf of any Borrower
or any guarantor of the Liabilities to the validity of any Loan Document or the
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applicability or enforceability of any Loan Document strictly in accordance with
the material substance of such Loan Document's terms or which seeks to void,
avoid, limit, or otherwise adversely affect any security interest created by or
in any Loan Document or any payment made pursuant thereto.
(b) ______ Any determination by any court or any other judicial
or government authority that any Loan Document is not enforceable substantially
in accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any material security interest created by
any Loan Document or which determines any material payment made pursuant thereto
is void or voidable.
10.15. Change in Control. Any Change in Control.
-----------------
ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies after and during
the occurrence of any Event of Default.
11.1. Rights of Enforcement.
---------------------
The Agent shall have all of the rights and remedies of a secured
party upon default under the UCC, in addition to which the Agent shall have all
and each of the following rights and remedies after and during the occurrence of
any Event of Default:
(a) To collect the Receivables Collateral with or without
the taking of possession of any of the Collateral;
(b) To take possession of all or any portion of the
Collateral;
(c) ______ To sell, lease, or otherwise dispose of any or all of
the Collateral, in its then condition or following such preparation or
processing as the Agent deems advisable and with or without the taking of
possession of any of the Collateral;
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(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral;
(e) To apply the Receivables Collateral or the Proceeds of
the Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities; and
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11.2. Sale of Collateral.
------------------
(a) ______ Any sale or other disposition of the Collateral may be
at public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) ______ The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned, leased, or occupied by any Borrower. The
Agent and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods(all of which other goods shall remain the
sole property of the Agent or such agent or contractor). Any amounts realized
from the sale of such goods which constitute augmentations to the Inventory (net
of an allocable share of the costs and expenses incurred in their disposition)
shall be the sole property of the Agent or such agent or contractor and neither
the Borrowers nor any Person claiming under or in right of the Borrowers shall
have any interest therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
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market (in which event the Agent shall provide the Lead Borrower with such
notice as may be practicable under the circumstances), the Agent shall give the
Lead Borrower at least ten (10) days prior written notice of the date, time, and
place of any proposed public sale, and of the date after which any private sale
or other disposition of the Collateral may be made. The Borrowers agree that
such written notice shall satisfy all requirements for notice to the Borrowers
which are imposed under the UCC or other applicable law with respect to the
exercise of the Agent's rights and remedies upon default.
(d) ______ The Agent and any Lender may, to the extent permitted
by the UCC, purchase the Collateral, or any portion of it at any sale held under
this Article.
(e) ______ If any of the Collateral is sold, leased, or otherwise
disposed of by the Agent on credit, the Liabilities shall be deemed to have been
reduced as a result thereof to the extent that payment is finally received
thereon by the Agent.
(f) ______ The Agent shall apply the proceeds of any exercise of
the Agent's Rights and Remedies under this Article 11 towards the Liabilities in
the manner set forth in Section 14.9.
11.3. Occupation of Business Location.
--------------------------------
In connection with the Agent's exercise of the Agent's rights
under this Article XI, the Agent may, unless prohibited by law, enter upon,
occupy, and use any premises owned or occupied by any Borrower, and may, unless
prohibit by law, exclude the Borrowers from such premises or portion thereof as
may have been so entered upon, occupied, or used by the Agent. The Agent shall
not be required to remove any of the Collateral from any such premises upon the
Agent's taking possession thereof, and may render any Collateral unusable to the
Borrowers. In no event shall the Agent be liable to the Borrowers for use or
occupancy by the Agent of premises to this Article XI, nor for any charge
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(such as wages for the Borrowers' employees and utilities) incurred in
connection with the Agent's exercise of the Agent's Rights and Remedies.
11.4. Grant of Nonexclusive License.
------------------------------
Each Borrower hereby grants to the Agent a royalty free
nonexclusive irrevocable license, subject to the terms of any applicable
licensing agreement, with any third party licensor, to use, apply, and affix any
trademark, trade name, logo, or the like in which the Borrower now or hereafter
has rights, such license being with respect to the Agent's exercise of the
rights hereunder, in connection with any sale or other disposition of Inventory.
11.5. Assembly of Collateral.
----------------------
The Agent may require the Borrowers to assemble the Collateral
and make it available to the Agent at the Borrowers' sole risk and expense at a
place or places which are reasonably convenient to both the Agent and Borrowers.
11.6. Rights and Remedies.
-------------------
The rights, remedies, powers, privileges, and discretions of the
Agent hereunder (herein, the "AGENT'S RIGHTS AND REMEDIES") shall be cumulative
and not exclusive of any rights or remedies which it would otherwise have. No
delay or omission by the Agent in exercising or enforcing any of the Agent's
Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver
by the Agent of any Event of Default or of any default under any other agreement
shall operate as a waiver of any other default hereunder or under any other
agreement. No single or partial exercise of any of the Agent's Rights or
Remedies, and no express or implied agreement or transaction of whatever nature
entered into between the Agent and any person, at any time, regarding a
particular, limited exercise of the Agent's Rights and Remedies shall preclude
any other or further exercise of the Agent's Rights and Remedies. No waiver by
the Agent of any of the Agent's Rights and Remedies on any one occasion shall be
deemed a waiver on any subsequent occasion, nor shall it, in the absence of
express provisions in that regard, be deemed a continuing waiver.
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All of the Agent's Rights and Remedies and all of the Agent's rights, remedies,
powers, privileges, and discretions under any other agreement or transaction may
be exercised by the Agent at such time or times and in such order of preference
as the Agent in its sole discretion may determine. The Agent's Rights and
Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.
ARTICLE XII - NOTICES:
12.1 Notice Addresses.
----------------
All notices, demands, and other communications made in respect of
this Agreement (other than a request for a loan or advance or other financial
accommodation under the Revolving Credit or the Tranche B Loan) shall be made to
the following addresses, each of which may be changed upon seven (7) days
written notice to all others given as provided in Section 12.2:
If to the Agent: Fleet Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention: Ms. Sally A. Sheehan, Director
Fax: 617-434-4339
With a copy to: Brown Rudnick Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Peter J. Antoszyk, Esquire
Fax: 617-856-8201
If to the Tranche B Lender: Back Bay Capital Funding, LLC
40 Broad Street, Boston, Massachusetts 02109
Attention: Kristan M. O'Connor,
Vice President
Fax: 617-434-4312
With a copy to: Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Edwin E. Smith, Esq.
Fax: 617-951-8736
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If to the Borrowers: Lechters, Inc.
One Cape May Street
Harrison, New Jersey 07029
Attention: Daniel L. Anderton,
Chief Financial Officer
Fax: 973-481-7330
With a copy to: Lechters, Inc.
One Cape May Street
Harrison, New Jersey 07029
Attention: Sheon Karol, General Counsel
Fax: 973-481-0182
12.2. Notice Given.
------------
(a) ______ Except as otherwise specifically provided herein,
notices shall be deemed made and correspondence received, as follows (all times
being local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery: the
Business Day following the day when sent.
(iii) ____ By Hand: If delivered on a Business Day after
9:00 AM and no later than two (2) hours prior to the close of customary
business hours of the recipient, when delivered. Otherwise, at the
opening of the next succeeding Business Day.
(iv) _____ By facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than two (2) hours
prior to the close of customary business hours of the recipient, one (1)
hour after being sent. Otherwise, at the opening of the next succeeding
Business Day.
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(b) ______ Rejection or refusal to accept delivery and
inability to deliver because of a changed address or facsimile number
for which no due notice was given shall each be deemed receipt of the
notice sent.
ARTICLE XIII - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13.1. Revolving Credit Funding Procedures. Subject to Section 13.2:
-----------------------------------
(a) ______ The Agent shall advise each of the Tranche A Lenders
by no later than 2:00 PM (Boston Time) on any day on which any Revolving Credit
Loan other than a SwingLine Loan is to be made. Such advice, in each instance,
may be by telephone, provided that any such telephonic advice shall be confirmed
in writing and shall include reference (as applicable) to the interest rate
applicable to the proposed Revolving Credit Loan.
(b) ______ Each Tranche A Lender, by no later than the end of
business on the day on which the subject Revolving Credit Loan is to be made,
subject to that Tranche A Lender's Tranche A Dollar Commitment, shall transfer
that Tranche A Lender's Tranche A Percentage Commitment of the requested
Revolving Credit Loan to the Agent.
13.2 SwingLine Loans.
---------------
(a) ______ In the event that, when a Revolving Credit Loan is
requested, the aggregate unpaid balance of the SwingLine Loan is less than the
SwingLine Loan Ceiling, then the SwingLine Lender may advise the Agent that the
SwingLine Lender has determined to include up to the amount of the requested
Revolving Credit Loan as part of the SwingLine Loan. In such event, the
SwingLine Lender shall transfer the amount of the requested Revolving Credit
Loan to the Agent.
(b) ______ The SwingLine Loan shall be converted to a Revolving
Credit Loan in which all Tranche A Lenders participate as follows:
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(i) ______ Weekly, the SwingLine Lender shall advise the
Agent that the SwingLine Loan is to be converted to a Revolving Credit
Loan in which all Tranche A Lenders participate.
