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EXHIBIT 10.12
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SIXTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FLEET CAPITAL CORPORATION
THE CIT GROUP/BUSINESS CREDIT, INC.
ADMINISTRATIVE AGENTS
FLEET RETAIL FINANCE INC.
FLEET CAPITAL CORPORATION
COLLATERAL AGENTS
FLEET CAPITAL CORPORATION
AGENT FOR THE
TRANCHE A LENDERS REFERENCED HEREIN
BACK BAY CAPITAL FUNDING, LLC
THE TRANCHE B LENDER
ENHANCED RETAIL FUNDING, LLC
ONE OF THE TRANCHE C LENDERS
GOLDMAN SACHS CREDIT PARTNERS L.P.
ONE OF THE TRANCHE C LENDERS
FLEET ROBERTSON STEPHENS, INC.
THE SYNDICATION AGENT
RESTORATION HARDWARE, INC.
THE LEAD BORROWER
FOR THE BORROWERS REFERENCED HEREIN
SEPTEMBER 27, 2000
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TABLE OF CONTENTS
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ARTICLE I. -- DEFINITIONS....................................................................2
ARTICLE II. -- THE WORKING CAPITAL LOANS....................................................41
2.1 ESTABLISHMENT OF WORKING CAPITAL LOANS..............................................41
2.2 ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS)....................................45
2.3 RISKS OF VALUE OF COLLATERAL........................................................45
2.4 COMMITMENT TO MAKE TRANCHE A LOANS AND SUPPORT LETTERS OF CREDIT....................45
2.5 TRANCHE A LOAN REQUESTS.............................................................46
2.6 MAKING OF TRANCHE A LOANS...........................................................48
2.7 SWINGLINE LOANS.....................................................................48
2.8 THE LOAN ACCOUNT....................................................................49
2.9 THE NOTES...........................................................................50
2.10 PAYMENT OF THE WORKING CAPITAL LOANS................................................51
2.11 INTEREST ON WORKING CAPITAL LOANS...................................................55
2.12 INTENTIONALLY LEFT BLANK............................................................58
2.13 COMMITMENT FEES; TRANCHE B ANNIVERSARY FEE; TRANCHE C ANNIVERSARY FEE...............58
2.14 ADMINISTRATIVE AGENT'S FEE..........................................................59
2.15 MONITORING FEE......................................................................59
2.16 UNUSED LINE FEE.....................................................................59
2.17 EARLY TERMINATION FEES..............................................................60
2.18 CONCERNING FEES.....................................................................60
2.19 DISCRETION OF AGENTS AND LENDERS....................................................60
2.20 PROCEDURES FOR ISSUANCE OF L/C'S....................................................61
2.21 FEES FOR L/C'S......................................................................62
2.22 CONCERNING L/C'S....................................................................64
2.23 CHANGED CIRCUMSTANCES...............................................................65
2.24 LENDERS' COMMITMENTS................................................................67
2.25 DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT....................................68
ARTICLE III. -- CONDITIONS PRECEDENT........................................................69
3.1 CORPORATE DUE DILIGENCE.............................................................69
3.2 OPINION.............................................................................69
3.3 OFFICERS' CERTIFICATES..............................................................69
3.4 ADDITIONAL DOCUMENTS................................................................70
3.5 REPRESENTATIONS AND WARRANTIES......................................................70
3.6 MINIMUM DAY ONE AVAILABILITY........................................................71
3.7 ALL FEES AND EXPENSES PAID..........................................................71
3.8 NO SUSPENSION EVENT.................................................................71
3.9 NO ADVERSE CHANGE...................................................................71
3.10 ACCOUNTS PAYABLES...................................................................71
3.11 DUE DILIGENCE.......................................................................71
3.12 LEGAL DUE DILIGENCE.................................................................72
3.13 CLOSING DATE........................................................................72
ARTICLE IV. -- GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES............................72
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4.1 PAYMENT AND PERFORMANCE OF
LIABILITIES.................................................................................72
4.2 DUE ORGANIZATION. CORPORATE AUTHORIZATION. NO CONFLICTS.............................72
4.3 TRADE NAMES.........................................................................74
4.4 INFRASTRUCTURE......................................................................74
4.5 INTENTIONALLY DELETED...............................................................75
4.6 LOCATIONS...........................................................................75
4.7 TITLE TO ASSETS.....................................................................77
4.8 INDEBTEDNESS........................................................................77
4.9 INSURANCE...........................................................................78
4.10 LICENSES............................................................................79
4.11 LEASES..............................................................................79
4.12 REQUIREMENTS OF LAW.................................................................80
4.13 LABOR RELATIONS.....................................................................80
4.14 MAINTAIN PROPERTIES.................................................................81
4.15 TAXES...............................................................................82
4.16 NO MARGIN STOCK.....................................................................83
4.17 ERISA...............................................................................83
4.18 HAZARDOUS MATERIALS.................................................................84
4.19 LITIGATION..........................................................................85
4.20 DIVIDENDS; INVESTMENTS; CORPORATE ACTION............................................85
4.21 LOANS...............................................................................85
4.22 PROTECTION OF ASSETS................................................................86
4.23 LINE OF BUSINESS....................................................................86
4.24 AFFILIATE TRANSACTIONS..............................................................86
4.25 FURTHER ASSURANCES..................................................................87
4.26 ADEQUACY OF DISCLOSURE..............................................................87
4.27 NO RESTRICTIONS ON LIABILITIES......................................................88
4.28 OTHER COVENANTS.....................................................................88
ARTICLE V. -- FINANCIAL REPORTING AND PERFORMANCE COVENANTS.................................88
5.1 MAINTAIN RECORDS....................................................................88
5.2 ACCESS TO RECORDS...................................................................89
5.3 IMMEDIATE NOTICE TO AGENTS..........................................................90
5.4 BORROWING BASE CERTIFICATE..........................................................91
5.5 WEEKLY REPORTS......................................................................92
5.6 MONTHLY REPORTS.....................................................................92
5.7 QUARTERLY REPORTS...................................................................93
5.8 ANNUAL REPORTS......................................................................94
5.9 OFFICERS' CERTIFICATES..............................................................95
5.10 INVENTORIES, APPRAISALS, AND AUDITS.................................................96
5.11 ADDITIONAL FINANCIAL INFORMATION....................................................97
5.12 FINANCIAL PERFORMANCE COVENANTS.....................................................98
ARTICLE VI. -- USE AND COLLECTION OF COLLATERAL............................................100
6.1 USE OF INVENTORY COLLATERAL........................................................100
6.2 INVENTORY QUALITY..................................................................100
6.3 ADJUSTMENTS AND ALLOWANCES.........................................................100
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6.4 VALIDITY OF ACCOUNTS.................................................................100
6.5 NOTIFICATION TO ACCOUNT DEBTORS......................................................100
ARTICLE VII. -- CASH MANAGEMENT; PAYMENT OF LIABILITIES......................................101
7.1 DEPOSITORY ACCOUNTS..................................................................101
7.2 CREDIT CARD RECEIPTS.................................................................102
7.3 THE CONCENTRATION, BLOCKED, AND DISBURSEMENT ACCOUNTS................................103
7.4 PROCEEDS AND COLLECTION OF ACCOUNTS..................................................103
7.5 PAYMENT OF LIABILITIES...............................................................104
7.6 THE DISBURSEMENT ACCOUNT.............................................................105
ARTICLE VIII. -- GRANT OF SECURITY INTEREST..................................................106
8.1 GRANT OF SECURITY INTEREST...........................................................106
8.2 EXTENT AND DURATION OF SECURITY INTEREST.............................................107
ARTICLE IX. -- COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT...............................107
9.1 APPOINTMENT AS ATTORNEY-IN-FACT......................................................107
9.2 NO OBLIGATION TO ACT.................................................................108
ARTICLE X. -- EVENTS OF DEFAULT..............................................................108
10.1 FAILURE TO PAY WORKING CAPITAL LOANS.................................................109
10.2 FAILURE TO MAKE OTHER PAYMENTS.......................................................109
10.3 FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD)...........................109
10.4 FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD)..............................109
10.5 MISREPRESENTATION.....................................................................110
10.6 ACCELERATION OF OTHER DEBT. BREACH OF LEASE..........................................110
10.7 DEFAULT UNDER OTHER AGREEMENTS.......................................................110
10.8 UNINSURED CASUALTY LOSS..............................................................111
10.9 ATTACHMENT; JUDGMENT; RESTRAINT OF BUSINESS..........................................111
10.10 BUSINESS FAILURE.....................................................................111
10.11 BANKRUPTCY...........................................................................112
10.12 INDICTMENT -- FORFEITURE.............................................................112
10.13 CHALLENGE TO LOAN DOCUMENTS..........................................................112
10.14 KEY MANAGEMENT.......................................................................113
10.15 CHANGE IN CONTROL....................................................................113
ARTICLE XI. -- RIGHTS AND REMEDIES UPON DEFAULT..............................................113
11.1 RIGHTS OF ENFORCEMENT................................................................113
11.2 SALE OF COLLATERAL...................................................................114
11.3 OCCUPATION OF BUSINESS LOCATION......................................................115
11.4 GRANT OF NONEXCLUSIVE LICENSE........................................................115
11.5 ASSEMBLY OF COLLATERAL...............................................................116
11.6 RIGHTS AND REMEDIES..................................................................116
ARTICLE XII. -- TRANCHE A FUNDINGS AND DISTRIBUTIONS.........................................116
12.1 TRANCHE A FUNDING PROCEDURES.........................................................116
12.2 SWINGLINE LOANS......................................................................117
12.3 ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS..........................................118
12.4 ORDINARY COURSE DISTRIBUTIONS........................................................120
ARTICLE XIII. -- ACCELERATION................................................................123
13.1 ACCELERATION NOTICE BY ADMINISTRATIVE AGENT..........................................123
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13.2 ACCELERATION NOTICE BY SUPERMAJORITY LENDERS.........................................123
13.3 ACCELERATION NOTICE BY THE TRANCHE B LENDER..........................................123
13.4 ACCELERATION RIGHT OF TRANCHE B LENDER...............................................123
13.5 ACCELERATION NOTICE BY THE TRANCHE C LENDER..........................................124
13.6 ACCELERATION RIGHT OF TRANCHE C LENDER...............................................124
ARTICLE XIV. -- LIQUIDATIONS.................................................................125
14.1 ACCELERATION..........................................................................125
14.2 INITIATION OF LIQUIDATION............................................................125
14.3 ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION..................................125
14.4 COLLATERAL AGENT'S CONDUCT OF LIQUIDATION............................................126
14.5 DISTRIBUTION OF LIQUIDATION PROCEEDS.................................................127
14.6 RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION.......................................127
ARTICLE XV. -- THE AGENTS....................................................................130
15.1 APPOINTMENT OF AGENT.................................................................130
15.2 RESPONSIBILITIES OF AGENTS...........................................................131
15.3 DISTRIBUTIONS BY THE AGENT...........................................................132
15.4 DISPUTE RESOLUTION...................................................................133
15.5 DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS............................................133
15.6 CONFIDENTIAL INFORMATION.............................................................134
15.7 RELIANCE BY AGENT....................................................................134
15.8 NON-RELIANCE ON AGENTS AND OTHER LENDERS.............................................135
15.9 INDEMNIFICATION.......................................................................136
15.10 RESIGNATIONS OF AGENTS...............................................................136
ARTICLE XVI. -- ACTION BY AGENTS -- CONSENTS -- AMENDMENTS -- WAIVERS........................137
16.1 ADMINISTRATION OF CREDIT FACILITIES..................................................137
16.2 ACTIONS REQUIRING MAJORITY CONSENT...................................................139
16.3 ACTIONS REQUIRING COMBINED MAJORITY CONSENT PLUS.....................................139
16.4 ACTIONS REQUIRING SUPERMAJORITY LENDER CONSENT.......................................139
16.5 ACTIONS REQUIRING COMBINED SUPERMAJORITY CONSENT PLUS................................140
16.6 ACTIONS REQUIRING UNANIMOUS TRANCHE A CONSENT........................................141
16.7 ACTIONS REQUIRING OR DIRECTED BY COMBINED UNANIMOUS CONSENT..........................141
16.8 ACTIONS REQUIRING TRANCHE B CONSENT.................................................143
16.9 ACTIONS REQUIRING TRANCHE C CONSENT.................................................143
16.10 INTENTIONALLY LEFT BLANK.............................................................144
16.11 ACTIONS REQUIRING SUPERMAJORITY CONSENT, TRANCHE B CONSENT AND TRANCHE C CONSENT.....145
16.12 ACTIONS REQUIRING SWINGLINE LENDER CONSENT...........................................145
16.13 ACTIONS REQUIRING AGENTS' CONSENT....................................................145
16.14 MISCELLANEOUS ACTIONS................................................................145
16.15 NONCONSENTING TRANCHE A LENDER.......................................................146
ARTICLE XVII. -- ASSIGNMENT BY LENDERS.......................................................147
17.1 ASSIGNMENTS AND ASSUMPTIONS..........................................................147
17.2 ASSIGNMENT PROCEDURES................................................................148
17.3 EFFECT OF ASSIGNMENT.................................................................149
ARTICLE XVIII. -- NOTICES....................................................................150
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18.1 NOTICE ADDRESSES...................................................................150
18.2 NOTICE GIVEN.......................................................................152
ARTICLE XIX. -- TERM.......................................................................153
19.1 TERMINATION OF TRANCHE A REVOLVING CREDIT..........................................153
19.2 ACTIONS ON TERMINATION.............................................................153
ARTICLE XX. -- GENERAL.....................................................................153
20.1 PROTECTION OF COLLATERAL...........................................................153
20.2 PUBLICITY..........................................................................154
20.3 SUCCESSORS AND ASSIGNS.............................................................154
20.4 SEVERABILITY.......................................................................154
20.5 AMENDMENTS; COURSE OF DEALING......................................................154
20.6 POWER OF ATTORNEY..................................................................155
20.7 APPLICATION OF PROCEEDS............................................................155
20.8 INCREASED COSTS....................................................................156
20.9 COSTS AND EXPENSES OF THE AGENT....................................................156
20.10 COPIES AND FACSIMILES..............................................................157
20.11 MASSACHUSETTS LAW..................................................................158
20.12 CONSENT TO JURISDICTION............................................................158
20.13 INDEMNIFICATION....................................................................158
20.14 RULES OF CONSTRUCTION..............................................................159
20.15 INTENT.............................................................................161
20.16 PARTICIPATIONS.....................................................................161
20.17 RIGHT OF SET-OFF...................................................................162
20.18 PLEDGES TO FEDERAL RESERVE BANKS...................................................162
20.19 MAXIMUM INTEREST RATE..............................................................162
20.20 WAIVERS............................................................................162
20.21 THE BUYOUT.........................................................................164
20.22 COUNTERPARTS.......................................................................165
20.23 AMENDMENT AND RESTATEMENT..........................................................165
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EXHIBITS
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2.7 : SwingLine Note
2.9(b): Tranche B Note
2.9(c): Tranche C Note
2.21 : L/C Fee Schedule
2.24 : Tranche A Lenders' Commitments
4.2 : Affiliates
4.3 : Trade Names
4.6 : Locations, Leases, and Landlords
4.7 : Encumbrances
4.8 : Indebtedness
4.9 : Insurance Policies
4.11 : Capital Leases
4.15 : Taxes
4.19 : Litigation
5.4 : Borrowing Base Certificate
5.9 : Officer's Compliance Certificate
7.1 : DDA's.