(ii) _____ At the initiation of a Liquidation, the entire
unpaid principal balance of the SwingLine Loan shall be converted to a
Revolving Credit Loan in which all Tranche A Lenders participate. In
either such event, the Agent shall advise each Tranche A Lender of such
conversion as if, and with the same effect as if such conversion were
the making of a Revolving Credit Loan as provided in Section 13.1.
(c) The SwingLine Lender, in separate capacities, may also
be the Agent and a Tranche A Lender.
(d) The SwingLine Lender, in its capacity as SwingLine
Lender, is not a "Tranche A Lender" for any of the following purposes:
(i) Except as otherwise specifically provided in the
relevant Section, any distribution pursuant to Section 14.9.
(ii) Determination of whether the requisite Tranche A
Commitment Percentage has Consented to action requiring such Consent.
13.3 Agent's Covering of Fundings.
----------------------------
(a) ______ Each Tranche A Lender shall make available to the
Agent, as provided herein, that Tranche A Lender's Commitment Percentage of the
following:
(i) ______ Each Revolving Credit Loan, up to the maximum
amount of that Tranche A Lender's Tranche A Dollar Commitment.
(ii) _____ Each L/C Drawing (to the extent that such L/C
Drawing is not "covered" by a Revolving Credit Loan as provided herein).
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(b) In all circumstances, the Agent may:
(i) ______ Assume that each Tranche A Lender timely shall
make available to the Agent that Tranche A Lender's Tranche A Commitment
Percentage of each Revolving Credit Loan notice of which is provided
pursuant to Section 12.1 and shall make available, to the extent not
"covered" by a Revolving Credit Loan, its Tranche A Commitment
Percentage of each L/C Drawing.
(ii) In reliance upon such assumption, make available
the corresponding amount to the Borrowers.
(iii) Assume that each Tranche A Lender timely shall pay,
and shall make available, to the Agent all other amounts which that
Tranche A Lender is obligated to so pay and/or make available hereunder
or under any of the Loan Documents.
(c) ______ In the event that, in reliance upon any of such
assumptions, the Agent makes available advances or pays a Tranche A Lender's
Tranche A Commitment Percentage of one (1) or more Revolving Credit Loans, L/C
drawings, or any other amount to be made available hereunder or under any of the
Loan Documents with respect to the Revolving Credit, which amounts a Tranche A
Lender (a "DELINQUENT TRANCHE A LENDER") fails to provide to the Agent within
one (1) Business Day of written notice of such failure, then:
(i) The amount which had been made available by the
Agent is an "AGENT'S COVER".
(ii) _____ All interest paid by the Borrowers on account
of a Revolving Credit Loan or coverage of a L/C drawing which relate to
an Agent's Cover shall be retained by the Agent until the Agent's Cover
has been paid with interest by the applicable Delinquent Tranche A
Lender.
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(iii) ____ The Delinquent Tranche A Lender shall pay to
the Agent, on demand, interest (based upon a 360 day year and actual
days elapsed) at a rate equal to the weighted average interest rate paid
by the Agent for federal funds during the period during which such
amount remains unpaid, on the principal balance of the Agent's Cover,
from the date of the making of the Agent's Cover until repaid.
(iv) _____ The Agent shall succeed to all rights to
payment to which the Delinquent Tranche A Lender otherwise would have
been entitled hereunder in respect of those amounts paid by or in
respect of the Borrowers on account of any Agent's Cover together with
interest until it is repaid by the applicable Delinquent Tranche A
Lender. Such payments shall be deemed made first towards the amounts in
respect of which the Agent's Cover was provided and only then towards
amounts in which the Delinquent Tranche A Lender is then participating.
For purposes of distributions to be made pursuant to Section 13.4(a)
(which relates to ordinary course distributions) or Section 14.7 (which
relates to distributions of proceeds of a Liquidation) below, amounts
shall be deemed distributable to a Delinquent Tranche A Lender (and
consequently, to the Agent to the extent to which the Agent is then
entitled) at the highest level of distribution (if applicable) at which
the Delinquent Tranche A Lender would otherwise have been entitled to a
distribution.
(v) ______ Subject to Subsection 13.3(c)(iv), the
Delinquent Tranche A Lender shall be entitled to receive any payments
from the Borrower which do not relate to an Agent's Cover.
(d) A Delinquent Tranche A Lender shall not be relieved, by
virtue of any Agent's Cover or otherwise, of any obligation of such Delinquent
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Tranche A Lender hereunder (all and each of which shall constitute continuing
obligations on the part of any Delinquent Tranche A Lender).
(e) ______ A Delinquent Tranche A Lender may cure its status as a
Delinquent Tranche A Lender by paying the Agent the aggregate of the following:
(i) ______ The Agent's Cover (to the extent not previously
repaid by the Borrower and retained by the Agent in accordance with
Subsection 13.3(c)(iv), above) with respect to that Delinquent Tranche A
Lender.
Plus
(ii) Any interest payable under Subsection 13.3
(c)(iii), above.
Plus
(iii) ____ All such costs and expenses as may be incurred
by the Agent in the enforcement of the Agent's rights against such
Delinquent Tranche A Lender.
13.4 Ordinary Course Distributions: Revolving Credit.
-----------------------------------------------
This Section 13.4 applies unless the provisions of Section 14.9
(which relates to distributions in the event of a Liquidation) become operative.
(a) ______ Weekly, on such day as may be set from time to time by
the Agent (or more frequently at the Agent's option) the Agent and each Tranche
A Lender shall settle up on amounts advanced and payments received under the
Revolving Credit.
(b) The Agent shall distribute to the SwingLine Lender and
to each Tranche A Lender, their respective Pro-Rata shares of interest payments
on the Revolving Credit Loans when actually received and collected by the Agent
(excluding the one (1) Business Day settlement delay to the extent provided for
in Section 8.6(a), which shall be for the account of the Agent only). For
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purposes of calculating interest due to a Tranche A Lender, that Tranche A
Lender shall be entitled to receive interest on the actual amount contributed by
that Tranche A Lender towards the principal balance of the Revolving Credit
Loans outstanding during the applicable period covered by the interest payment
made by the Borrowers. Any net principal reductions to the Revolving Credit
Loans received by the Agent in accordance with the Loan Documents during such
period shall not reduce such actual amount so contributed, for purposes of
calculation of interest due to that Tranche A Lender, until the Agent has
distributed to that Tranche A Lender its Pro-Rata share thereof.
(c) The Agent shall distribute fees paid on account of the
Revolving Credit, as follows:
(i) Unused (Line) Fee: Pro-Rata to the Tranche A
Lenders.
(ii) Tranche A Early Termination Fee: Pro-Rata to the
Trance A Lenders.
(iii) Underwriting Fee: As provided in separate fee
letter between the Agent and
the Lead Borrower.
(iv) Agency Fee: As provided in separate
fee letter between the
Agent and the Lead Borrower.
(d) ______ No Lender shall have any interest in, or right to
receive any part of the Underwriting Fee or Agent's Fee to be paid by the
Borrowers to the Agent pursuant to the separate fee letters.
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(e) ______ Any amount received by the Agent as reimbursement for
any cost or expense (including without limitation, reasonable attorneys' fees)
shall be distributed by the Agent to the Person entitled to such reimbursement
as provided in this Agreement.
(f) ______ Each distribution pursuant to this Section 13.4 is
subject to Section 13.3(c), above (which relates to Delinquent Lenders).
(g) ______ Except as otherwise provided in Section 14.9 below
(which relates to distributions on account of a Liquidation), the Agent promptly
shall distribute to the Tranche B Lender, as provided in this Section, payments
made by the Borrowers on account of the Tranche B Obligations to the extent such
payments are actually received and collected by the Agent, or are made available
to the Agent. The Agent shall distribute to the Tranche B Lender the payments on
account of principal of, interest on, and fees in respect of the Tranche B
Obligations as received and collected by the Agent from the Borrowers or as made
available by the Agent as the proceeds of advances under the Revolving Credit.
ARTICLE XIV- ACCELERATION AND LIQUIDATION:
14.1 Acceleration Notices.
--------------------
The SuperMajority Lenders may give the Agent an Acceleration
Notice at any time following the occurrence of an Event of Default. Such notice
may be by multiple counterparts, provided that counterparts executed by the
requisite Lenders are received by the Agent within a period of five (5)
consecutive Business Days.
14.2 Acceleration Notice by the Tranche B Lender.
-------------------------------------------
The Tranche B Lender may give the Agent an Acceleration Notice as
follows:
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(a) ______ At any time following the occurrence of an Event of
Default which occurs after payment of all Tranche A Liabilities and the
obligation of the Tranche A Lenders to make Revolving Credit Loans and other
financial accommodations hereunder has been terminated.
(b) At any time following any default under Sections 10.10
or 10.11, with respect to any Borrower.
(c) At any time as permitted pursuant to Section 14.3 below.