7.2 : Credit Card Arrangements
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SIXTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
September 27, 2000
THIS AGREEMENT is made between and among
Fleet Capital Corporation a Rhode Island corporation with offices at
15260 Ventura Boulevard, Suite 400, Sherman Oaks, California 91403, as agent (in
such capacity, herein the "ADMINISTRATIVE AGENT"),for the benefit of the
"TRANCHE A LENDERS" and also itself, a Tranche A Lender, on a Pro Rata basis,
based upon each Tranche A Lender's Tranche A Percentage Commitment, who are, at
present, those financial institutions identified on the signature pages of this
Agreement and who in the future are those Persons (if any) who become a "TRANCHE
A LENDER" in accordance with the provisions of Article XVII below, and as agent
for the benefit of the Tranche B Lender and the Tranche C Lender;
and
The CIT Group/Business Credit, Inc., with offices at 300 South Grand
Avenue, 3rd Fl., Los Angeles, California 90017, in its capacity as the
"CO-ADMINISTRATIVE AGENT" for the Lenders, and the capacity of the
Co-Administrative Agent is solely titular in nature and the Co-Administrative
Agent shall not have any additional rights or obligations under the Loan
Documents by reason of such capacity;
and
Fleet Retail Finance Inc., a Delaware corporation, with offices at 40
Broad Street, Boston, MA 02109 and Fleet Capital Corporation (in such capacity,
herein individually and collectively, the "COLLATERAL AGENT") for the benefit of
the Lenders;
and
Fleet Robertson Stephens, Inc., a Massachusetts corporation with offices
at 100 Federal Street, Boston, Massachusetts 02110, as the "SYNDICATION AGENT"
for the Lenders;
and
Back Bay Funding, LLC, a Delaware limited liability company, with
offices at 40 Broad Street, Boston, MA 02109 (the "TRANCHE B LENDER") and those
Persons who in the future are those Persons (if any) who become a "TRANCHE B
LENDER" in accordance with the provisions of Article XVII, below;
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and
Enhanced Retail Funding, LLC, a Delaware limited liability company, with
offices at 40 Broad Street, Boston, MA 02109 and Goldman Sachs Credit Partners
L.P., with offices at 85 Broad Street, New York, New York, 10004 and those
Persons who in the future are those Persons (if any) who become a "TRANCHE C
LENDER" in accordance with the provisions of Article XVII, below; (collectively,
the "TRANCHE C LENDER", together with the Tranche A Lenders and the Tranche B
Lender, the "LENDERS");
and
Restoration Hardware, Inc., a Delaware corporation as a borrower (the
"LEAD BORROWER" and the "PARENT") and The Michaels Furniture Company, Inc., a
California corporation, also a borrower (individually, a "BORROWER", and,
together with the Lead Borrower, the "BORROWERS"), each of which has its
principal executive offices at 15 Koch Road, Suite J, Court Madera, California
94925
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:
"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 Administrative Agent to the Collateral Agent as
provided in Section 13.1.
(b) From the SuperMajority Lenders, as provided in Section 13.2.
(c) From the Tranche B Lender, as provided in Section 13.3.
(d) From the Tranche C Lender, as provided in Section 13.5.
The Administrative Agent shall provide copies of any Acceleration
Notice to each Lender, as applicable.
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"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as now or hereafter 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; 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.
"ACTUAL/PROJECTED EBITDA PERCENTAGE": As of any determination date, the
quotient of (i) Borrowers' EBITDA for the preceding 12 months
divided by (ii) Borrowers' projected EBITDA for the corresponding
time period.
"ADMINISTRATIVE AGENT": Defined in the Preamble.
"AFFILIATE":
(a) With respect to any two Persons (other than a Subsidiary), a
relationship in which (i) one holds, directly or indirectly, not
less than Five Percent (5%) of the capital stock, beneficial
interests, partnership interests, or other equity interests of
the other; or (ii) 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
(iii) the same third Person holds, directly or indirectly, not
less than Five Percent (5%) 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; or
(b) Any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise which: is a
parent, brother-sister, subsidiary, or affiliate, of any
Borrower; could have such enterprise's tax returns or financial
statements consolidated with the Lead Borrower's; could be a
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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 the
Lead Borrower is a member; controls or is controlled by the Lead
Borrower.
"AGENT": When not preceded by "Administrative" or "Collateral", the term
"Agent" refers collectively and individually to the
Administrative Agent and the Collateral Agent, but not the
Co-Administrative Agent.
"AGENT'S COVER": Defined in Section 12.3(c)(i).
"AGENT'S FEE": Defined in Section 2.14.
"AGENT FEE LETTER": That certain letter of even date by and between the
Administrative Agent and the Lead Borrower.
"AGENT'S RIGHTS AND REMEDIES": Defined in Section 11.6.
"AGREEMENT": This Sixth Amended and Restated Loan and Security
Agreement, and it may be modified, amended, supplemented or
restated from time to time.
"APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Cost of
Eligible Inventory (net of Inventory Reserves) multiplied by (b)
that percentage, determined from the then most recent appraisal
of the Borrowers' Inventory undertaken at the request of the
Collateral Agent, to reflect the appraiser's estimate of the net
realization on the Liquidation of the Cost of the Borrowers'
Inventory.
"ASSIGNING LENDER": Defined in Section 17.1(a).
"ASSIGNMENT AND ACCEPTANCE": Defined in Section 17.2(a).
"AUTHORIZED OFFICER": The Lead Borrower's President, Treasurer, Chief
Financial Officer, or Chief Administrative Officer duly
authorized by the Lead Borrower's Board of Directors, or, in the
case of Borrowing Base Certificates, such person as is authorized
by the Board of Directors of the Lead Borrower.
"AVAILABILITY": Defined in Section 2.1(e).
"AVAILABILITY RESERVES": Such reserves as the Collateral Agent from time
to time determines in the Collateral Agent's reasonable
discretion as being appropriate to
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reflect the impediments to the Collateral 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 (based upon past due rent and/or whether or not a
Landlord's Waiver, acceptable to the Collateral Agent, has been
received by the Collateral Agent)(initially which shall be 2
months rent for each location located in a Landlord State).
(ii) Customer Credit Liabilities (initially which shall be
50% of the amount for such items as reflected on the Borrowers'
stock ledger).
(iii) Past due taxes and other governmental charges,
including ad valorem, personal property, and other taxes which
might have priority over the Collateral Interests of the
Collateral Agent in the Collateral.
(iv) Import Landing Costs (initially which shall be 50% of
such amount as reflected on the Borrowers' stock ledger).
(v) Landing Costs (initially which shall be 50% of 15% of
Eligible Prepaid Inventory).
(vi) Deposits on special orders (initially which shall be
50% of total special order deposit amounts as reflected on the
Borrowers' balance sheet; effective December 1, 2000, such
reserve shall be 100% of total special order deposit amounts as
reflected on the Borrowers' balance sheet.
(vii) Payables (based upon payables which are past the
Borrowers' historical payment terms consistent with past
practices).
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE": The Base 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 Administrative Agent, in
good faith, designates as the functional equivalent to said Base
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 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 365/366-day year and actual days elapsed.
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"BASE MARGIN": As determined pursuant to the applicable section of the
Margin Pricing Grid set forth in Section 2.11(a)(vi).
"BASE MARGIN LOAN": Each Tranche A Loan while bearing interest at the
Base Margin Rate.
"BASE MARGIN RATE": The aggregate of Base plus the Base Margin per
annum.
"BLOCKED ACCOUNT": Any DDA into which the contents of any other DDA is
transferred.
"BLOCKED ACCOUNT AGREEMENT": An agreement, in form satisfactory to the
Collateral Agent, which agreement recognizes the Collateral
Agent's Collateral Interest in the contents of the DDA which is
the subject of such agreement and agrees that such contents shall
be transferred only to the Concentration Account or as otherwise
instructed by the Collateral Agent.
"BORROWERS": Defined in the Preamble.
"BORROWER DEFAULT": Any Borrowing Base Default, Tranche B Payment
Default, or General Default.
"BORROWING BASE": Defined in Section 2.1(f).
"BORROWING BASE CERTIFICATE": Defined in Section 5.4.
"BORROWING BASE DEFAULT": Any failure of the Borrowers to maintain the
unpaid balance of the Loan Account at an amount not in excess of
Borrowing Base for Two (2) consecutive days.
"BUSINESS DAY": Any day (with any references herein to time of day
requirements meaning such times based on Los Angeles time) other
than (a) Saturday or Sunday; (b) any day on which banks in
Boston, Massachusetts or Los Angeles, California are not open to
the general public for the purpose of conducting commercial
banking business; or (c) a day on which the principal office of
the Agent is not open to the general public to conduct business.
"BUSINESS PLAN": The Borrowers' three (3) year forecasted (i)
Consolidated balance sheets, (ii) Consolidated and consolidating
profit and loss statements, (iii)
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Consolidated cash flow statements, and (iv) projected borrowing
base, each broken down by month and all prepared on a consistent
basis with the Borrowers' historical financial statements,
together with appropriate supporting details and a statement of
underlying assumptions and otherwise in form and substance
satisfactory to the Administrative Agent, and any revision,
amendment, or update of such business plan, provided such
revision, amendment, or update has been accepted in writing by
the Administrative Agent.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities which may be capitalized in accordance with GAAP.
"CAPITAL LEASE": Any lease which may be capitalized in accordance with
GAAP.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The failure of the Lead Borrower to own, beneficially and of
record, 100% of the capital stock of all of the other Borrowers
or such lesser amount of Michaels stock as shall occur by reason
of the transfer of voting stock of Michaels to Michael Vermillion
pursuant to the earn out terms in that certain Stock Purchase
Agreement between the Lead Borrower and Michael Vermillion;
(b) The occurrence of any event or circumstance such that the
Lead Borrower does not have the power to elect all directors of
all other Borrowers (other than the sale of stock to Michael
Vermillion per the Stock Purchase Agreement referred to above);
or
(c) The acquisition, by any group of persons (within the meaning
of the Securities Exchange Act of 1934, as amended) or by any
Person, of beneficial ownership (within the meaning of Rule 13d-3
of the SEC), directly or indirectly, of 20% or more of the issued
and outstanding capital stock of the Parent having the right to
vote for the election of directors of the Parent; or
(d) More than one-third 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 which Twelve (12) month
periods commencing with the first day of the month during which
this Agreement was executed), cease, for any reason other than
death or disability, to be
7
<PAGE> 15
directors of the Parent, and the board of directors as thereafter
constituted is not reasonably acceptable to the Administrative
Agent; or
(e) Stephen Gordon ceases for any reason to be actively involved
in the day-to-day management of the Borrowers' business.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"CLOSING DATE": The date on which all the conditions precedent in
Article III of this Agreement are satisfied and the initial
Tranche A Loans, the Tranche B Loan and the Tranche C Loan are
made under this Agreement.
"COLLATERAL": Defined in Section 8.1.
"COLLATERAL AGENT": FRF and FCC.
"COLLATERAL INTEREST": Any interest in property to secure an obligation,
including, without limitation, a security interest, mortgage, and
deed of trust.
"COMBINED A & C COMMITMENTS": The sum of the Tranche A Loan Commitments
and the Tranche C Loan Ceiling (as reduced by any payments made
on account of the principal amount of the Tranche C Debt).
"COMBINED MAJORITY CONSENT PLUS": Consent of the Combined Majority
Lenders Plus.
"COMBINED MAJORITY LENDERS": At any time that any Tranche C Obligations
are outstanding, the Tranche A Lenders (other than Delinquent
Tranche A Lenders) and the Tranche C Lender, together holding 51%
or more of the Combined A & C Commitments. At all other times,
the Majority Lenders.
"COMBINED MAJORITY LENDERS PLUS": At any time that any Tranche C
Obligations are outstanding, the Combined Majority Lenders plus
the Tranche B Lender. At any other time, the Majority Lenders
Plus.
"COMBINED SUPERMAJORITY LENDERS": At any time that any Tranche C
Obligations are outstanding, Tranche A Lenders (other than
Delinquent Tranche A Lenders) and the Tranche C Lender, together
holding 66-2/3% or more the Combined A & C Commitments (other
than Tranche A Loan Commitments held by a Delinquent Tranche A
Lender). At all other times the SuperMajority Lenders.
8
<PAGE> 16
"COMBINED SUPERMAJORITY CONSENT PLUS": Consent of the Combined
SuperMajority Lenders Plus.
"COMBINED SUPERMAJORITY LENDERS PLUS": At any time that any Tranche C
Obligations are outstanding, the Combined SuperMajority Lenders
plus the Tranche B Lender. At any other time, the SuperMajority
Lenders Plus.
"COMBINED UNANIMOUS CONSENT": The Consent of all Tranche A Lenders
(other than Delinquent Tranche A Lenders), the Tranche B Lender
and Tranche C Consent.
"CONCENTRATION ACCOUNT": The deposit account established by the
Administrative Agent over which the Administrative Agent has sole
dominion and control.
"CONSENT": Actual written consent given by a Lender from whom such
consent is sought; or the passage of seven (7) Business Days from
receipt of written notice to a Lender from an Agent of a proposed
course of action to be followed by that Agent without that Agent
having received from such Lender's written notice of that
Lender's objection to such course of action, provided that that
Agent may rely on such passage of time as consent by a Lender
only if that Agent's written notice 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 Subsidiary.
"COST": The lower of
(a) the calculated cost of Inventory purchases, as determined
from invoices received by the Borrowers and reflected in the
Borrowers' 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
9
<PAGE> 17
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 freight and UNICAP) used in
the Borrowers' calculation of cost of goods sold.
"COSTS OF COLLECTION": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by
any Agent's attorneys, and all reasonable costs incurred by any
Agent including, without limitation, reasonable costs and
expenses associated with any bankruptcy or insolvency proceeding
or travel on behalf of any Agent, where such costs and expenses
are directly or indirectly related to or in respect of that
Agent's: administration and management of the Liabilities;
negotiation, documentation, and amendment of any Loan Document;
or efforts to preserve, protect, collect, or enforce the
Collateral, the Liabilities, and/or the Agent's Rights and
Remedies and/or any of the rights and remedies of any Agent
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). "Costs of Collection" shall also
include the reasonable costs and expenses similar to the
foregoing incurred by the Tranche B Lender and Tranche C Lenders
and the reasonable fees and expenses of Lenders' Special Counsel.
The Costs of Collection are Liabilities, and, Costs of Collection
that pertain to the Tranche A Obligations shall bear interest at
the then effective Base Margin Rate, and Costs of Collection that
pertain to the Tranche B Obligations or the Tranche C Obligations
shall bear interest at rate of interest then currently applicable
for Tranche B Loans and Tranche C Loans, respectively.
"CUSTOMER CREDIT LIABILITY": Gift certificates, deposits, merchandise
credits, layaway obligations, frequent shopping programs, and
similar liabilities of any Borrower to its retail customers and
prospective customers.
"DDA": Any checking or other demand depository account maintained by any
of the Borrowers other than an Exempt DDA.
"DELINQUENT TRANCHE A LENDER": Defined in Section 12.3(c).
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
10
<PAGE> 18
"DISBURSEMENT ACCOUNT": Defined in Section 7.3(a)(iii).
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.
"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 properly
deducted in determining earnings in accordance with GAAP, each as
determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE": In the case of an assignment by a Tranche A Lender,
a bank, insurance company, or company engaged in the business of
making commercial loans organized under the laws of the United
States of America, or a commercial bank organized under the laws
of any other country which is a member of the OECD, or a
political subdivision of any such country, provided that such
bank is acting through a branch or agency located in the country
in which it is organized or another country which is also a
member of the OECD, having a combined capital and surplus in
excess of $250,000,000.00, or any Affiliate of any Tranche A
Lender, or any Person to whom a Tranche A Lender assigns its
rights and obligations under this Agreement as part of a
programmed assignment and transfer of such Tranche A Lender's
rights of a material portion of such Tranche A Lender's portfolio
of asset based credit facilities. In the case of an assignment by
a Tranche B Lender or a Tranche C Lender, any Person except, so
long as no Event of Default exists or has occurred and is
continuing, such Person shall not be a competitor of the
Borrowers.
"ELIGIBLE INVENTORY": All of the following:
Such of the Borrowers' Inventory at such locations, and of such
types, character, qualities and quantities, as the Collateral
Agent in its reasonable discretion from time to time determines
to be acceptable Collateral for Borrowing Base purposes, as to
which the Collateral Agent has a perfected security interest that
is prior and superior to all claims and all Encumbrances (other
than Permitted Encumbrances, subject to the Collateral Agent's
right to establish Reserves therefor).
11
<PAGE> 19
"ELIGIBLE IN TRANSIT INVENTORY": That portion of the Lead Borrower's
Inventory (without duplication of Eligible Inventory or Eligible
L/C Inventory) for which the Lead Borrower has paid, title to
which passed to the Lead Borrower, which has been received by the
Lead Borrower or its bailee, and which has been shipped from a
foreign location to the Lead Borrowers' warehouse provided that
(a) Such Inventory is of such types, character, qualities and
quantities as the Collateral Agent in its reasonable discretion
from time to time determines to be Eligible Inventory;
(b) The documents which relate to such shipment name the
Collateral Agent as consignee of the subject Inventory and, if
required by the Collateral Agent, the Collateral Agent has
control over the documents which evidence ownership of the
subject Inventory such as by providing a customs brokers
agreement to the Collateral Agent); and
(c) Such Inventory has not yet been delivered to the Lead
Borrower's warehouse and has been in transit from the applicable
foreign location for no more than 45 calendar days.
"ELIGIBLE L/C INVENTORY": That portion of the Lead Borrower's Inventory
(without duplication of Eligible Inventory and Eligible Prepaid
Inventory) the purchase of which is supported by a documentary
L/C then having an initial expiry of sixty (60) days or less days
provided that
(a) Such Inventory is of such types, character, qualities and
quantities as the Collateral Agent in its reasonable discretion
from time to time determines to be Eligible Inventory;
(b) The documentary L/C which relate to such shipment name the
Collateral Agent as consignee of the subject Inventory and the
Collateral Agent has control over the documents which evidence
ownership of the subject Inventory such as by providing a customs
brokers agreement to the Collateral Agent); and
(c) Such Inventory has not yet been delivered to the Lead
Borrower's warehouse and has been in transit from the applicable
foreign location for no more than 45 calendar days.
"ELIGIBLE PREPAID INVENTORY": That portion of the Lead Borrower's
Inventory which consists of Eligible In Transit Inventory and
Eligible L/C Inventory.
12
<PAGE> 20
Eligible Prepaid Inventory shall not include the following:
(i) Landed Inventory.
(ii) From and after twenty-eight (28) days of the
Closing Date, Eligible In Transit Inventory.
"ELIGIBLE RECEIVABLES": Such of Michaels Accounts and accounts
receivable as arise in the ordinary course of Michaels business
for goods sold and/or services rendered by Michaels, which
Accounts and accounts receivable have been reasonably determined
by the Collateral Agent to be satisfactory and have been earned
by performance and are owed to Michaels by such of Michaels trade
customers as the Collateral Agent determines to be satisfactory,
in the Collateral Agent's reasonable discretion in each instance.
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing);
the interest of a lessor under a Capital Lease;
conditional sale or other title retention agreement; sale
of Accounts or Chattel Paper; or other arrangement
pursuant to which any Person is entitled to any preference
or priority with respect to the property or assets of
another Person or the income or profits of such other
Person or which constitutes an interest in property to
secure an obligation; each of the foregoing whether
consensual or non-consensual and 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
indefeasibly 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.
13
<PAGE> 21
"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.
(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 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 which is under common control with the
Borrowers within the meaning of Section 4001 of ERISA or is part
of a group including the Borrowers or the Parent and which would
be treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended.
"EVENTS OF DEFAULT": Defined in Article X. Each reference to an "Event
of Default" is to an Event of Default that has not been duly
waived by the requisite Lenders or by the Administrative Agent as
applicable. In the event of such due waiver, the so-waived Event
of Default shall be deemed never to have occurred, other than
with respect to any post-default interest which accrued prior to
such waiver and with respect to any reimbursement obligation in
respect of any Costs of Collection.
"EXEMPT DDA": A depository account maintained by any Borrower, the only
contents of which may be transfers from the Disbursement Account
and actually used solely for payroll of the Borrowers.
"EXTENDED BORROWING BASE DEFAULT": Any failure of the Borrowers to
maintain the unpaid balance of the Loan Account at an amount not
in excess of the Borrowing
14
<PAGE> 22
Base for Sixty (60) consecutive days due to the existence of Permissible
Overloans.
"FCC": Fleet Capital Corporation, and its successors and assigns.
"FEBRUARY 2000 AGREEMENT": Defined in Section 20.22.
"FEDERAL FUNDS EFFECTIVE RATE": For any day, a fluctuating per annum
interest rate equal to the weighted average of the rates on
overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on
that date (or on the then next succeeding Business Day, if not
one) by the Federal Reserve Bank of New York, provided that if
such a rate is not so published for a day which is a Business
Day, Federal Funds Effective Rate shall be the average of
quotations for such day on such transactions received by the
Agent from three federal funds brokers of recognized standing
selected by the Agent.
"FISCAL YEAR 2000": Defined in Section 5.12(b)(i).
"FISCAL YEAR 2001": Defined in Section 5.12(b)(ii).
"FIXTURES": Has the meaning given that term in the UCC.
"FRF": Fleet Retail Finance Inc., and its successors and assigns.
"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 that
accounting period in respect of which reference to GAAP is being
made, provided, however, in the event of a Material Accounting
Change, then unless otherwise specifically agreed to by the
Administrative Agent, (a) the Lead Borrower's compliance with the
financial performance covenants imposed pursuant to Section 5.12
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 to the statement with which
provided shall be described.
"GENERAL DEFAULT": The occurrence of any Event of Default, other than
any Event of Default which also constitutes a Borrowing Base
Default, an Extended Borrowing Base Default or a Tranche C
Payment Default.
15
<PAGE> 23
"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
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), computer records, computer software, rights of access
to computer record service bureaus, service bureau computer
contracts, and computer data; tapes, disks, semi-conductors chips
and printouts; trade secrets rights, 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, applications for registration of the
foregoing; and all other intangible property of the Borrowers in
the nature of intellectual property; proposals; cost 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.
"GROSS MARGIN": With respect to the subject accounting period for which
being calculated, the decimal equivalent of the following
(determined in accordance with the cost method of accounting):
16
<PAGE> 24
Sales (Minus) Cost of Goods Sold
--------------------------------
Sales
"GUARANTOR": Restoration Hardware Canada, Incorporated.
"GUARANTY": That certain Guaranty executed by Guarantor of even date
herewith.
"GUARANTOR SECURITY DOCUMENTS": That certain pledge executed by the Lead
Borrower whereby it pledges at least 66.66% of the voting capital
stock of the Guarantor and such other documents as the Collateral
Agent may require in order for the Collateral Agent to be granted
a first priority lien, charge and security interest in all assets
of the Guarantor, provided that the granting and perfection of
such lien, charge, and security interest does not cause the Lead
Borrower or any Subsidiary to incur significant adverse tax
consequences.
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products, which (as to
any of the foregoing) are defined or regulated as a hazardous
material in or under any Environmental Law and (b) oil in any
physical state.
"IMPORTLANDING COSTS": To the extent not included in the Stated Amount
of an L/C, Landing Costs for Inventory, the purchase of which is
supported by such L/C, or customs, duty, freight, and other
out-of-pocket costs and expenses which will be expended to "land"
in transit Inventory and which is not included in invoices for
prepaid Inventory.