14.3 Mandatory Acceleration Right of Tranche B Lender.
------------------------------------------------
(a) ______ Following the occurrence of any Borrower Default, the
Tranche B Lender may initiate a Standstill Period by written notice to the
Agent.
(b) ______ Upon the expiry of the relevant Standstill Period, the
Tranche B Lender may give the Agent an Acceleration Notice unless:
(i) ______ If the relevant Borrower Default is a Borrowing
Base Default, the sum of the Loan Account (other than the outstanding
amount of the Tranche B Loans) plus the then stated amount of the L/Cs
is restored to and remains less than or equal to the Borrowing Base for
at least Ten (10) consecutive days during the relevant Standstill
Period.
(ii) _____ If the relevant Borrower Default is a Tranche B
Payment Default, all then due Tranche B Debt Payments (other than those
which would be due only if Tranche B Loans were accelerated) have been
paid.
(iii) ____ If the relevant Borrower Default is a General
Default, such General Default has been duly waived by the Agent (with
the consent of the requisite Lenders, as provided in this Agreement) in
accordance with this Agreement.
(iv) Acceleration has been stayed by judicial or
statutory process.
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(c) ______ In the event that the Tranche B Lender is not
permitted to given an Acceleration Notice in accordance with Section 14.3 (b)
above due to the occurrence of an event described in Sections 14.3( b)(i)-(iv),
above, then the relevant Standstill Period shall be reset for any subsequent
Borrower Default which triggers the mandatory acceleration right of the Tranche
B Lender under this Section.
14.4 Acceleration.
------------
Unless stayed by judicial or statutory process, the Agent shall
Accelerate the Liabilities (including any Liabilities in respect of the Tranche
B Obligations) under the Loan Documents within a commercially reasonable time
following:
(a) The Agent's receipt of an Acceleration Notice from the
SuperMajority Lenders, in compliance with Section 14.1.
(b) ______ The Agent's receipt of an Acceleration Notice from the
Tranche B Lender, in compliance with Section 14.2.
14.5 Initiation of Liquidation.
--------------------------
Unless stayed by judicial or statutory process, a Liquidation may
(and upon the direction of the Majority Lenders, shall) be initiated by the
Agent within a commercially reasonable time following Acceleration of the
Liabilities pursuant to Agent's receipt of an Acceleration Notice under Section
14.4.
14.6 Actions At and Following Initiation of Liquidation.
--------------------------------------------------
(a) At the initiation of a Liquidation:
(i) ______ The unpaid principal balance of the SwingLine
Loan (if any) shall be converted, pursuant to Section 13.1, to a
Revolving Credit Loan in which all Tranche A Lenders participate.
(ii) The Agent and the Tranche A Lenders shall "net
out" each Tranche A Lender's respective contributions towards the
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Revolving Credit Loans, so that each Tranche A Lender holds that Tranche
A Lender's Revolving Credit Commitment Percentage of the Revolving
Credit Loans.
(b) ______ Following the initiation of a Liquidation, each
Tranche A Lender shall contribute towards any L/C thereafter honored and not
immediately reimbursed by the Borrowers that Tranche A Lender's Revolving Credit
Tranche A Commitment Percentage of such honoring.
14.7 Agent's Conduct of Liquidation.
------------------------------
(a) Any Liquidation shall be conducted by the Agent with the
advice and assistance of the Lenders.
(b) The Agent may establish one or more Nominees to "bid in"
or otherwise acquire ownership to any Post Foreclosure Asset.
(c) ______ The Agent shall manage the Nominee and manage and
dispose of any Post Foreclosure Assets with a view towards the realization of
the economic benefits of the ownership of the Post Foreclosure Assets and in
such regard, the Agent and/or the Nominee may operate, repair, manage, maintain,
develop, and dispose of any Post Foreclosure Asset in such manner as the Agent
determines is appropriate under the circumstances.
(d) ______ The Agent may decline to undertake or to continue
taking a course of action or to execute an action plan (whether proposed by the
Agent or by any Lender) unless indemnified to the Agent's satisfaction by the
Lenders against any and all liability and expense which may be incurred by the
Agent by reason of taking or continuing to take that course of action or action
plan.
(e) ______ The Agent and each Lender shall execute all such
instruments and documents not inconsistent with the provisions of this Agreement
as the Agent and/or the Nominee reasonably may request with respect to the
creation and governance of any Nominee, the conduct of the Liquidation, and the
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management and disposition of any Post Foreclosure Asset.
14.8 Distribution of Liquidation Proceeds.
------------------------------------
(a) ______ The Agent may establish one or more reasonably funded
reserve accounts into which proceeds of the conduct of any Liquidation may be
deposited in anticipation of future expenses which may be incurred by the Agent
in the exercise of rights as a secured creditor of the Borrowers and prior
claims which the Agent anticipates may need to be paid.
(b) ______ The Agent shall distribute the proceeds of any
Liquidation to itself and the Lenders in accordance with the relative priorities
set forth in Section 14.9.
(c) ______ Each Lender shall, on the written request of the Agent
and/or any Nominee, but not more frequently than once each month, reimburse the
Agent and/or any Nominee, Pro-Rata, for any cost or expense reasonably incurred
by the Agent and/or the Nominee in the conduct of a Liquidation, if such amount
is not covered out of current proceeds of the Liquidation.
14.9 Relative Priorities To Proceeds of Liquidation.
----------------------------------------------
The relative priorities in which the proceeds of a Liquidation are to be applied
are as follows:
(a) First: To the Agent as reimbursement for all Costs
of Collection incurred by the Agent and to
any funded reserve established pursuant
to Section 14.6(a) and on account of payment
of the Agency Fee.
(b) Second: The SwingLine Lender, on account of any
SwingLine loans not converted to Revolving
Credit Loans pursuant to Section 14.4(a)(i).
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(c) Third: The Tranche A Lenders, Tranche A Pro-Rata,
on account of the principal balance of
Revolving Credit Loans.
(d) Fourth: The Tranche A Lenders, Tranche A Pro-Rata,
on account of accrued interest on the
Revolving Credit Loans.
(e) ______ Fifth: ______ The Tranche A Lenders,
Tranche A Pro-Rata, on account of all fees
payable to the Tranche A Lenders, including
without limitation the Unused (Line) Fee and
the Tranche A Early Termination Fee, and the
Costs of Collection incurred by the Tranche
A Lenders.
(f) Sixth: To the Tranche B Lender to the extent of the
Tranche B Debt.
(g) ______ Seventh: ____ To the Tranche B Lender
to the extent of the aggregate of all
Tranche B Fees, including, without
limitation, the Tranche B Early Termination
Fee and Costs of Collection incurred by the
Tranche B Lender.
(h) Eighth: To any other Liabilities under the Loan
Documents.
ARTICLE XV - THE AGENT:
15.1 Appointment of Agent.
--------------------
(a) Each Lender appoints and designates FRF as the "Agent"
hereunder and under the other Loan Documents.
(b) Each Lender authorizes the Agent:
(i) To execute those of the Loan Documents and all
other instruments relating thereto to which Agent is a party.
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(ii) _____ To take such action on behalf of the Lenders
and to exercise all such powers as are expressly delegated to the Agent
hereunder and in the other Loan Documents and all related documents,
together with such other powers as are reasonably incident thereto. 15.2
Responsibilities of Agent.
-------------------------
(a) ______ The Agent shall have principal responsibilities for
and primary authority for the administration of the credit facilities
contemplated by the Loan Documents and for all matters for which the Agent is
accorded responsibility under this Agreement, including the conduct of the
Liquidation and the distribution of the proceeds of such Liquidation.
(b) ______ The Agent shall have no duties or responsibilities to,
or any fiduciary relationship with, any Lender except for those expressly set
forth in this Agreement.
(c) Neither the Agent nor any of its affiliates shall be
responsible to any Lender for any of the following:
(i) Any recitals, statements, representations or
warranties made by the Borrowers, or any other person.
(ii) Any appraisals or other assessments of the assets
of the Borrowers or of anyone else responsible for or on account of the
Liabilities.
(iii) ____ The value, validity, effectiveness,
genuineness, enforceability, or sufficiency of the Loan Agreement, any
other Loan Documents or any other document referred to or provided for
therein.
(iv) _____ Any failure by the Borrowers, or any other
person (other than the Agent) to perform their respective obligations
under the Loan Documents.
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(d) ______ The Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the Agent with
reasonable care. No such attorney, accountant, other professional, agent, or
attorney in fact shall be responsible for any action taken or omitted to be
taken by any other such Person.
(e) ______ Neither the Agent, nor any of its directors, officers,
or employees shall be responsible for any action taken or omitted to be taken by
any other of them nor for any action taken or omitted to be taken in connection
herewith, or with respect to the credit facility contemplated by this Agreement,
except for any action taken or omitted to be taken as to which a final judicial
determination has been or is made (in a proceeding in which such person has had
an opportunity to be heard) that such Person had acted in a grossly negligent
manner, in actual bad faith, or in willful misconduct.