"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 money
(whether or not such obligations are convertible into
equity);
(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
amount for which such Person would be
17
<PAGE> 25
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 the sale
or discount of Accounts 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;
(f) In connection with any sale and leaseback transaction.
"INDEBTEDNESS" also includes:
(a) Indebtedness of others secured by an Encumbrance on
any asset of such Person, whether or not such Indebtedness
is assumed by such Person.
(b) Any guaranty, endorsement, suretyship or other
undertaking pursuant to which that Person may be liable on
account of any obligation of any third party.
(c) The Indebtedness of a partnership or joint venture in
which such Person is a general partner or joint venturer.
"INDEMNIFIED PERSON": Defined in Section 20.13.
"INDEX BUSINESS DAY": Any day which is both a Business Day and a day on
which the principal market in Libor deposits in London in which
Fleet National Bank or its successors participate is open for
dealings in United States Dollar deposits.
"INDEX LOAN": Any Tranche A Loan which bears interest at a Index Rate.
"INDEX MARGIN": As determined pursuant to the applicable section of the
Margin Pricing Grid set forth in Section 2.11(a)(vi), for loans
initiated on or after the date when so set, that is to say Index
contracts in effect at the time of increases/decreases in margin
will remain in effect at the margin originally utilized when the
contract was opened. The margin in effect at a given time will
apply to contracts opened at that time, and shall be based upon
the Margin Pricing Grid.
18
<PAGE> 26
"INDEX OFFER RATE": With respect to any Index Loan, the rate of interest
(rounded upwards, if necessary, to the next 1/100 of 1%)
determined by the Administrative Agent to be the highest
prevailing rate per annum at which deposits on U.S. Dollars are
offered to Fleet National Bank, by first-class banks in the
London interbank market in which Fleet National Bank participates
at or about 10:00AM (California Time) two (2) Index Business Days
before the first day of the Interest Period for the subject Index
Loan, for a deposit approximately in the amount of the subject
loan for a period of time approximately equal to such Interest
Period.
"INDEX RATE": That per annum rate (calculated on a 360-day year and
actual days elapsed) equal to the Index Offer Rate plus the Index
Margin except that, in the event that the Administrative Agent
determines that any Tranche A Lender may be subject to the
Reserve Percentage, the "Index Rate" shall mean, with respect to
any Index Loans then outstanding (from the date on which that
Reserve Percentage first became applicable to such loans), and
with respect to all Index Loans thereafter made, an interest rate
per annum equal the sum of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
Index Offer Rate
----------------
1 minus Reserve Percentage
(b) is the applicable Index Margin.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
(a) Each Index Loan: (i) having an Interest Period of one,
two, or three months, the last day of the Interest Period
relating thereto, the Termination Date and the End Date;
(ii) having an Interest Period of six 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.
(b) Each Base Margin Loan: the first day of each month;
the Termination Date; and the End Date.
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<PAGE> 27
"INTEREST PERIOD":
(a) With respect to each Index Loan: Subject to Subsection
(b), below, the period commencing on the date of the
making or continuation of, or conversion to, the subject
Index Loan and ending on the day that corresponds
numerically to such date, one, two, three or six months
thereafter, as the Lead Borrower may elect by notice
(pursuant to Section 2.5(b)) to the Administrative Agent.
(b) The setting of Interest Periods is in all instances
subject to the following:
(i) Any Interest Period for a Index Loan which
would otherwise end on a day that is not a Index
Business Day shall be extended to the next
succeeding Index Business Day, unless that
succeeding Index Business Day is in the next
calendar month, in which event such Interest Period
shall end on the last Index 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 Index Loan,
which Interest Period 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 Index Business Day of
the month during which that Interest Period ends.
(iii) Any Interest Period which would otherwise end
after the Revolving Credit Termination Date shall
end on the Revolving Credit Termination Date.
(iv) The Lead Borrower shall not select, renew, or
convert any interest rate for a Tranche A Loan such
that, in addition to interest at the Base Margin
Rate, there are more than six (6) Interest Periods
applicable to Index Loans 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
20
<PAGE> 28
or contracts of sale or service by the Borrowers, or used or
consumed or to be used or consumed in the Borrowers' business;
Goods of said description in transit; returned, repossessed and
rejected Goods of said description; and all Documents (whether or
not negotiable) which represent any of the foregoing.
"INVENTORY ADVANCE RATE": The following percentages during the periods
indicated in the chart below:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
Closing Date -- 72%
December 15, 2000
December 16, 2000 -- 68%
Tranche A Maturity Date
</TABLE>
"INVENTORY APPRAISAL CAP": 85% of the Appraised Inventory Liquidation
Value.
"INVENTORY RESERVES": Such Reserves as may be established from time to
time by the Collateral Agent in the Collateral Agent's reasonable
discretion with respect to the determination of the saleability,
at Retail, of the Eligible Inventory or which reflect such other
factors as affect the market value of the Eligible Inventory.
Without limiting the generality of the foregoing, Inventory
Reserves may include (but are not limited to) reserves based on
the following:
(i) Obsolescence (based upon Inventory on hand
beyond a given number of days).
(ii) Seasonality.
(iii) Shrinkage, which initially shall be the
amount equal to that percentage of actual shrink in
excess of the percentage accrued by the Borrowers.
(iv) Imbalance.
(v) Change in Inventory character.
(vi) Change in Inventory composition.
(vii) Change in Inventory mix.
(viii) Markdowns (both permanent and point of
sale).
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<PAGE> 29
(ix) Retail mark ons and markups inconsistent
with prior period practice and performance;
industry standards; current business plans; or
advertising calendar and planned advertising
events.
(x) Damaged goods.
(xi) Consigned goods.
(xii) Any non-merchandise Inventory (such as
labels, bags, and packaging materials).
(xiii) Return to vendor merchandise.
(xiv) Packaways.
(xv) RAW Inventory (i.e. Inventory delivered to
vendors on a temporary basis for such work as
assembly).
(xvi) Catalogue and photo sample Inventory.
(xvii) Inventory subject to open L/C's.
(xviii) Inventory owned by the Lead Borrower's
Affiliate in Canada.
(xix) Eligible PrePaid Inventory, which initially
shall be the following amounts during the following
periods: (a) 25% of the Cost of Eligible In Transit
Inventory for the period commencing with the 14th
day following the Closing Date and ending on the
21st day following the Closing Date and (b) 50% of
the Cost of Eligible In Transit Inventory for the
period commencing with the 22nd day following the
Closing Date and ending on the 28th day following
the Closing Date.
"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 Encumbrances of the Collateral Agent in the
Collateral.
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"LANDING COSTS": Customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" in transit
Inventory, without duplication of Import Landing Costs.
"LANDED INVENTORY": Eligible Prepaid Inventory that has been received by
the Borrowers at the Borrowers' warehouse or distribution center
located in the United States and recorded in the Borrowers' stock
ledger. For the initial 45 days following the Closing Date,
Eligible Prepaid Inventory shall be deemed Landed Inventory 30
days following the wire transfer payment date for such Inventory.
"L/C": Any letter of credit, the issuance of which is procured by the
Administrative Agent for the account of any Borrower and any
acceptance made on account of such letter of credit.
"LEAD BORROWER": Defined in the Preamble.
"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, the Tranche B Lender, and the Tranche
C Lender, collectively and individually.
"LENDERS' SPECIAL COUNSEL": Includes the following (in addition to
counsel for the Agents):
(a) A single counsel, selected by the Administrative Agent
following the occurrence of an Event of Default, to
represent the interests of the Tranche A Lenders in
connection with the enforcement, attempted enforcement, or
preservation of any rights and remedies under this, or any
other Loan Document, as well as in connection with any
"workout", forbearance, or restructuring of the credit
facility contemplated hereby.
(b) A single counsel, selected by the Tranche B Lender, to
represent the interests of the Tranche B Lender in
connection with the negotiation, drafting, modification,
amendment, restatement, enforcement, attempted
enforcement, or preservation of any rights and remedies
under this, or any
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other Loan Document, as well as in connection with any
"workout", forbearance, or restructuring of the credit
facility contemplated hereby.
(c) A single counsel, selected by the Tranche C Lender, to
represent the interests of the Tranche C Lender in
connection with the negotiation, drafting, modification,
amendment, restatement, enforcement, attempted
enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as in
connection with any "workout", forbearance, or
restructuring of the credit facility contemplated hereby.
"LIABILITIES": Includes, without limitation, the following:
(a) All and each of the following, whether now existing or
hereafter arising under this Agreement or under any of the
other Loan Documents:
(i) Any and all direct and indirect liabilities,
debts, and obligations of the Borrowers to any
Agent or any Lender, each of every kind, nature,
and description.
(ii) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or
amount now or hereafter owing by the Borrowers to
an Agent or any Lender (including all future
advances whether or not made pursuant to a
commitment by an Agent or 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 an Agent or any Lender, may hold against the
Borrowers.
(iii) All notes and other obligations of the
Borrowers now or hereafter assigned to or held by
the Administrative Agent or any Lender, each of
every kind, nature, and description.
(iv) All interest, fees, and charges and other
amounts which may be charged by the Agents or any
Lender, to the Borrowers and/or which may be due
from the Borrowers to the Agents or any Lender,
from time to time.
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(v) All costs and expenses incurred or paid by the
Agents or any Lender, in respect of any agreement
between the Borrowers and any of the Agents or any
Lender, or instrument furnished by the Borrowers to
the any of the Agents or any Lender (including,
without limitation, Costs of Collection, attorneys'
reasonable fees (including reasonable fees and
expenses of Lenders' Special Counsel), and all
court and litigation costs and expenses).
(vi) Any and all covenants of the Borrowers to or
with the Agents 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 Agents or any Lender,
or instrument furnished by the Borrowers to the
Agents or any Lender.
(vii) Each of the foregoing as if each reference to
"the Agents or any Lender," were to each Affiliate
of the Agents or any Lender.
(b) Any and all direct or indirect liabilities, debts, and
obligations of the Borrowers to any Agent or any Affiliate
of any Agent, each of every kind, nature, and description
owing on account of any service or accommodation provided
to, or for the account of any Borrowers pursuant to this
or any other Loan Document, including cash management
services and the issuances of L/C's.
"LIQUIDATION": The exercise, by the Collateral Agent, of those rights
and remedies accorded to the Collateral Agent under the Loan
Documents and applicable law as a creditor of the Borrowers
following and on account of the occurrence of an Event of
Default. Derivations of the word "Liquidation" (such as
"Liquidate") are used with like meaning in this Agreement.
"LOAN ACCOUNT": Defined in Section 2.8.
"LOAN DOCUMENTS": This Agreement, each instrument and document executed
and/or delivered as contemplated by Article III, below, each
instrument and document executed and/or delivered as contemplated
by Article III, hereof, (including without limitation the fee
letters by and between any of the Agents and the Borrowers or any
of the Lenders and the Borrowers, and the Warrant Agreement)
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<PAGE> 33
and each other instrument or document from time to time executed
and/or delivered in connection with the arrangements contemplated
hereby or in connection with any transaction with any Agent or
any Affiliate of any Agent or, including, without limitation, any
transaction which arises out of any cash management, depository,
investment, letter of credit, interest rate protection, or
equipment leasing services provided by any Agent or any Affiliate
of any Agent, as each may be amended from time to time.
"MAJORITY CONSENT": Consent of Majority Lenders.
"MAJORITY LENDERS": Tranche A Lenders (other than Delinquent Tranche A
Lenders) holding 51% or more (but at no time no less than two
Tranche A Lenders) of the Tranche A Loan Commitments (other than
any Tranche A Loan Commitments held by Delinquent Tranche A
Lenders).
"MAJORITY LENDERS PLUS": Majority Lenders plus the Tranche B Lender.
"MARGIN PRICING GRID": Provides for quarterly adjustment to the interest
rate to be charged on Tranche A Loans based upon Actual to
Projected EBITDA Percentage and is shown in Section 2.11(a)(vi).
"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
and reports in compliance with such change results in the breach
of a financial performance covenant imposed pursuant to Section
5.12, 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:
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(a) Would reasonably be expected to materially adversely
affect (i) the ability of the Borrowers to (A) operate or
conduct its business in all material respects in the
manner in which such business is currently operated or
conducted, or (B) to perform its obligations under the
Loan Documents or (ii) the assets, properties, business,
prospects, profitability, operations, or condition
(financial or otherwise) of the Borrowers.
(b) Would reasonably be expected to have a Material
Adverse Effect on the value, enforceability, or
collectibility of the Collateral.
"MATERIAL ADVERSE EFFECT": A result, consequence, or outcome which
constitutes a Material Adverse Change.
"MICHAELS": The Michaels Furniture Company, Inc., a Borrower hereunder.
"MICHAELS PLEDGE": That Pledge Agreement of even date herewith by and
between the Lead Borrower and the Collateral Agent, on behalf of
the Lenders, whereby the Lead Borrower pledges 100% of the voting
stock in Michaels, or such lesser amount of Michaels stock as
shall occur by reason of the transfer of voting stock of Michaels
to Michael Vermillion pursuant to the earn out terms in that
certain Stock Purchase Agreement between the Lead Borrower and
Michael Vermillion.
"MONITORING FEE": Defined in section 2.15(a).
"NET TRANCHE A LOANS": The result of (a) the unpaid principal balance
of all Tranche A Loans minus (b) the then unpaid principal
balance of all SwingLine Loans.
"NET CAPITAL EXPENDITURES": Capital Expenditures net of actual cash
received from landlords for tenant improvements relating to the
Borrowers' leased store locations.
"NOMINEE": A business entity (such as a corporation or limited
partnership) formed by the Collateral Agent to own or manage any
Post Foreclosure Asset.
"NONCONSENTING TRANCHE A LENDER": Defined in Section 16.15(a).
"NOTICE ADDRESS": With respect to the Administrative Agent, as provided
in Section 18.1.
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<PAGE> 35
With respect to either Collateral Agent, as provided in Section
18.1.
With respect to any Tranche A Lender, as indicated adjacent to
such Lender's signature at the foot of this Agreement. With
respect to any Person who becomes a Tranche A Lender hereafter
pursuant to Section 17.2, as indicated in the Assignment and
Acceptance of such Person.
With respect to the Tranche B Lender, as provided in Section
18.1.
With respect to the Tranche C Lender, as provided in Section
18.1.
Each Notice Address is subject to change as provided in Section
18.1.
"OVERALL INVENTORY APPRAISAL CAP": 92% of the Appraised Inventory
Liquidation Value.
"OVERALL INVENTORY ADVANCE RATE": The following percentages during the
periods indicated in the chart below:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
December 16th -- 72%
February 15th
February 16th -- 74%
September 15th
September 16th -- 79%
December 15th
</TABLE>
"OVERLOAN": A loan, advance, or providing of credit support (such as the
issuance of any L/C) to the extent that, at the time it is made,
(a) it is in excess of the Borrowing Base or (b) exceeds
Availability immediately prior to the making of such loan,
advance, or providing of credit support.
"PARTICIPANT": Defined in Section 20.16, hereof.
"PERMISSIBLE OVERLOANS": Tranche A Loans which are Overloans, which
aggregate no more than Five Percent (5%) of the Borrowing Base at
any one time outstanding, where such loans (without duplication)
are either (a) Protective Advances or (b) made when Availability
equals zero and are not extant for more than sixty (60)
consecutive days during any 12 month period absent consent of the
Combined SuperMajority Lenders Plus pursuant to Section 16.5,
hereof; provided however,
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<PAGE> 36
in no event shall the making of any Permissible Overloan cause
any Tranche A Lender to exceed that Tranche A Lender's Tranche A
Dollar Commitment. For the purposes of determining whether a
Permissible Overloan is outstanding for more than sixty (60)
consecutive days, any reduction of the Loan Account so that no
Permissible Overloan is then outstanding must be in effect for
not less than ten (10) consecutive days in order for such
reduction to terminate the running of such sixty (60) consecutive
day period.
"PERMITTED ENCUMBRANCES": The following:
(a) Encumbrances in favor of the Collateral Agent pursuant
to the terms of the Loan Documents.
(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 in
good faith by the Borrowers and for which the Borrowers
have established adequate cash reserve; 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
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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 of law where
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 and which is pledged to the
Collateral Agent for the benefit of the Lenders pursuant to a
control or similar agreement acceptable to the Collateral Agent:
(a) Debt entitled to the full faith and credit of the
United States with maturities not to exceed one hundred
and eighty-one (181) days.
(b) Banker's acceptances accepted, savings accounts made
available, repurchase agreements entered into, and
certificates of deposit issued by the Collateral Agent or
any bank whose most senior debt has been assigned an
investment grade credit rating by a nationally recognized
credit rating service.
(c) Commercial paper rated A-1/P-1.
(d) 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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"PERMITTED SUBDEBT": Indebtedness of the Borrowers which (a) is on such
terms and conditions as are acceptable to the SuperMajority
Lenders Plus and (b) is subordinated to the Liabilities pursuant
to a written agreement which is reasonably satisfactory to the
SuperMajority Lenders Plus.
"PERSON": Any natural person, and any 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 is acquired by the Collateral Agent or a Nominee on
account of the "bidding in" on behalf of the Lenders at a
foreclosure of Collateral as part of a Liquidation.
"PREPAID INVENTORY CAP": Ten Percent (10%) of the Cost of Eligible
Inventory (net of Inventory Reserves).
"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 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 all Tranche A Loan Commitments have been
terminated, the numerator shall be the unpaid amount of such
Tranche A Lender's Tranche A Loans and its interest in L/C
exposure and the denominator shall be the aggregate amount of all
unpaid Tranche A Loans and L/C exposure.
"PROCEEDS": Includes, without limitation, "Proceeds" as defined in the
UCC (defined below), and proceeds of all Collateral.
"PROTECTIVE ADVANCES": The aggregate of Tranche A Loans and expenditures
and incurrences of obligations by the Administrative Agent which
are made or undertaken in the Administrative Agent's discretion
or at the direction of the Collateral Agent to protect or
preserve the Collateral Interests which secure the Liabilities
and the Collateral Agent's rights upon default or otherwise, or
which any Agent determines in that Agent's discretion (such as
preservation of the Borrowers' infrastructure), are appropriate
to facilitate a Liquidation, provided, however, "Protective
Advances", when made, together with other Permissible Overloans,
shall not exceed Five Percent (5%) of the Borrowing Base in the
aggregate at any time.
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"PUT RIGHTS": The right of the holder of the Warrants to put the
Warrants to the Borrowers for cash.
"PUT RIGHT DEBT": The aggregate of the Borrowers' Liabilities,
obligations, and indebtedness (including any interest or fees
related thereto) to the holder of the Warrants on account of such
holder exercising the Put Rights.
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral.
"RECEIVABLES ADVANCE RATE": 85%.
"RECEIVABLES COLLATERAL": Any right to payment with respect to any of
the Collateral.
"RECEIVABLES RESERVES": Such Reserves as may be established from time to
time by the Administrative Agent, at the direction the Collateral
Agent in the Collateral Agent's reasonable discretion based upon
the Collateral Agent's determination of the collectability in the
ordinary course and of the creditworthiness of the Eligible
Receivables. Without limiting the generality of the foregoing,
Receivables Reserves may include (but are not limited to)
reserves based on the following:
(i) The aggregate of all Accounts which are more
than 90 days past invoice or are due or unpaid for
more than 60 days from the due date.
(ii) The aggregate of all Accounts for which 25% or
more of Accounts from the Account Debtor are deemed
subject to reserves hereunder or not deemed
Eligible Receivables.
(iii) That portion of Eligible Receivables owed by
any Account Debtor which exceed ten percent (10%)
of all Eligible Receivables.
(iv) The aggregate of all Accounts which arise out
of the sale by the Borrowers of goods consigned or
delivered to the Borrowers or to an Account Debtor
on sale or return terms (whether or not compliance
has been made with the applicable provisions of
Article 2 of the Uniform Commercial Code).
(v) The aggregate of all Accounts which arise out
of any sale made on a basis other than upon terms
usual to the business of the Borrowers.
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(vi) The aggregate of all Accounts which arise out
of any sale made on a "bill and hold," dating, or
delayed shipping basis.
(vii) The aggregate of all Accounts which are owed
by any Account Debtor whose principal place of
business is not within the continental United
States.
(viii) The aggregate of all Accounts which are owed
by any Affiliate, including Restoration.
(ix) The aggregate of all Accounts to the extent
that the Account Debtor holds or is entitled to any
claim, counterclaim, set off, or chargeback as
determined by the Agent in its discretion.
(x) The aggregate of all Accounts which are
evidenced by a promissory note or other
documentation evidencing modified payment terms.
(xi) The aggregate of all Accounts which are owed
by any Person employed by, or a salesperson of, the
Borrowers.
(xii) The Account Debtor is also a Michaels
creditor or supplier, and the Account Debtor has
disputed liability with respect to such Account,
and the Account Debtor has made any claim with
respect to any other Account due from such Account
Debtor to Michaels, or the Account otherwise is or
may become subject to any right of setoff by an
Account Debtor who is also a Michaels creditor or
supplier.
(xiii) The goods giving rise to such Account have
not been delivered to and accepted by the Account
Debtor or the services giving rise to such Account
or the Account does not otherwise represent a final
sale.
(xiv) There exists any agreement with the Account
Debtor for any deduction therefrom, including
finance charges and reserves for rebates and
advertising, except for discounts or allowances
which are made in the ordinary course of business
for prompt payment and which discounts or
allowances are reflected in the calculation of the
face value of each invoice related to the Account.
"REGISTER": Defined in Section 17.2(c).
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"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) That Person's charter, certificate of incorporation,
articles of organization, and/or other organizational
documents, as applicable; and
(c) That Person's by-laws and/or other instruments which
deal with corporate or similar governance, as applicable.
"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 Index 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": The following: Receivables Reserves; Availability Reserves;
and Inventory Reserves.
"RESTORATION": Restoration Hardware, Inc.
"RETAIL": The current ticket price aggregated by SKU of the Eligible
Inventory, as reflected in the Borrowers' Consolidated stock
ledger except that to the extent that Eligible Inventory is not
reflected in the stock ledger, "Retail" shall be determined using
such Consolidated non-stock ledger inventory systems of the
Borrowers as the Agent shall deem adequate for such purpose in
its reasonable discretion.
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"REVOLVING CREDIT": Defined in Section 2.1(a).
"SEC": The United States Securities and Exchange Commission, or any
successor thereto.
"STATED AMOUNT": The maximum amount for which an L/C may be honored,
less any amounts already drawn thereunder.
"STANDSTILL PERIOD":
(a) In the case of the Tranche B Lender, a period initiated by
written notice by the Tranche B Lender to the Administrative
Agent in accordance with Section 13.4(a), which period is 15 days
for any Borrowing Base Default or Tranche B Payment Default and
30 days for any General Default.
(b) In the case of the Tranche C Lender, a period initiated by
written notice by the Tranche C Lender to the Administrative
Agent in accordance with Section 13.6(a), which period is 30 days
for any Tranche C Payment Default and for any Extended Borrowing
Base Default which is continued for longer than the initial sixty
(60) consecutive day period during which Permissible Overloans
may be outstanding by Combined SuperMajority Consent Plus
pursuant to Section 16.5(b), and 60 days for any General Default.
"STORES": All of the Borrowers' present and future retail locations,
including without limitation, those locations listed on EXHIBIT
4.6 as retail locations.
"SUBSIDIARY": (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
Subsidiary, and (b) any partnership in which a Person and/or one
or more Subsidiary 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 CONSENT": Consent of the SuperMajority Lenders.
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"SUPERMAJORITY LENDERS": Tranche A Lenders (other than Delinquent
Tranche A Lenders) holding 66-2/3% or more the Tranche A Loan
Commitments (other than Tranche A Loan Commitments held by a
Delinquent Tranche A Lender).
"SUPERMAJORITY LENDERS PLUS": SuperMajority Lenders plus the Tranche B
Lender.
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event of
Default if any requisite notice were given 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 pursuant to which the SwingLine Lender may
advance SwingLine Loan to the Borrower aggregating up to the
SwingLine Loan Ceiling.
"SWINGLINE LENDER": FCC.
"SWINGLINE LOAN CEILING": Seven Million Five Hundred Thousand Dollars
($7,500,000.00) (subject to increase as provided in Section
2.7(a)), which amount shall be a sublimit of the Tranche A
Ceiling.
"SWINGLINE LOANS": Defined in Section 2.7(a).
"SWINGLINE NOTE": Defined in Section 2.7(c).
"TRANCHE A COMMITMENT": With respect to each Tranche A Lender, that
respective Tranche A Lender's Tranche A Dollar Commitment.
"TRANCHE A CEILING": The aggregate amount of the Tranche A Commitments
of all Tranche A Lenders which shall equal One Hundred Million
Dollars ($100,000,000.00).
"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 Tranche A Loans
(including without limitation any Costs of Collection of the
Tranche A Lenders), other than Tranche A Fees.
"TRANCHE A DOLLAR COMMITMENT": As set forth on EXHIBIT 2.24(a), annexed
hereto (as such amounts may change in accordance with the
provisions of this
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Agreement). The aggregate of Tranche A Dollar Commitments shall
not exceed $100,000,000.00.
"TRANCHE A EARLY TERMINATION FEE": Defined in Section 2.17(a).
"TRANCHE A FEES" All fees (such as a fee on account of the execution of
an amendment of the Loan Agreement or the Tranche A Early
Termination Fee) payable by the Borrowers in respect of the
Tranche A Loans, including any fee payable on account of cash
management services and the issuance of L/C's relating to this
Agreement and 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": Defined in Section 2.1(a).
"TRANCHE A NOTE": Defined in Section 2.9(a).
"TRANCHE A MATURITY DATE": June 30, 2003.
"TRANCHE A OBLIGATIONS": The aggregate of Tranche A Debt and Tranche A
Fees.
"TRANCHE A PERCENTAGE COMMITMENT": As set forth on EXHIBIT 2.24(a),
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
A Dollar Commitments of all Tranche A Lenders (as such percentage
may change in accordance with the provisions of this Agreement).