(f) ______ The Agent shall have no responsibility in any event
for more funds than the Agent actually receives and collects.
(g) ______ The Agent, in its separate capacity as Lender, shall
have the same rights and powers hereunder as any other Lender.
15.3 Concerning Distributions By the Agent.
-------------------------------------
(a) ______ The Agent, in its reasonable discretion based upon its
determination of the likelihood that additional payments will be received,
expenses incurred, and/or claims made by third parties to all or a portion of
such proceeds, may delay the distribution of any payment received on account of
the Liabilities.
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(b) ______ The Agent may disburse funds prior to determining that
the sums which the Agent expects to receive have been finally and
unconditionally paid to the Agent. If and to the extent that the Agent does
disburse funds and it later becomes apparent that the Agent did not then receive
a payment in an amount equal to the sum paid out, then any Lender to whom the
Agent made the funds available, on demand from the Agent, shall refund to the
Agent the sum paid to that person that exceeds the amount actually received by
the Agent.
(c) ______ If, in the opinion of the Agent, the distribution of
any amount received by the Agent might involve the Agent in liability, or might
be prohibited hereby, or might be questioned by any Person, then the Agent may
refrain from making distribution until the Agent's right to make distribution
has been adjudicated by a court of competent jurisdiction.
(d) ______ The proceeds of any Lender's exercise of any right of,
or in the nature of, set-off shall be deemed, First, to the extent that a Lender
is entitled to any distribution hereunder, to constitute such distribution and
Second, shall be shared with the other Lenders Pro-Rata based upon their
respective contributions to the then principal balance of the Revolving Credit
(and shall be deemed distributions by the Agent hereunder).
(e) ______ Each Lender acknowledges that the crediting of the
Borrowers with the "proceeds" of any transaction in which a Post Foreclosure
Asset is acquired is a non-cash transaction and that, in consequence, no
distribution of such "proceeds" will be made by Agent to any Lender.
(f) ______ In the event that (x) a court of competent
jurisdiction shall adjudge that any amount received and distributed by Agent is
to be repaid or disgorged, or (y) the Lenders, acting by Consent of the
SuperMajority Lenders, determine to effect such repayment or disgorgement, then
each Lender to which any such distribution shall have been made shall repay, to
the Agent, that
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Lender's Pro-Rata share of the amount so adjudged or determined to be repaid or
disgorged.
15.4 Dispute Resolution.
------------------
Any dispute among the Lenders and/or the Agent hereunder, under
any of the other Loan ____ Documents, or concerning the interpretation,
administration, or enforcement of the credit facilities contemplated by this
Agreement or the interpretation or administration of any Loan Document which
cannot be resolved amicably shall be resolved in the United States District
Court for the District of Massachusetts, sitting in Boston or in the Superior
Court of Suffolk County, Massachusetts, to the jurisdiction of which courts all
parties hereto hereby submit.
15.5 Distributions of Notices and of Documents.
-----------------------------------------
The Agent will forward to each Lender, promptly after the Agent's
receipt thereof, a copy of each notice or other document furnished to the Agent
pursuant to the Loan Documents, including monthly, quarterly, and annual
financial statements received from the Borrower pursuant to Article V of this
Agreement, other than any of the following:
(a) Routine communications associated with requests for
Revolving Credit Loans and/or the issuance of L/C's.
(b) Routine and nonmaterial communications;
(c) Any notice or document required by any of the Loan
Documents to be furnished to the Lenders by the Lead Borrower or any Borrower.
(d) Any notice or document of which the Agent has knowledge
that such notice or document had been forwarded to the Lenders other than by the
Agent.
15.6 Confidential Information.
------------------------
Each Lender will maintain, as confidential, all of the following:
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(a) ______ Proprietary approaches, techniques, and methods of
analysis which are applied by the Agent in the administration of the credit
facility contemplated by the Loan Agreement.
(b) ______ Proprietary forms and formats utilized by the Agent in
providing reports to the Lenders pursuant hereto, which forms or formats are not
of general currency.
(c) ______ Confidential information provided by any Borrower
pursuant to the Loan Documents, other than any information which becomes known
to the general public through sources other than that Lender. Nothing included
herein shall prohibit the disclosure of any such information as may be required
to be provided by judicial process or by regulatory authorities having
jurisdiction over any party to this Agreement.
15.7 Reliance by Agent.
------------------
The Agent shall be entitled to rely upon any certificate, notice
or other document(including any cable, telegram, telex, or facsimile) reasonably
believed by the Agent to be genuine and correct and to have been signed or sent
by or on behalf of the proper person or persons, and upon advice and statements
of attorneys, accountants and other experts selected by the Agent. As to any
matters not expressly provided for in this Agreement, any Loan Document, or in
any other document referred to therein, the Agent shall in all events be fully
protected in acting or in refraining from acting, in accordance with the
applicable Consent required by this Agreement. Instructions given with the
requisite Consent shall be binding on all Lenders.
15.8 Non-Reliance on Agent and Other Lenders.
---------------------------------------
(a) Each Lender represents to all other Lenders and to the
Agent that such Lender:
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(i) ______ Independently and without reliance on any
representation or act by the Agent or by any other Lender, and based on
such documents and information as that Lender has deemed appropriate,
has made such Lender's own appraisal of the financial condition and
affairs of the Borrowers and decision to enter into this Agreement and
the other Loan Documents.
(ii) _____ Has relied upon that Lender's review of the
Loan Documents and such review of the Loan Documents by counsel to that
Lender as that Lender deemed appropriate under the circumstances.
(b) ______ Each Lender agrees that such Lender, independently and
without reliance upon the Agent or any other Lender, and based upon such
documents and information as such Lender shall deem appropriate at the time,
will continue to make such Lender's own appraisals of the financial condition
and affairs of the Borrowers when determining whether to take or not to take any
discretionary action under this Agreement or any other Loan Document.
(c) ______ The Agent, in the discharge of its duties hereunder,
shall not be required to make inquiry of, or to inspect the properties or books
of, any Person.
(d) ______ Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder (as to which, see Section 15.5), the Agent shall not have any
affirmative duty or responsibility to provide any Lender with any credit or
other information concerning any Person which may come into the possession of
the Agent or any of its Affiliates.
(e) ______ Each Lender shall have reasonable access to all
documents relating to the Agent's performance of the Agent's duties hereunder at
such Lender's request.
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15.9 Indemnification.
---------------
Without limiting the liabilities of the Borrowers under any of
the Loan Documents, each Lender shall indemnify the Agent, Pro-Rata, for any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including reasonable attorneys' fees and expenses and other out-of- pocket
expenditures) which may at any time be imposed on, incurred by, or asserted
against the Agent and in any way relating to or arising out of this Agreement or
any other Loan Document or any documents contemplated by or referred to therein
or the transactions contemplated thereby or the enforcement of any of the terms
hereof or of any other documents, provided, however, that no Lender shall be
liable for any of the foregoing to the extent that any of the foregoing arises
from any action taken or omitted to be taken by the Agent as to which a final
judicial determination has been or is made (in a proceeding in which the Agent
has had an opportunity to be heard) that the Agent had acted in a grossly
negligent manner or in bad faith, or has engaged in willful misconduct.
15.10 Resignation of Agent.
--------------------
(a) ______ The Agent may resign at any time by giving sixty (60)
days (thirty (30) days after the payment of all Tranche A Liabilities and the
obligation of the Tranche A Lenders to make Revolving Credit Loans and other
financial accommodations has terminated) prior written notice thereof to the
Lenders (including, without limitation, the Tranche B Lender) and the Lead
Borrower. Upon receipt of any such notice of resignation, the Majority Lenders,
with the consent of the Tranche B Lender, shall have the right to appoint a
successor Agent (provided, that no such consent of the Lead Borrower shall be
requested if an Event of Default has occurred, and provided, further that such
consent shall be deemed given if no written objection is received within seven
(7) days of the Lead Borrower's receipt of notice of such successor). If no
successor Agent shall have been so appointed and shall have accepted such
appointment within the requisite period after the giving of notice by the Agent,
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then the resigning Agent may appoint a successor Agent, which shall be either
the Tranche B Lender or a financial institution with an office in the
Northeastern United States having a combined capital and surplus in excess of
$500 Million ($500,000,000.00). The consent of the Borrowers otherwise required
by this Section 15.10(a) shall not be required if an Event of Default has
occurred.
(b) ______ Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor shall thereupon succeed to, and
become vested with, all the rights, powers, privileges, and duties of the
(resigning) Agent so replaced, and the (resigning) Agent shall be discharged
from the (resigning) Agent's duties and obligations hereunder, other than on
account of any responsibility for any action taken or omitted to be taken by the
(resigning) Agent as to which a final judicial determination has been or is made
(in a proceeding in which the (resigning) Agent has had an opportunity to be
heard) that such Agent had acted in a grossly negligent manner or in bad faith
or has engaged in willful misconduct. Upon the effectiveness of the resignation
of an Agent and the appointment of a successor Agent the (resigning) Agent will,
at the cost of the Borrowers, promptly assign, without recourse (except as
provided herein) of record its rights as named party under all UCC financing
statements, mortgages and other instruments of record to the successor Agent.