"TRANCHE A SENIOR COLLATERAL": All Collateral which is not Tranche B
Senior Collateral or Tranche C Senior Collateral.
"TRANCHE A TERMINATION DATE": The earliest of (a) the Tranche A Maturity
Date; or (b) the occurrence of any event described in Section
10.11, below; or (c) the date set as the Tranche A Termination
Date in a notice by the Administrative Agent to the
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Lead Borrower on account of the occurrence of any Event of
Default other than as described in Section 10.11, below.
"TRANCHE B ANNIVERSARY FEE": Defined in Section 2.13(c).
"TRANCHE B COMMITMENT FEE": Defined in Section 2.13(a).
"TRANCHE B CONSENT": Consent of the Tranche B Lender.
"TRANCHE B CURRENT PAY INTEREST": Defined in Section 2.11(b)(i).
"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 (including
without limitation any Costs of Collection of the Tranche B
Lender), 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 2.11(b)(i).
"TRANCHE B EARLY TERMINATION FEE": Defined in Section 2.17(b).
"TRANCHE B FEES" All fees (such as Tranche B Commitment Fee, Tranche B
Anniversary 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 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 B FEE LETTER": That certain letter of even date by and between
the Lead Borrower and the Tranche B Lender.
"TRANCHE B INTEREST": Defined in Section 2.11(b)(i).
"TRANCHE B LENDER": Defined in the Preamble, together with its
successors and assigns.
"TRANCHE B LOANS": Defined in Section 2.1(b).
"TRANCHE B LOAN CEILING": $5,000,000.00.
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"TRANCHE B MATURITY DATE": June 30, 2003.
"TRANCHE B NOTE": Defined in Section 2.9(b).
"TRANCHE B OBLIGATIONS": The aggregate of Tranche B Debt and Tranche B
Fees.
"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 SENIOR COLLATERAL": (i) Equipment and Fixtures located at the
Lead Borrower's Warehouses; (ii) each item of Collateral now or
hereafter owned by Michaels (other than Accounts and Inventory,
and all products, Proceeds, substitutions and accessions of or to
any of the foregoing), wherever located, and all products,
Proceeds, substitutions and accessions of or to any of the
foregoing; (iii) all the capital stock of Michaels, which shall
be pledged to the Collateral Agent pursuant to the Michaels
Pledge; and (iv) all presently existing or hereafter existing
assets of Guarantor pursuant to the Guarantor Security Documents.
"TRANCHE B TERMINATION DATE": The earliest of (a) the Tranche B Maturity
Date; or (b) the occurrence of any event described in Section
10.11, below; or (c) the date set as the Tranche B Termination
Date in a notice by the Administrative Agent to the Lead Borrower
on account of the occurrence of any Event of Default other than
as described in Section 10.11, below.
"TRANCHE C ANNIVERSARY FEE": Defined in Section 2.13(d).
"TRANCHE C COMMITMENT FEE": Defined in Section 2.13(b).
"TRANCHE C CONSENT": Consent of the holders of 80% of the Tranche C
Debt.
"TRANCHE C DEBT": The aggregate of the Borrowers' Liabilities,
obligations, and indebtedness of any character to the Tranche C
Lenders (including without limitation any Costs of Collection of
the Tranche C Lenders), other than the Put Right Debt and Tranche
C Fees.
"TRANCHE C DEBT PAYMENT": Any payment of principal, interest (whether
payable in cash or otherwise), fees, premium, or otherwise on
account of the Tranche C Debt.
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"TRANCHE C EARLY TERMINATION FEE": Defined in Section 2.17(c).
"TRANCHE C FEES" The Tranche C Closing Fee, Tranche C Anniversary Fee,
Tranche C Commitment Fee, Tranche C Early Termination Fee and all
other 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 C Loans, other than 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 C FEE LETTER": That certain letter of even date by and between
the Lead Borrower and the Tranche C Lender.
"TRANCHE C LENDER(s)": Defined in the Preamble, together with their
successors and assigns.
"TRANCHE C LOANS": Defined in Section 2.1(c).
"TRANCHE C LOAN CEILING": $6,000,000.00.
"TRANCHE C MATURITY DATE": December 31, 2001.
"TRANCHE C NOTE": Defined in Section 2.9(c).
"TRANCHE C OBLIGATIONS": The aggregate of Tranche C Debt, the Put Right
Debt (if then or previously exercised and outstanding) and
Tranche C Fees.
"TRANCHE C PAYMENT DEFAULT" The failure of the Borrowers to have made
any Tranche C Debt Payment prior to the expiry of any grace
period applicable to such payment.
"TRANCHE C SENIOR COLLATERAL": Equipment located at the Borrowers'
Stores.
"TRANCHE C TERMINATION DATE": The earliest of (a) the Tranche C Maturity
Date; or (b) at the option of the Tranche C Lender, the
occurrence of a Change in Control, or (c) the occurrence of any
event described in Section 10.11, below; or (d) the date set as
the Tranche C Termination Date in a notice by the Administrative
Agent to the Lead Borrower on account of the occurrence of any
Event of Default other than as described in Section 10.11, below.
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"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
Administrative Agent making such Transfer and the subject Lender.
Wire instructions may be changed in the same manner that Notice
Addresses may be changed pursuant to Section 18.1, except that no
change of the wire instructions for Transfers to any Lender shall
be effective without the consent of the Administrative Agent.
"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106) as used herein in the
context of any definitions; otherwise, as in effect from time to
time in Massachusetts.
"UNANIMOUS TRANCHE A CONSENT": The Consent of all Tranche A Lenders
other than Delinquent Tranche A Lenders.
"UNUSED LINE FEE": Defined in Section 2.16.
"WAREHOUSE": The Borrowers' distribution centers and warehouses listed
in Exhibit 4.6 hereto, and any future locations at which the
Borrowers store Inventory for shipment to its Stores or directly
to customers.
"WARRANT": The right of the Tranche C Lender (or their assignees) to
purchase stock of the Lead Borrower pursuant to the Warrant
Agreement.
"WARRANT AGREEMENT": That certain Warrant Agreement dated as of
September 27, 2000, by and among the Lead Borrower and the
Tranche C Lender.
"WORKING CAPITAL LOANS": The aggregate of the Revolving Credit, the
Tranche B Loan and the Tranche C Loan.
ARTICLE II. - THE WORKING CAPITAL LOANS
2.1 ESTABLISHMENT OF WORKING CAPITAL LOANS.
(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 Administrative Agent shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrowers as
follows:
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Subject to the terms hereof, each Tranche A Lender agrees to make available from
time to time until the Tranche A Maturity Date its Pro Rata share of advances
(each, a "TRANCHE A LOAN") in each instance equal to its applicable Tranche A
Percentage Commitment of Availability, up to a maximum amount of its applicable
Tranche A Dollar Commitment. The obligations of each Tranche A Lender hereunder
shall be several and not joint.
(b) Subject to the terms hereof, the Tranche B Lender agrees to
advance to the Borrowers on the Closing Date amounts equal to the Tranche B Loan
Ceiling (the "TRANCHE B LOAN").
(c) Subject to the terms hereof, the Tranche C Lender agrees to
advance to the Borrowers on the Closing Date amounts equal to the Tranche C Loan
Ceiling (the "TRANCHE C LOAN").
(d) Tranche A Loans shall be made with reference to the Borrowing
Base and shall be subject to Availability. The Borrowing Base and Availability
shall be determined by the Collateral Agent by reference to Borrowing Base
Certificates furnished as provided in Section 5.4 below. The Collateral Agent
shall advise the Administrative Agent of its determination of the Borrowing Base
and Availability no later than 1:30 PM California time on any day it is
furnished a Borrowing Base Certificate in accordance with Section 5.4 below.
(e) As used herein "AVAILABILITY" refers at any time to the
result of the following:
(i) Borrowing Base.
Minus
(ii) the then unpaid principal balance of all Tranche A
Loans outstanding (including, without duplication,
the unpaid principal balance of any SwingLine
Loans).
Minus
(iii) the then Stated Amount of all L/C's.
(f) As used herein "BORROWING BASE" refers at any time to the
least of 2.1(f)(i), 2.1(f)(ii) or 2.1(f)(iii), where
(i) the Tranche A Loan Ceiling plus the Tranche B Loan
Ceiling.
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(ii) the result of the following:
(A) The Cost of Eligible Inventory of the Lead
Borrower (net of Inventory Reserves)
multiplied by the Inventory Advance Rate,
not to exceed the Inventory Appraisal Cap.
plus
(B) The Cost of Eligible PrePaid Inventory (net
of Inventory Reserves) multiplied by the
Inventory Advance Rate, not to exceed the
PrePaid Inventory Cap.
plus
(C) The product of the Cost of Eligible
Inventory of Michaels (net of Inventory
Reserves) multiplied by 25%, which, together
with the result of subsection 2.1(f)(ii)(D),
shall not exceed $2,000,000.00.
plus
(D) The product of the face amount of Eligible
Receivables (net of Receivable Reserves)
multiplied by the Receivable Advance Rate,
which, together with the result of
subsection 2.1(f)(ii)(C), shall not exceed
$2,000,000.00.
minus
(E) The then aggregate of the Availability
Reserves.
(iii) the result of the following:
(A) The Cost of Eligible Inventory of the Lead
Borrower (net of Inventory Reserves)
multiplied by the Overall Inventory Advance
Rate, not to exceed the Overall Inventory
Appraisal Cap.
plus
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(B) The Cost of Eligible PrePaid Inventory (net
of Inventory Reserves) multiplied by the
Inventory Advance Rate, not to exceed the
PrePaid Inventory Cap.
plus
(C) The product of the Cost of Eligible
Inventory of Michaels (net of Inventory
Reserves) multiplied by 25%, which, together
with the result of subsection
2.1(f)(iii)(D), shall not exceed
$2,000,000.00.
plus
(D) The product of the face amount of Eligible
Receivables (net of Receivable Reserves)
multiplied by the Receivable Advance Rate,
which, together with the result of
subsection 2.1(f)(iii)(C), shall not exceed
$2,000,000.00.
minus
(E) The then aggregate of the Availability
Reserves.
minus
(F) The unpaid principal balance of the all
outstanding Tranche B Loans and all accrued
and unpaid Tranche B Deferred Interest.
(g) Intentionally Left Blank.
(h) The commitment of each Tranche A Lender to provide such
loans, advances, and financial accommodations is subject to Section 2.2.
(i) The proceeds of borrowings of Working Capital Loans shall be
used (i) solely for working capital purposes and (ii) for the Borrowers' Capital
Expenditures, all solely to the extent permitted by this Agreement. No proceeds
of Working Capital Loans may be used, nor shall any be requested, with a view
towards the accumulation of any general fund or funded
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reserve of the Borrowers other than in the ordinary course of the Borrowers'
business and consistent with the provisions of this Agreement.
2.2 ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS)
(a) No Tranche A Lender has any obligation to make any loan or
advance, or otherwise to provide any credit to or for the benefit of the
Borrowers where the result of such loan, advance, or credit is an Overloan.
(b) The Tranche A Lenders' obligations, among themselves, are
subject to Section 12.3(a) (which relates to each Tranche A Lender's making
amounts available to the Administrative Agent) and to Sections 16.1(d) and
16.5(b) (which relate to Permissible Overloans).
(c) The Tranche A Lenders' providing of an Overloan on any one
occasion does not affect the obligations of the Borrowers hereunder (such as the
Borrowers' obligation to immediately repay any amount which otherwise
constitutes an Overloan) nor shall it obligate the Tranche A Lenders to do so on
any other occasion.
2.3 RISKS OF VALUE OF COLLATERAL.
Any 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 any Agent or any Lender relative to the
actual value of the asset in question. All risks concerning the value of the
Collateral are and remain upon the Borrowers. All Collateral secures the prompt,
punctual, and faithful performance of the Liabilities whether or not relied upon
by the Agents in connection with the making of loans, credits, and advances and
the providing of financial accommodations under the Working Capital Loans.
2.4 COMMITMENT TO MAKE TRANCHE A LOANS AND SUPPORT LETTERS OF CREDIT.
Subject to the provisions of this Agreement, the Tranche A Lenders shall
make a loan or advance under the Revolving Credit and the Administrative Agent
shall endeavor to have an L/C issued for the account of the Borrowers, in each
instance if duly and timely requested by the Lead Borrower as provided herein
provided that:
(a) No Overloan would be extant.
(b) The Revolving Credit has not been suspended as provided in
Section 2.5(h).
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2.5 TRANCHE A LOAN REQUESTS.
(a) Requests for loans and advances under the Revolving Credit
shall be made by the Lead Borrower to the Administrative Agent as provided
herein.
(b) Subject to the provisions of this Agreement, the Lead
Borrower may from time to time borrow, repay and reborrow under this Section
2.5. Each Tranche A Loan shall be made on notice by the Lead Borrower to the
Administrative Agent. Each notice must be given by no later than the following:
(i) In the case of a Tranche A Loan which is to be a Base
Margin Loan (which shall include the conversion of an Index
Loan): By 10:30 AM, California time, on the Business Day on which
such Tranche A Loan is to be made. Base Margin Loans requested by
the Lead Borrower, other than those resulting from the conversion
of a Index Loan, shall not be less than $10,000.00.