(c) ______ After the retiring Agent's resignation, the provisions
of this Agreement shall continue in effect for the retiring Agent's benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent. ARTICLE XVI - ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS:
16.1 Administration of Credit Facilities.
-----------------------------------
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(a) ______ Except as otherwise specifically provided in this
Agreement, the Agent may take any action with respect to the credit facility
contemplated by the Loan Documents as the Agent determines to be appropriate
within its area of responsibility and authority, as set forth in Sections
15.2(b) and 15.2(a), provided, however, the Agent is not under any affirmative
obligation to take any action which it is not required by this Agreement or the
other Loan Documents specifically to so take.
(b) ______ Except as specifically provided in the following
Sections of this Agreement, whenever this Agreement or any other Loan Document
provides that action may be taken or omitted to be taken in the Agent's
discretion, the Agent shall have the sole right to take, or refrain from taking,
such action without, and notwithstanding, any vote of the Lenders:
Actions Described in Section Type of Consent Required
---------------------------- ------------------------
<TABLE>
<S> <C>
16.2 Majority Lenders
16.3 Super Majority Lenders
16.4 Unanimous Consent
16.5 Consent of SwingLine Lender
16.6 Tranche B Lender Consent
16.7 Agent's Consent
16.8 Miscellaneous Actions
16.9 Nonconsenting Tranche A Lenders
</TABLE>
(c) ______ The rights granted to the Lenders in those sections
referenced in Section 16.1(b) shall not otherwise limit or impair the Agent's
exercise of its discretion under the Loan Documents.
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(d) ______ The Tranche A Lenders agree that, subject to Section
16.3, any advance under the Revolving Credit which results in a Permissible
Overloan may be made by the Agent in its discretion without the Consent of the
Tranche A Lenders and that each Tranche A Lender shall be bound thereby.
16.2 Actions Requiring Consent or Direction of Majority Lenders. Except
as otherwise provided in this Agreement, the Consent or direction of the
Majority Lenders is required for any amendment, waiver, or modification of any
Loan Document.
16.3 Actions Requiring Consent or Direction of SuperMajority Lenders.
---------------------------------------------------------------
The Consent or direction of the SuperMajority Lenders is required
as follows:
(a) ______ To permit a Permissible Overloan to be outstanding for
more than sixty (60) consecutive Business Days or more than twice in any twelve
(12) month period; provided that the Tranche B Lender shall have consented
thereto as required by Section 16.6.
(b) ______ If an Event of Default (other than an Event of Default
arising under Sections 10.10 or 10.11) shall have occurred and be continuing,
the SuperMajority Lenders may direct the Agent to suspend the Revolving Credit
(including the making of any Permissible Overloans), whereupon, as long as such
Event of Default exists and is continuing, Revolving Credit Loans shall be made
and L/C's shall be issued, amended, or renewed only with Consent of the
SuperMajority Lenders.
(c) If an Event of Default has occurred and not been duly
waived, the SuperMajority Lenders may direct the Agent to:
(i) Give an Acceleration Notice in accordance with
Section 14.l(a); or
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(ii) Increase the rate of interest on the Revolving Credit
Loans to the default rate of interest as provided in, and to the extent
permitted by, the Loan Agreement.
16.4 Actions Requiring or Directed By Unanimous Consent. None of the
following may take place except with the written consent of each Lender
adversely affected thereby or with Unanimous Consent.
(a) ______ Any increase in any Lender's Dollar Commitment (other
than by reason of the application of Section 16.9 (which deals with
Nonconsenting Tranche A Lenders) or Section 17.1 (which deals with assignments
and participations).
(b) ______ Any decrease in any interest rate or fee payable to
the Tranche A Lenders on account of the Revolving Credit Loans (but with respect
to any such decrease, the Tranche B Lender's consent shall not be required).
(c) Any change to the Maturity Date.
(d) Any forgiveness of all or any portion of any payment
Liability.
(e) Any release of a material portion of the Collateral not
otherwise permitted, required or provided for in the Loan Documents.
(f) ______ Any amendment of the definition of the terms
"Borrowing Base", or "Availability" or of any definition of any component
thereof, such that more credit would be available to the Borrowers, based on the
same assets, than would have been available to the Borrowers immediately prior
to such amendment, it being understood, however, that:
(i) The foregoing shall not limit the adjustment by
the Agent of any Reserve in the Agent's administration of the Revolving
Credit as otherwise permitted by this Agreement; and
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(ii) _____ The foregoing shall not prevent the Agent, in
its administration of the Revolving Credit, from restoring any component
of the Borrowing Base which had been lowered by the Agent back to the
value of such component as stated in this Agreement or to an
intermediate value.
(g) Any release of any Person obligated on account of the
Liabilities;
(h) The making of any Revolving Credit Loan which, when
made, exceeds
Availability and is not a Permissible Overloan, provided, however, that
(i) No Consent shall be required in connection with
making of any Revolving Credit Loan to "cover" any honoring of a drawing
under any L/C; and
(ii) _____ Each Lender acknowledges that subsequent to the
making of a Revolving Credit Loan which does not constitute a
Permissible Overloan, the unpaid principal balance of the Loan Account
may exceed the Borrowing Base on account of changed circumstances beyond
the control of the Agent (such as a drop in collateral value).
(i) ______ The waiver of the obligation of the Borrowers to
reduce the unpaid principal balance of loans under the Revolving Credit to an
amount so that a Permissible Overloan does not exceed 5% of the Tranche A Loan
Ceiling, or subject to the time limits included in Sections 16.3(a) and 16.6
(which relates to the outside limit on the number of consecutive Business Days
that a Permissible Overloan may be outstanding);
(j) Any amendment to Section 13.4, Section 14.9 or this
Article XVI;
(k) Amendment of the definitions of the following terms:
"Majority Lenders"
"Permissible Overloan"
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"Protective Advances"
"SuperMajority Lenders"
"Unanimous Consent"
(l) Any continuation of the Revolving Credit following the
occurrence and during the continuance of an Event of Default under Sections
10.10 or 10.11; and
16.5 Actions Requiring SwingLine Lender Consent.
----------------------------------------------
No action under, amendment of, or waiver of compliance with, any
provision of this Agreement or any of the other Loan Documents which affects the
SwingLine Lender may be undertaken without the Consent of the SwingLine Lender.
16.6 Tranche B Lender Consent.
-------------------------
Notwithstanding the foregoing provisions of this Article
XVI for so long as the Tranche B Commitment remains in effect or any of the
Tranche B Debt remains outstanding, no modification, amendment or waiver
(including any modification, amendment or waiver of any related defined terms)
shall without the Consent of the Tranche B Lender (a) change the terms and
conditions of the Tranche B Loan or the Tranche B Fees, or forgive all or any
portion thereof, (b) waive any Borrowing Base Default or Tranche B Payment
Default or change the Tranche B Lender's acceleration rights under Article XIV
or rights to the proceeds of any Liquidation under Article XIV, (c) change the
Tranche B Lender's reporting or monitoring rights, or the conditions to
assignment of the Tranche B Loan, (d) change the minimum Availability amounts
required to effect any Permitted Repurchase or Bond Retirement under Section
4.20(b), (e) permit a Permissible Overloan to be outstanding for more than sixty
(60) consecutive Business Days or more than twice in any twelve (12) month
period, (f) accelerate the scheduled dates of principal or interest payments, or
the maturity of the Revolving Credit Loans(other than in connection with an
acceleration of the Loans following an Event of Default), (g) increase the
Eurodollar Margin or Base Margin applicable to the Revolving Credit Loans
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(other than an increase to the default rate in accordance with the Loan
Agreement) by more than one percent (1%) per annum; provided that in any event
any increase in such rate shall result in an equal increase in the rate of
interest applicable to the Tranche B Loan, or (h) increase ____ the fees payable
for the account of the Tranche A Lenders from those in effect on the Closing
Date, or require payment of any amendment or similar fee, unless (in either
case) the Tranche B Lender is paid its Pro Rata portion thereof.
16.7 Actions Requiring Agent's Consent.
---------------------------------
(a) ______ No action under, amendment of, or waiver of compliance
with, any provision of this Agreement or any of the other Loan Documents which
affects the Agent in its capacity as an Agent may be undertaken without the
consent of the Agent; and
(b) ______ No action referenced herein which affects the rights,
duties, obligations or liabilities of the Agent shall be effective without the
written consent of the Agent.
16.8 Miscellaneous Actions.
---------------------
(a) ______ Notwithstanding any other provision of this Agreement,
no single Lender independently shall exercise any right of action or enforcement
against or with respect to the Borrowers.