(ii) In the case of a Tranche A Loan which is to be an
Index Loan (which shall include the continuation of, or the
conversion of a Base Margin Loan to an Index Loan): By 10:30 AM,
California time, three (3) Index Business Days prior to the first
day of the Interest Period being requested. Index Loans and
conversions to Index Loans shall each be not less than
$1,000,000.00 and in increments of $100,000.00 in excess of such
minimum.
(iii) Any Index Loan which matures while a Suspension
Event is extant may be converted, at the option of the
Administrative Agent, to a Base Margin Loan notwithstanding any
notice from the Lead Borrower that such Loan is to be continued
as a Index Loan.
(c) Any request for a Tranche A Loan or for the conversion of a
Tranche A 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
then next Business Day or Index Business Day, as applicable. Each request for a
Tranche A Loan or for the conversion of a Tranche A Loan shall be made in such
manner as may from time to time be acceptable to the Administrative Agent.
(d) Intentionally Left Blank.
(e) The Lead Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrowers as provided in
Section 2.20.
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(f) The Administrative Agent may rely on any request for a loan
or advance, or other financial accommodation under the Revolving Credit which
the Administrative 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 advance, or issuance, or to provide any such
financial accommodation pending the Administrative Agent's being furnished with
such documentation concerning that Person's authority to act as may be
satisfactory to the Administrative Agent.
(g) A request by the Lead Borrower for a loan or advance or other
financial accommodation under the Revolving Credit 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 Administrative Agent or any
Lender pursuant to this Agreement.
(ii) Each Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) 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 to all of the Borrowers' obligations for sales tax on account
of sales since the then most recent borrowing pursuant to the
Revolving Credit.
(iv) Each representation which is made herein or in any of
the Loan Documents is then true and complete as of and as if made
on 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).
(v) No Suspension Event is then extant.
(h) Upon the occurrence from time to time of any Suspension Event
neither the Administrative Agent on behalf of Tranche A Lenders nor the
SwingLine Lender shall be obligated to make any loans or advance, to provide any
financial accommodation hereunder, or to issue any L/C, or to accept any request
of the Lead Borrower that any Index Loan be made or any Base Margin Loan be
converted to an Index Loan.
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2.6 MAKING OF TRANCHE A LOANS
(a) A loan or advance under the Revolving Credit shall be made by
the Transfer of the proceeds of such loan or advance to the Disbursement Account
or as otherwise instructed by the Lead Borrower.
(b) A loan or advance shall be deemed to have been made under the
Revolving Credit (and the Borrowers shall be indebted to the Administrative
Agent and the applicable Tranche A Lenders for the amount thereof immediately)
upon the Administrative Agent's initiation of the Transfer of the proceeds of
such loan or advance in accordance with the Lead Borrower's instructions (if
such loan or advance is of funds requested by the Lead Borrower) 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
Administrative Agent or any Tranche A Lender (except to the extent caused by the
gross negligence or willful misconduct of the Administrative Agent or any
Tranche A Lender, respectively, 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 by any bank or other depository institution
in treating the proceeds of any such loan or advance as collected
funds.
(iii) Any delay in the receipt, and/or any loss, of funds
which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the
Administrative Agent in accordance with wire instructions
provided to the Administrative Agent by the Lead Borrower.
2.7 SWINGLINE LOANS.
(a) For ease of administration of Tranche A Loans, Tranche A
Loans which are 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 Tranche A Loans. 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 amendment from time to
time, by reasonable advance notice by the Administrative Agent to the Lead
Borrower).
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(b) The aggregate unpaid principal balance of SwingLine Loans
shall bear interest at the rate applicable to Base Margin Loans and shall be
repayable as a Tranche A Loan under the Revolving Credit.
(c) The Borrowers' obligation to repay SwingLine Loans shall be
evidenced by a Note in the form of EXHIBIT 2.7 ("SWINGLINE NOTE"), 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 to establish or prove any Liability. Upon the Lead Borrower
being provided with an affidavit (which shall include an indemnity reasonably
satisfactory to the Lead Borrower) from the SwingLine Lender 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 and deliver a
replacement of any SwingLine Note to the SwingLine Lender.
(d) For all purposes of this Loan Agreement, the SwingLine Loans
and the Borrowers' obligations to the SwingLine Lender constitute Tranche A
Loans and are secured as "Liabilities".
(e) SwingLine Loans may be subject to periodic settlement with
the Tranche A Lenders as provided in Section 12.2 of this Agreement.
2.8 THE LOAN ACCOUNT.
(a) An account ("LOAN ACCOUNT") shall be opened on the books of
the Administrative Agent in which a record shall be kept of all Tranche A Loans.
(b) The Administrative Agent may also keep a record (either in
the Loan Account or elsewhere, as the Administrative Agent may from time to time
elect) of all interest, fees, service charges, costs, expenses, and other debits
owed to the Administrative Agent, the SwingLine Lender, and each Tranche A
Lender on account of the Liabilities and of all credits against such amounts so
owed.
(c) All credits against the Liabilities shall be conditional upon
receipt of final payment to the Administrative Agent for the account of each
Tranche A Lender of the items giving rise to such credits. The amount of any
item credited against the Liabilities which is charged back against the
Administrative Agent or any Tranche A Lender for any reason or is not
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so 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 Administrative
Agent may deem fees, service charges, accrued interest (except for interest
charged on Index Loans, which, absent the occurrence of an Event of Default,
shall be charged on the maturity date of the Index contract), 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 Administrative Agent, without the request of the Lead
Borrower, may advance under the Revolving Credit any interest, fee, service
charge, or other payment to which the Agents 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 Borrowing Base's
being exceeded. Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2.8(e) on account of the Administrative
Agent shall bear interest at the rate then applicable to Base Margin Loans. Such
charge by the Administrative Agent shall not constitute a waiver of the
Administrative Agent's right or the Borrowers' obligations under Section
2.10(b).
(f) Any statement rendered by the Administrative 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
Administrative Agent or such Lender with written objection thereto within twenty
(20) 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 Administrative Agent's and the Lender's
books and records concerning the loan arrangement contemplated herein and the
Liabilities shall be prima facie evidence and proof of the items described
therein.
2.9 THE NOTES.
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(a) The Borrowers' obligation to repay the Tranche A Loans, with
interest as provided herein, may be evidenced by Notes (each, a "TRANCHE A
NOTE") in form and substance acceptable to the Administrative Agent executed by
the Lead Borrower on behalf of itself and the other Borrowers, one payable to
each Tranche A Lender. No Tranche A Note shall be required, however, to
establish or prove any Liability. Upon the Lead Borrower being provided with an
affidavit (which shall include an indemnity reasonably satisfactory to the Lead
Borrower) from the subject Tranche A Lender to the effect that a Tranche A Note
(having previously been provided by the Borrowers) has been lost, mutilated, or
destroyed, the Lead Borrower on behalf of itself and the other Borrowers shall
execute and deliver a replacement thereof to such Tranche A Lender.
(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 2.9(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. Upon the Lead Borrower being
provided with an affidavit (which shall include an indemnity reasonably
satisfactory to the Lead Borrower) from the subject Tranche B Lender to the
effect that the Tranche B Note has been lost, mutilated, or destroyed, the Lead
Borrower on behalf of itself and the other Borrowers shall execute and deliver a
replacement thereof to the Tranche B Lender.
(c) The Borrowers' obligation to repay the Tranche C Loan, with
interest as provided herein, shall be evidenced by a Note (a "TRANCHE C NOTE")
in the form of EXHIBIT 2.9(c), annexed hereto, executed by the Lead Borrower on
behalf of itself and the other Borrowers, payable to a Tranche C Lender. Neither
the original nor a copy of the Tranche C Note shall be required, however, to
establish or prove any Liability. Upon the Lead Borrower being provided with an
affidavit (which shall include an indemnity reasonably satisfactory to the Lead
Borrower) from the subject Tranche C Lender to the effect that the Tranche C
Note has been lost, mutilated, or destroyed, the Lead Borrower on behalf of
itself and the other Borrowers shall execute and deliver a replacement thereof
to the Tranche C Lender.
2.10 PAYMENT OF THE WORKING CAPITAL LOANS.
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(a) The Borrowers may repay all or any portion of the principal
balance of the Loan Account from time to time until the Tranche A Termination
Date.
(b) The Borrowers, without notice or demand from the
Administrative Agent or any Tranche A Lender, shall pay the Administrative Agent
that amount, from time to time, which is necessary so that there is no Overloan
outstanding.
(c) The Borrowers shall repay the then entire unpaid balance of
the Revolving Credit and all other Liabilities (including the Put Right Debt, if
then or previously exercised and outstanding) on the Tranche A Termination Date.
(d) The Borrowers may prepay the principal balance of the Tranche
B Loan prior to the Tranche B Maturity Date pursuant to Section 2.10(j), below.
Any amounts prepaid on account of the Tranche B Loan cannot be reborrowed.
(e) The Borrowers shall repay the then entire unpaid balance of
the Tranche B Obligations on the Tranche B Termination Date.
(f) The Borrowers shall prepay the principal balance of the
Tranche C Loan prior to the Tranche C Maturity Date pursuant to Section
2.10(k)(i) and (ii), below and may prepay the principal balance of the Tranche C
Loan prior to the Tranche C Maturity Date pursuant to Section 2.10(k)(iii),
below. Any amounts prepaid on account of the Tranche C Loan cannot be
reborrowed.
(g) The Borrowers shall repay the then entire unpaid balance of
the Tranche C Obligations on the Tranche C Termination Date subject to and only
to the extent permitted by Section 2.10(l), below; it being understood and
agreed that the Borrowers' failure to repay the balance of the Tranche C
Obligations on the Tranche C Termination Date shall be an Event of Default,
notwithstanding the provisions of Section 2.10(l), below. The Borrowers shall
pay the Put Right Debt, if the Put Rights are exercised by the holder of the
Warrants after the Tranche C Termination Date, subject to and only to the extent
permitted by Section 2.10(m), below. The Borrowers shall not have the obligation
nor the right to pay the Put Right Debt prior to the Tranche C Termination Date.
Except for regularly scheduled payments of interest and subject to the
provisions of Section 14.6, the Tranche C Lender shall apply payments received
on account of the Tranche C Obligations in the following order of priority:
first, to the Tranche C Debt, second,
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to the Tranche C Fees, third, to the Put Right Debt (if the Put Rights had
theretofore been exercised).
(h) The Administrative Agent shall endeavor to cause payments,
pursuant to Sections 2.10(a), and 2.10(b) to be applied in the order and
priority set forth in Section 12.4(a). The Administrative Agent shall endeavor
to cause those application of payments (if any), pursuant to Sections 2.10(a)
and 2.10(b) against Index 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 liability on account of the Administrative Agent's failure to have
done so. In no event shall action or inaction taken by the Administrative Agent
excuse the Borrowers from any indemnification obligation under Section 2.10(i).
(i) Upon the request of any Agent, the Borrowers shall indemnify
the subject Agent and Lender and hold the subject Agent and each Lender harmless
from and against any loss, cost or expense (including loss of anticipated
profits) which the subject Agent or such Lender may sustain or incur (including,
without limitation, by virtue of acceleration after the occurrence of any Event
of Default) as a consequence of any of the following:
(i) Default by the Borrowers in payment of the principal
amount of or any interest on any Index Loan as and when due and
payable, including any such loss or expense arising from interest
or fees payable by such Tranche A Lender in order to maintain its
Index 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 Tranche A Loan or a request to
convert a Tranche A Loan from one applicable interest rate to
another.
(iii) The making of any payment on an Index Loan or the
making of any conversion of any such 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 Tranche A Lender as "breakage fees".
(j) Upon thirty (30) days prior written notice by the Lead
Borrower to the Tranche B Lender, the balance of the Tranche B Debt may be
prepaid in whole or in part at any time, following indefeasible payment in full
of the Tranche C Debt as follows:
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(i) With the net proceeds of the sale of equity
securities, the issuance of which is otherwise permitted in this
Agreement.
(ii) With the net proceeds of Permitted SubDebt.
(iii) With proceeds of advances under the Loan Account,
provided that, each of the conditions set forth in Section
2.10(k)(iii), below, is satisfied.
(k) Upon thirty (30) days prior written notice by the Lead
Borrower to the Tranche C Lender, the balance of the Tranche C Debt:
(i) Shall be prepaid with the net proceeds of the sale of
equity securities, the issuance of which is otherwise permitted
in this Agreement.
(ii) Shall be prepaid with the net proceeds of Permitted
SubDebt.
(iii) May be prepaid with proceeds of advances under the
Loan Account, provided that, each of the following conditions is
met:
(A) Such prepayment is not less than $250,000.00
or an integer multiple of $100,000.00.
(B) Availability, immediately following the
making of such payment, is not less than $15
million (less any amounts paid in cash to
the Administrative Agent (for the benefit of
the Tranche A Lenders or the Tranche B
Lender), the Tranche A Lenders or the
Tranche B Lender for any incremental
interest or fees not otherwise provided for
pursuant to terms of this Agreement as of
the Closing Date).