(b) ______ The Agent shall be fully justified in failing or
refusing to take action under this Agreement or any other Loan Document on
behalf of any Lender unless the Agent shall first
(i) Receive such clear, unambiguous, written
instructions as the Agent deems appropriate; and
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(ii) _____ Be indemnified to the Agent's satisfaction by
the Lenders against any and all liability and expense which may be
incurred by the Agent by reason of taking or continuing to take any such
action, unless such action had been grossly negligent, or in bad faith
or shall constitute willful misconduct.
(c) ______ The Agent may establish reasonable procedures for the
providing of direction and instructions from the Lenders to the Agent, including
the Agent's reliance on multiple counterparts, facsimile transmissions, and time
limits within which such direction and instructions must be received in order to
be included in a determination of whether the requisite Commitment Percentage of
Lenders has provided its direction or instructions.
16.9 Nonconsenting Tranche A Lenders.
-------------------------------
(a) ______ In the event that a Tranche A Lender (in this Section
16.9, a "NONCONSENTING TRANCHE A LENDER") does not provide its Consent to a
proposal by the Agent to take action which requires consent under this Article
XVI, then one or more Tranche A Lenders who provided Consent to such action may
require the assignment, without recourse and in accordance with the procedures
outlined in Section 17.1, of the NonConsenting Tranche A Lender's Commitment on
fifteen (15) days written notice to the Agent and to the NonConsenting Tranche A
Lender.
(b) ______ At the end of such fifteen (15) days, the Tranche A
Lenders who have given such written notice shall Transfer the following to the
NonConsenting Tranche A Lender, but only if the NonConsenting Tranche A Lender
delivers to the Agent the Revolving Credit Note held by the NonConsenting
Tranche A Lender:
(i) Such NonConsenting Tranche A Lender's Pro-Rata
share of the principal and interest of the Revolving Credit Loans.
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(ii) All fees due to the NonConsenting Tranche A
Lender to the date of such assignment.
(iii) ____ Any out-of-pocket costs and expenses for which
the NonConsenting Tranche A Lender is entitled to reimbursement from the
Borrowers.
(c) ______ In the event that the NonConsenting Tranche A Lender
fails to deliver to the Agent the Revolving Credit Note held by the
NonConsenting Tranche A Lender as provided in Section 16.9(b), then:
(i) ______ The amount otherwise to be Transferred to the
NonConsenting Tranche A Lender shall be Transferred to the Agent and
held by the Agent, without interest, to be turned over to the
NonConsenting Tranche A Lender upon delivery of the Revolving Credit
Note held by that NonConsenting Tranche A Lender;
(ii) The Revolving Credit Note held by the
NonConsenting Tranche A Lender shall have no force or effect whatsoever;
(iii) The NonConsenting Tranche A Lender shall cease to
be a "Lender"; and
(iv) _____ The Tranche A Lender(s) which have Transferred
the amount to the Agent as described above shall succeed to all rights
and become subject to all of the obligations of the NonConsenting
Tranche A Lender as "Tranche A Lender".
(d) ______ In the event that more than one (1) Tranche A Lender
wishes to require such assignment, the NonConsenting Tranche A Lender's Tranche
A Commitment shall be divided amongst such Tranche A Lenders, Pro-Rata based
upon their respective Tranche A Commitments, with the Agent coordinating such
transaction.
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(e) ______ The Agent shall coordinate the retirement of the
Revolving Credit Note held by the NonConsenting Tranche A Lender and the
issuance of Revolving Credit Notes to those Tranche A Lenders which "take-out"
such NonConsenting Tranche A Lender, provided, however, that no processing fee
otherwise payable as provided in Section 17.1(c) shall be due under such
circumstances.
ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS 17.1 Assignments and Assumptions by
Lenders.
--------------------------------------
(a) ______ Except as provided herein, each Tranche A Lender (in
this Section 17.1, an "ASSIGNING LENDER") may assign to one or more Eligible
Tranche A Assignees (in this Section 17.1, an "ASSIGNEE LENDER") all or a
portion of such Tranche A Lender's interests, rights and obligations under this
Agreement and the other Loan Documents (including all or a portion of its
Tranche A Commitment) and the same portion of the Revolving Credit Loans at the
time owing to it, and of the Revolving Credit Note held by it, provided that:
(i) ______ The Agent shall have given its prior written
consent to such assignment, which consent shall not be unreasonably
withheld, but need not be given if the proposed assignment would result
in any Assignee Lender's having a Tranche A Dollar Commitment of less
than the "minimum hold" amount specified in Section 17.l(a)(iv).
(ii) _____ If no Event of Default has occurred, such
assignment shall be subject to the consent of the Lead Borrower. Such
consent shall not be unreasonably withheld or delayed and shall be
deemed given if no written objection is received within seven (7) days
of the Lead Borrower's receipt of notice of such proposed assignment.
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(iii) ____ Each such assignment shall be of a constant,
and not a varying, percentage of all the Assigning Lender's rights and
obligations under this Agreement.
(iv) _____ Following the effectiveness of such assignment,
the Assigning Lender's Tranche A Dollar Commitment (if not an assignment
of all of the Assigning Lender's Commitment) shall not be less than $10
Million ($10,000,000.00).
(b) ______ The parties to such assignment shall execute and
deliver to the Agent, for recording in the Register, an Assignment and
Acceptance substantially in the form of EXHIBIT 17.1, annexed hereto (a "Tranche
A ASSIGNMENT AND ACCEPTANCE"):
(c) ______ The Assigning Lender shall deliver to the Agent, with
such Tranche A Assignment and Acceptance, the Revolving Credit Note held by such
Assigning Lender and the Agent's processing fee of $3,000.00 provided, however,
that no such processing fee shall be due where the Assigning Lender is one of
the Lenders at the initial execution of this Agreement.
(d) ______ From and after the effective date specified in an
Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Agent may delay by up to five (5) Business Days after
the delivery of such Assignment and Acceptance):
(i) The Assignee Lender;
(A) Shall be a party to this Agreement and the
other Loan Documents (and to any amendments of this Agreement and the
other Loan Documents) as fully as if the Assignee Lender had executed
each.
(B) Shall have the rights of a Tranche A
Lender hereunder, to the extent of the Tranche A Commitment assigned by
such Assignment and Acceptance.
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(ii) _____ The Assigning Lender shall be released from the
Assigning Lender's obligations under this Agreement and the other Loan
Documents, with the Assignee Lender being released to the extent of the Tranche
A Commitment assigned by such Assignment and Acceptance.
(iii) ____ The Agent shall undertake to obtain and distribute
replacement Revolving Credit Notes to such Assigning Lender and Assignee Lender.
(e) ______ Each party to an Assignment and Acceptance confirms to
and agrees with all parties to this Agreement as to those matters which are set
forth in such Assignment and Acceptance.
(f) ______ The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Revolving Credit Loans and Tranche B Loans hereunder
owing to, the Lenders from time to time. As between the Agent and the Lenders,
the entries in the Register shall be conclusive, in the absence of manifest
error, and the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a "Lender" hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Lenders at any
reasonable time and from time to time upon reasonable prior notice.
(g) ______ The Assigning Lender and Assignee Lender, directly
between themselves, shall make all appropriate adjustments in payments for
periods prior to the effective date of an Assignment and Assumption.
(h) ______ Unless an Event of Default has occurred (in which
event, no consent of the Lead Borrower is required), the Tranche B Commitment
and Tranche B Loan may be assigned in whole or in part at any time by the
Tranche B
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Lender to any Eligible Tranche B Assignee with the prior consent of the Lead
Borrower (not to be unreasonably withheld), which consent will be deemed given
unless the Lead Borrower provides the Agent with written objection not more than
seven (7) days after the Agent shall have given the Lead Borrower notice of such
proposed assignment. In addition, the Agent's prior written consent to such
assignment shall be required, not to be unreasonably withheld. The parties to
such assignment shall execute and deliver to the Agent, an Assignment and
Acceptance substantially in the form of Exhibit 17.2 annexed hereto. The Tranche
B Assigning Lender shall deliver to the Agent with such Assignment and
Acceptance the Tranche B Note held by such Tranche B Lender. Upon written notice
to the Lead Borrower from time to time given by the Agent of any assignment
under this Section 17.2, the Lead Borrower shall execute one or more replacement
Tranche B Notes, on behalf of itself and the other Borrowers reflecting such
assignment, and shall deliver such replacement Tranche B Notes to the Agent
(which promptly thereafter shall cancel and deliver to the Lead Borrower the
Tranche B Notes so replaced), provided, however, that in the event a Tranche B
Note is to be exchanged following its acceleration or the entry of an order for
relief under the Bankruptcy Code with respect to the Borrowers, the Agent, in
lieu of obtaining a replacement Tranche B Note, may issue one or more
certificates confirming the Tranche B Loans. Such change shall be effective from
the effective date specified in such Assignment and Acceptance and any person
added as a Tranche B Lender shall have the rights and privileges of a Tranche B
Lender hereunder thereafter as if such Person had been a signatory to this
Agreement and any other Loan Agreement to which the Tranche B Lender is a
signatory and any Person removed as a Tranche B Lender shall thereafter be
relieved of any obligations or responsibilities of a Tranche B Lender hereunder
and thereunder.
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17.2 Participations.
--------------
Each Lender may sell participations to one or more financial
institutions in all or a portion of such Lender's rights and obligations under
the Loan Agreement, provided that no such participation shall include any
provision which accords the Person purchasing such participation the right to
consent to any action, amendment, or waiver which is subject to any requirement
herein for approval by all or a requisite number or proportion of the Lenders.
No such sale of a participation shall relieve a Lender from that Lender's
obligations hereunder nor obligate the Agent to any Person other than a Lender.
17.3 Pledges To Federal Reserve Banks.
--------------------------------
Nothing included in this Agreement shall prevent or limit any
Lender, to the extent that such Lender is subject to any of the twelve Federal
Reserve Banks organized under ss.4 of the Federal Reserve Act(12 U.S.C. ss.341),
from pledging all or any portion of that Lender's interest and rights under this
Agreement to any such Federal Reserve Bank, provided, however, that neither such
pledge nor the enforcement thereof shall release the pledging Lender from its
obligations hereunder or under any of the Loan Documents. ARTICLE XVIII - TERM:
18.1 Termination of Revolving Credit.
-------------------------------
The Revolving Credit shall remain in effect(subject to suspension
as provided in Section 2.4(g) hereof) until the Termination Date.
18.2 Effect of Termination.
-----------------------
On the Termination Date, the Borrowers shall pay the Agent
(whether or not then due), in immediately available funds, all then outstanding
Liabilities including, without limitation: the entire balance of the Loan
Account; any accrued and unpaid Line (Unused) Fee, Annual Facility Fee,
Collateral Monitoring Fee, Tranche A Early Termination Fee, Tranche B Early
Termination Fee and any other fees and charges; any payments due on account of
the indemnification obligations included in Section 2.9(e); and all unreimbursed
costs and expenses of the Agent and of each Lender for which the Borrowers are
responsible; and shall make such arrangements
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concerning any L/C's then outstanding as are reasonably satisfactory to the
Agent. Until such payment, all provisions of this Agreement, other than those
contained in Article II which place an obligation on the Agent and any Lender to
make any loans or advances or to provide financial accommodations under the
Revolving Credit or otherwise, shall remain in full force and effect until all
Liabilities shall have been paid in full. The release by the Agent of the
security and other collateral interests granted the Agent by the Borrowers
hereunder may be upon such conditions and indemnifications as the Agent may
reasonably require. ARTICLE XIX - GENERAL:
19.1. Protection of Collateral.
------------------------
The Agent has no duty as to the collection or protection of the
Collateral beyond the safe custody of such of the Collateral as may come into
the possession of the Agent and shall have no duty as to the preservation of
rights against prior parties or any other rights pertaining thereto. The Agent
may include reference to the Borrowers (and may utilize any logo or other
distinctive symbol associated with the Borrowers) in connection with any
advertising, promotion, or marketing undertaken by the Agent with the Lead
Borrower's approval, which approval shall not be unreasonably withheld or
delayed.
19.2. Successors and Assigns. This Agreement shall be binding
upon the Borrowers and the Borrowers' representatives, successors, and assigns
and shall inure to the benefit of the Agent and each Lender and the respective
successors and assigns of each provided, however, no trustee or other fiduciary
appointed with respect to the Borrowers shall have any rights hereunder. In the
event that the Agent or any Lender assigns or transfers its rights under this
Agreement, the assignee shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of such assignor hereunder and such
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assignor shall thereupon be discharged and relieved from its duties and
obligations hereunder.
19.3. Severability.
Any determination that any provision of this Agreement or any
application thereof is invalid, illegal, or unenforceable in any respect in any
instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provision of this Agreement.
19.4. Amendments; Course of Dealing.
-----------------------------
(a) ______ This Agreement and the other Loan Documents
incorporate all discussions and negotiations between the Borrowers and the Agent
and each Lender, either express or implied, concerning the matters included
herein and in such other instruments, any custom, usage, or course of dealings
to the contrary notwithstanding. No such discussions, negotiations, custom,
usage, or course of dealings shall limit, modify, or otherwise affect the
provisions thereof. No failure by the Agent or any Lender to give notice to the
Borrowers of the Borrowers' having failed to observe and comply with any
warranty or covenant included in any Loan Document shall constitute a waiver of
such warranty or covenant or the amendment of the subject Loan Document. No
change made by the Agent in the manner by which Availability is determined shall
obligate the Agent to continue to determine Availability in that manner.
(b) ______ The Borrowers may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Agent shall be in reliance upon all representations
and warranties theretofore made to the Agent by or on behalf of the Borrowers
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(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
(c) ______ The following provisions of this Agreement may be
amended without the consent of the Lead Borrower or any Borrower (a copy of
which amendments shall be provided by the Agent to the Lead Borrower):
Article Relates To
------- ----------
13: _________________ Revolving Credit Fundings
and Distributions
15 (other than 15.10 with respect The Agent to required notices to and
consents of Lead Borrower):
17 (other than 17.1(a)(ii), 17.2 Assignments and Participations and
17.3 with respect to required notices to and consents of Lead
Borrower):
19.5. Power of Attorney.
------------------
In connection with all powers of attorney included in this
Agreement, each Borrower hereby grants unto the Agent full power (exercisable
after and during the occurrence of an Event of Default) to do any and all things
necessary or appropriate in connection with the exercise of such powers as fully
and effectually as the Borrowers might or could do, hereby
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ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Borrowers and each shall survive
the same. All powers conferred upon the Agent by this Agreement, being coupled
with an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Agent.
19.6. Application of Proceeds.
-----------------------
The proceeds of any collection, sale, or disposition of the
Collateral, or of any other payments received hereunder, shall be applied
towards the Liabilities in such order and manner as the Agent determines in its
sole discretion (subject, as between the Agent and the Lenders, to Section
14.7). The Borrowers shall remain liable for any deficiency remaining following
such application.
19.7. Costs and Expenses of Agent and Of Lenders.
------------------------------------------
(a) ______ The Borrowers shall pay on demand all Costs of
Collection and all reasonable expenses of the Agent and Tranche B Lender in
connection with the preparation, execution, and delivery of this Agreement and
of any other Loan Documents, whether now existing or hereafter arising, and all
other reasonable expenses which may be incurred by the Agent and Tranche B
Lender in preparing or amending this Agreement and all other agreements,
instruments, and documents related thereto, or otherwise incurred with respect
to the Liabilities, and all costs and expenses of the Agent which relate to the
credit facility contemplated hereby.
(b) ______ The Borrowers shall pay on demand all costs and
expenses (including reasonable attorneys' fees) incurred, following the
occurrence of any Event of Default, by each Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as any such costs and expenses
in connection with any
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"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) ______ The Borrowers authorize the Agent to pay all such fees
and expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) ______ The undertaking on the part of the Borrowers in this
Section 19.7 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrowers, other
than a termination, release, or discharge which given because all Liabilities
had been paid in full.
19.8. Copies and Facsimiles.
----------------------
This Agreement and all documents which relate thereto, which have
been or may be hereinafter furnished the Agent or any Lender may be reproduced
by such Lender or by the Agent by any photographic, microfilm, xerographic,
digital imaging, or other process, and any document so reproduced may be
destroyed. Any such reproduction shall be admissible in evidence as the original
itself in _____ any ____ judicial ____ or administrative ____ proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.
19.9. New York Law.
------------
Pursuant to Section 5-1401 of the New York General Obligations
Law, this Agreement and all rights and obligations hereunder, including matters
of construction, validity, and performance, shall be governed by the laws of the
State of New York.
19.10 Consent to Jurisdiction.
-----------------------
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(a) _______ Pursuant to Section 5-1402 of the New York General
Obligations Law, the Borrowers agree that any legal action, proceeding, case, or
controversy against any Borrower with respect to any Loan Document may be
brought in the New York State courts and the United State District Court sitting
in Manhattan, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, each Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) ______ To the extent permitted by applicable law, each
Borrower WAIVES personal service of any and all process upon it, and irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by certified
mail, postage prepaid, to the Lead Borrower at the Lead Borrower's address for
notices as specified herein, such service to become effective five (5) Business
Days after such mailing.
(c) ______ Each Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) ______ Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other court of competent jurisdiction.
(e) ______ Each Borrower agrees that any action commenced by that
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in New York
City and that such Courts shall have exclusive jurisdiction with respect to any
such action.
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19.11. Indemnification.
---------------
The Borrowers shall indemnify, defend, and hold the Agent and
each Lender and ____ any Participant and any employee, officer, or agent of any
of the foregoing (each, an "INDEMNIFIED PERSON") harmless of and from any claim
brought or threatened against any Indemnified Person by any Person other than
any Borrower (as well as from reasonable attorneys' fees and expenses in
connection therewith) on account of the relationship of the Borrowers with the
Agent or any Lender (each of claims which may be defended, compromised, settled,
or pursued by the Indemnified Person with counsel of the Lender's selection, but
at the expense of the Borrowers with the understanding that in the absence of an
Event of Default any compromise or settlement shall be with the Lead Borrower's
consent) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Agent and any other Indemnified Person has had
an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith or has engaged in willful misconduct.
This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
Borrowers, other than a termination, release, or discharge which makes specific
reference to this Section 19.11.
19.12. Rules of Construction.
---------------------
The following rules of construction shall be applied in the
interpretation, construction, and enforcement of this Agreement and of the other
Loan Documents:
(a) Words in the singular include the plural and words in
the plural include the singular.
(b) Each representation, warranty, covenant, and undertaking
of the Borrowers in any Loan Document is the joint and several representation,
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warranty, covenant, and undertaking of all of the Borrowers unless such
representation, warranty, covenant or undertaking is made by the Lead Borrower
alone or by any other specific Borrowers.
(c) ______ Titles, headings (indicated by being underlined or
shown in SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(d) The words "includes" and "including" are not limiting.
(e) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(f) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(g) ______ Text which is shown in italics, shown in BOLD, shown
IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed
to be conspicuous.
(h) The words "may not" are prohibitive and not permissive.
(i) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).
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(j) ______ Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) ______ References to "this Agreement" or to any other Loan
Document are to such instrument as amended to the date on which application of
such reference is being made.
(n) Except as otherwise specifically provided, all
references to time are to Boston time.
(o) In the determination of any notice, grace, or other
period of time prescribed or allowed hereunder:
(i) ______ Unless otherwise provided (I) the day of the
act, event, or default from which the designated period of time begins
to run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on the
relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The word "through" means "to and including".
(p) In the event of any inconsistency between the provisions
of this Agreement and any other Loan Document, the provisions of this Agreement
shall govern and control.
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19.13. Intent.
------
It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
(c) ______ The security interests created by this Agreement
secure all Liabilities under the Loan Documents, whether now existing or
hereafter arising.
(d) ______ Unless otherwise explicitly provided herein, the
Agent's consent to any action of the Borrowers which is prohibited unless such
consent is given may be given or refused by the Agent in its sole discretion and
without reference to Section 2.16 hereof.
19.14. Right of Set-Off.
----------------
Any and all deposits or other sums at any time credited by or due
to any Borrower from the Agents, any Lender, or any participant (a
"PARTICIPANT") in the credit facility contemplated hereby or ____ any from any
Affiliate of the Agent or, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrowers in the possession of
the Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any and
all obligations of the Borrowers to the Agent and each Lender or any Participant
or any such Affiliate and may be applied or set off against the Liabilities and
against such obligations, following the occurrence of an Event of Default and
then only with the consent of, or upon the direction of, the Agent and whether
or not other Collateral is then available to the Agent, any Lender, or any
Participant or any such Affiliate.
19.15. Maximum Interest Rate.
----------------------
Regardless of any provision of any Loan Document, none of the
Agent or any Lender shall be entitled to contract ____ for, charge
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receive, collect, or apply as interest on any Liability, any amount in excess of
the maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."
19.16. Waivers.
-------
(a) ______ The Borrowers (and all guarantors, endorsers, and
sureties of the Liabilities) make each of the waivers included in Section
19.16(b), below, knowingly, voluntarily, and intentionally, and understand that
the Agent and each Lender, in entering into the financial arrangements
contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Borrowers as provided herein, whether not or in the
future, are relying on such waivers.
(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) ______ Except as otherwise specifically required
hereby, notice of non-payment, demand, presentment, protest and all
forms of demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) _____ Except as otherwise specifically required
hereby or by applicable law, the right to notice and/or hearing prior to
the Agent's exercising of the Agent's rights upon default.
(iii) ____ THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
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OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWERS OR ANY OTHER PERSON
AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE
WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) _____ Any defense, counterclaim, set-off, recoupment,
or other basis on which the amount of any Liability, as stated on the
books and records of the Agent or any Lender, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Liability.
(v) Any claim to consequential, special, or punitive
damages.
19.17 Transitional Arrangements.
-------------------------
This Agreement, upon the satisfaction of each of the conditions
set forth in Article III, shall amend, replace and supercede the Loan and
Security Agreement, dated November 30, 1999 as amended (the "Original Loan
Agreement") among FRF, the Tranche A Lenders parties thereto and the Borrowers,
provided that each of the Revolving Loans and L/Cs outstanding under the
Original Loan Agreement shall become Revolving Loans and L/Cs under this
Agreement and all interest, fees and charges payable under the Original Loan
Agreement shall continue in effect and be payable as provided under this
Agreement subject to any change or modification thereto that is provided in this
Agreement. The Borrowers, Agent and Lenders all agree that all Loan Documents in
effect with respect to the Original Loan Agreement (with the exception of the
Notes which are to be reissued in connection with this Agreement) shall continue
in full force and effect with such amendments thereto as may be entered into in
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connection with this Agreement, shall be deemed to be Loan Documents hereunder
and shall be deemed to be amended pursuant hereto to provide that any reference
therein to the Original Loan Agreement shall be deemed to be to this Agreement.
[Remainder of Page Intentionally Left Blank]
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LECHTERS, INC.
("Lead Borrower")
By
Print Name:
Title:
ALL BORROWERS IN EXHIBIT A HERETO
(other than the Lead Borrower)
By
Print Name:
Title:
FLEET RETAIL FINANCE INC.
("Agent")
By
Print Name:
Title:
CONGRESS FINANCIAL CORPORATION
(a "Tranche A Lender")
By
Print Name:
Title:
HELLER FINANCIAL, INC.
(a "Tranche A Lender")
By
Print Name:
Title:
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<PAGE>
LASALLE BUSINESS CREDIT, INC.
-----------------------------
(a "Tranche A Lender")
By
Print Name:
Title:
FLEET RETAIL FINANCE INC.
-------------------------
(a "Tranche A Lender")
By
Print Name:
Title:
BACK BAY CAPITAL FUNDING, LLC
("Tranche B Lender")
By
Print Name:
Title:
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EXHIBIT A
Borrowers
Lechters Alabama, Inc.
Lechters Arizona, Inc.
Lechters Arkansas, Inc.
Lechters California, Inc.
Lechters Colorado, Inc.
Lechters Connecticut, Inc.
Lechters Delaware, Inc.
Lechters Florida, Inc.
Lechters Georgia, Inc.
Lechters Idaho, Inc.
Lechters Illinois, Inc.
Lechters Indiana, Inc.
Lechters Iowa, Inc.
Lechters Kansas, Inc.
Lechters Kentucky, Inc.
Lechters Louisiana, Inc.
Lechters Maine, Inc.
Lechters Baltimore, Inc.
Lechters Holyoke, Inc.
Lechters Michigan, Inc.
Lechters Minnesota, Inc.
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Lechters Mississippi, Inc.
Lechters Missouri, Inc.
Lechters Nebraska, Inc.
Lechters Nevada, Inc.
Lechters New Hampshire, Inc.
Lechters New Jersey, Inc.
Lechters New Mexico, Inc.
Lechters New York, Inc.
Lechters N.Y.C., Inc.
Lechters North Carolina, Inc.
Lechters Ohio, Inc.
Lechters Oklahoma, Inc.
Lechters Oregon, Inc.
Lechters Pennsylvania, Inc.
Lechters Rhode Island, Inc.
Lechters South Carolina, Inc.
Lechters Tennessee, Inc.
Lechters Texas, Inc.
Lechters Utah, Inc.
Lechters Vermont, Inc.
Lechters Springfield, Inc.
Lechters Washington, Inc.
Lechters West Virginia, Inc.
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Lechters Wisconsin, Inc.
Lechters M Street, Inc.
Lechters.com, Inc.
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SCHEDULE B
SCHEDULE OF TRANCHE A LENDERS' COMMITMENTS
<TABLE>
------------------------------ ------------- -----------------------------------
TRANCHE A LENDER TYPE OF DOLLAR COMMITMENT
LOAN COMMITMENT PERCENTAGE
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
<S> <C> <C> <C>
Fleet Retail Finance Inc. Revolving $50,000,000.00 41.6666%
Credit
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
Heller Financial, Inc. Revolving $27,500,000.00 22.91666%
Credit
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
Congress Financial Corporation Revolving $27,500,000.00 22.91666%
Credit
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
LaSalle Business Credit, Inc. Revolving $15,000,000.00 12.50000%
Credit
------------------------------ ------------- ------------------ ---------------
------------------------------ ------------- ------------------ ---------------
TOTAL COMMITMENTS $120,000,000 100%
------------------------------ ------------- ------------------ ---------------
</TABLE>
SCHEDULE OF TRANCHE B LENDER'S COMMITMENT
<TABLE>
------------------------------- ------------ ------------ -----------
<S> <C> <C> <C>
TRANCHE B LENDER TYPE OF DOLLAR COMMITMENT
LOAN COMMITMENT PERCENTAGE
------------------------------- ------------ ------------ ----------
------------------------------- ------------ ------------ ----------
Back Bay Capital Funding LLC Tranche B $10,000,000 100%
------------------------------- ------------ ------------ ----------
</TABLE>
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