(C) The Borrowers have, as of December 1, 2001,
a minimum of $23,000,000 of EBITDA based
upon a rolling historical 12 months,
calculated in accordance with the financial
statements provided under Section
5.6(a)(ii)(G) (which $23,000,000 minimum
shall be reduced by any amounts paid in cash
to the Administrative Agent (for the benefit
of the Tranche A Lenders or the Tranche B
Lender), the Tranche A Lenders or Tranche B
Lender for any incremental interest
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<PAGE> 62
or fees not otherwise provided for pursuant
to terms of this Agreement as of the Closing
Date).
(D) The Administrative Agent shall have been
provided with the following:
(I) A Certificate by an Authorized
Officer of the Lead Borrower that,
with the exception of those accounts
which are subject of a good faith
dispute, the Borrowers' accounts
payable, taken as a whole, are
materially consistent with the
Borrowers' historical accounts
payable.
(II) No Suspension Event is then extant
and no Event of Default shall have
occurred or will occur by reason of
the making of such repayment.
(l) The entire balance of the Tranche C Obligations shall be paid
at the Tranche C Termination Date 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 the net proceeds of Permitted SubDebt.
(iii) With advances under the Loan Account, providing that
each of the conditions set forth in Section 2.1(k)(iii)(B),
2.1(k)(iii)(C) and 2.1(k)(iii)(D) are satisfied.
(m) The Put Right Debt, if the Put Rights are exercised by the
holder of the Warrants after the Tranche C Termination Date, shall be paid 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 the net proceeds of Permitted SubDebt.
(iii) With advances under the Loan Account, providing that
each of the conditions set forth in Section 2.1(k)(iii)(B),
2.1(k)(iii)(C) and 2.1(k)(iii)(D) are satisfied.
2.11 INTEREST ON WORKING CAPITAL LOANS.
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(a) Tranche A Loans.
(i) Each Tranche A Loan shall bear interest at the Base
Margin Rate (determined based upon a 365/366-day year and actual days elapsed)
unless and until it is made as, or is converted to, an Index Loan pursuant to
Section 2.5 hereof.
(ii) Each Tranche A Loan which consists of an Index Loan
shall bear interest at the applicable Index Rate (determined based upon a
360-day year and actual days elapsed).
(iii) Subject to, and in accordance with, the provisions
of this Agreement, the Borrowers may cause all or a part of the unpaid principal
balance of Tranche A Loans to bear interest at the Base Margin Rate or the Index
Rate as specified from time to time by the Lead Borrower.
(iv) The Lead Borrower shall not select, renew, or convert
any interest rate for a Tranche A Loan such that, in addition to interest at the
Base Margin Rate, there are more than six (6) Index Periods applicable to the
Index Loans at any one time.
(v) The Borrowers shall pay accrued and unpaid interest on
each Tranche A Loan in arrears on the applicable Interest Payment Date therefor.
Following the occurrence of any Event of Default (and whether or not an Agent
exercises such Agent's rights on account thereof), all Tranche A Loans shall
bear interest, at the option of the Administrative Agent or at the instruction
of the SuperMajority Lenders at a rate which is the aggregate in the case of
Base Margin Loans, of the then applicable Base Margin Rate plus two percent (2%)
per annum, and in the case of Index Loans, the then applicable Index Rate plus
two percent (2%) per annum.
(vi) Interest shall accrue on the principal amount of the
Base Margin Loans outstanding at the end of each day at a fluctuating rate per
annum equal to the Base Margin Rate applicable based upon the Margin Pricing
Grid set forth below. Interest shall accrue on the principal amount of the Index
Loans outstanding at the end of each day at a fluctuating rate per annum equal
to the Index Rate applicable based upon the Margin Pricing Grid set forth below:
MARGIN PRICING GRID
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
TIER Actual/Projected EBITDA INDEX MARGIN BASE MARGIN
Percentage (Basis Points) (Percentage)
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
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<PAGE> 64
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
I >95% of the Business Plan 2.50% 1.00%
---------------------------------------------------------------------------------------
II >90%<=95% of the Business Plan 2.75% 1.00%
---------------------------------------------------------------------------------------
III <=90% of the Business Plan 3.00% 1.25%
---------------------------------------------------------------------------------------
</TABLE>
The interest rate shall be set at no less than Tier III until the Administrative
Agent's receipt and satisfactory review of the Borrowers' February 3, 2001
quarterly Officer's Compliance Certificate. At such time, and quarterly
thereafter, the interest rate shall be adjusted as provided above based on the
Actual/Projected EBITDA Percentage, in each case as determined by the
Administrative Agent based upon the Borrowers' fiscal quarter-end financial
statements, effective immediately upon such determination by the Administrative
Agent which shall be made promptly following receipt of such financial
statements.
(b) Tranche B Loan.
(i) Subject to Section 2.11(b)(ii), the Tranche B Loan
shall bear interest, until repaid, fixed at Fifteen and One Half
Percent (15.5%) per annum (determined based upon a 360-day year
and actual days elapsed), payable as follows:
(A) Subject to the deferral of the payment of a
portion of interest pursuant to Section
2.11(b)(i)(B)), below, interest on the
unpaid principal balance of the Tranche B
Loan shall be payable monthly in arrears, on
the first Business Day of each month, and on
Tranche B Maturity Date ("TRANCHE B CURRENT
PAY INTEREST").
(B) The Borrowers shall have the option to pay
all or a portion of the interest payable on
the Tranche B Loan in excess of 12.5% 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 ("TRANCHE B DEFERRED
INTEREST"). The Lead Borrower shall give the
Tranche B Lender an irrevocable notice that
it will exercise
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such right at least three (3) Business Days
prior to any date on which an interest
payment on the Tranche B Loan is due as to
which such right is to be exercised.
(ii) Following the occurrence and during the continuance
of any Event of Default (and whether or not an Agent exercises
such Agent's rights on account thereof), Tranche B Interest shall
accrue at the rate of 17.5% per annum and such interest shall be
payable on demand.
(c) Tranche C Loan.
(i) Subject to Section 2.11(c)(ii), the Tranche C Loan
shall bear interest at Sixteen Percent (16%) per annum
(determined based upon a 360-day year and actual days elapsed),
payable on the first day of each month in arrears, and on the
Tranche C Maturity Date.
(ii) Following the occurrence and during the continuance
of any Event of Default (and whether or not an Agent exercises
such Agent's rights on account thereof), the Tranche C Loan shall
bear interest, at rate of Eighteen Percent (18%) per annum, and
such interest shall be payable upon demand.
(d) As among the Lenders, interest shall accrue on their
respective Liabilities in accordance with the priorities of Section 14.6
notwithstanding whether such interest is allowable by a court of competent
jurisdiction.
2.12 INTENTIONALLY LEFT BLANK.
2.13 COMMITMENT FEES; TRANCHE B ANNIVERSARY FEE; TRANCHE C ANNIVERSARY
FEE.
(a) In addition to any other fee or expense to be paid by the
Borrowers on account of the Tranche B Loan, the Borrowers shall pay the Tranche
B Lender the "TRANCHE B COMMITMENT FEE" as and when provided in the Tranche B
Fee Letter. Upon the termination of the Revolving Credit or upon the occurrence
of any Event of Default described in Section 10.11 or at instruction of the
Tranche B Lender upon the occurrence of any other Event of Default, any
remaining installments of the applicable Tranche B Anniversary Fee shall be
immediately due and payable.
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<PAGE> 66
(b) In addition to any other fee or expense to be paid by the
Borrowers on account of the Tranche C Loan, the Borrowers shall pay the Tranche
C Lender the "TRANCHE C COMMITMENT FEE" as and when provided in the Tranche C
Fee Letter. Upon the termination of the Revolving Credit or upon the occurrence
of any Event of Default described in Section 10.11 or at instruction of the
Tranche C Lender upon the occurrence of any Tranche C Payment Default, any
remaining installments of the applicable Tranche C Commitment Fee shall be
immediately due and payable.
(c) In addition to any other fee or expense to be paid to the
Borrowers on account of the Tranche B Loan, the Borrowers shall pay the Tranche
B Lender the "TRANCHE B ANNIVERSARY FEE" as and when provided in the Tranche B
Fee Letter.
(d) In addition to any other fee or expense to be paid to the
Borrowers on account of the Tranche C Loan, the Borrowers shall pay the Tranche
C Lender the "TRANCHE C ANNIVERSARY FEE" as and when provided in the Tranche C
Fee Letter.
2.14 ADMINISTRATIVE AGENT'S FEE.
In addition to any other fee or expense to be paid by the Borrowers on
account of the Revolving Credit, the Borrowers shall pay the Administrative
Agent the "AGENT'S FEE" , as and when provided in the Agent Fee Letter.
2.15 MONITORING FEE.
In addition to any other fee or expense to be paid by the Borrowers on
account of the Tranche B Loan, the Borrowers shall pay the Tranche B Lender a
"MONITORING FEE" in accordance with the terms of the Tranche B Fee Letter.
2.16 UNUSED LINE FEE.
In addition to any other fee to be paid by the Borrowers on account of
the Revolving Credit, the Borrowers shall pay the Administrative Agent, for the
Pro Rata benefit of the Tranche A Lenders, the "UNUSED LINE FEE". The Unused
Line Fee shall equal 0.375% per annum of the average difference, during the
quarter just ended (or relevant period with respect to the payment being made on
the Tranche A Termination Date) between the Tranche A Loan Ceiling and the
unpaid principal balance of all the aggregate of all outstanding Tranche A
Loans. The Unused
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Line Fee shall be paid in arrears, on the first Business Day of each quarter
after the execution of this Agreement and on the Tranche A Termination Date.
2.17 EARLY TERMINATION FEES.
(a) In the event that the Tranche A Termination Date occurs, for
any reason, prior to the Tranche A Maturity Date, the Borrowers shall pay the
Administrative Agent for the Pro Rata benefit of the Tranche A Lenders the
"TRANCHE A EARLY TERMINATION FEE" determined and payable as follows:
(i) 0.5% of the Tranche A Loan Ceiling in effect on the
date of this Agreement, if such termination occurs prior to the
end of the first anniversary date of this Agreement.
(ii) 0.25% of the Tranche A Loan Ceiling in effect on the
date of this Agreement, if such termination occurs after the
first anniversary date of this Agreement but prior to the Tranche
A Maturity Date.
(b) In the event that the Tranche B Termination Date occurs, for
any reason, prior to the Tranche B Maturity Date, the Borrowers shall pay the
Tranche B Lender the "TRANCHE B EARLY TERMINATION FEE" as and when provided in
the Tranche B Fee Letter.
(c) In the event that the Tranche C Termination Date occurs, for
any reason, prior to the Tranche C Maturity Date, the Borrowers shall pay the
Tranche C Lender the "TRANCHE C EARLY TERMINATION FEE" as and when provided in
the Tranche C Fee Letter.
2.18 CONCERNING FEES.
The Borrowers shall not be entitled to any credit, rebate or repayment
of any commitment fee, Agent's Fee, Monitoring Fee, Unused Line Fee, any early
termination fee, or any other fee earned by the Administrative Agent or any
Lender pursuant to this Agreement or any Loan Document notwithstanding any
termination of this Agreement or suspension or termination of the Administrative
Agent's or any Lender's respective obligation to make loans and advances
hereunder.
2.19 DISCRETION OF AGENTS AND LENDERS.
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<PAGE> 68
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by an Agent or any Lender shall be to that Person's
exercise of its reasonable judgment, 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.
(b) In the exercise of such judgment, the Agents and each Lender
also may take into account any of the following factors:
(i) Those included in, or tested by, the definitions of
"Eligible Accounts," "Eligible Inventory," "Eligible PrePaid
Inventory", "Eligible In Transit Inventory", "Eligible L/C
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 macroeconomic conditions which have a
material effect on the Borrowers' cost structure;
(iv) Material changes in or to the mix of the Borrowers'
Inventory;
(v) Changes reflecting seasonality with respect to the
Borrowers' Inventory and patterns of retail sales; and
(vi) Changes in such other factors as any Agent and/or any
Lender determines as having 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 Agents or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers' and may be made only be clear and convincing
evidence.
2.20 PROCEDURES FOR ISSUANCE OF L/C'S.
(a) The Lead Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrower. Each such request
shall be in such manner as may from time to time be acceptable to the
Administrative Agent.
(b) The Administrative 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 2.5(h) and if so issued:
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<PAGE> 69
(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 Ten Million Dollars ($10,000,000.00);
(ii) The expiry of the requested L/C is not later than the
earlier of thirty (30) days prior to the Tranche A Maturity Date
or the following:
(A) For standby L/C's: One (1) year from initial
issuance.
(B) For documentary L/C's: Sixty (60) 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 an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Administrative Agent or any Tranche A Lender on account of
(i) Any delay or refusal by an Issuer to issue an L/C; or
(ii) Any action or inaction of an Issuer on account of or
in respect to, any L/C.
(e) The Borrowers shall reimburse the Issuer for the amount of
any drawing honored under an L/C on the same day on which such drawing takes
place. The Administrative Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit (and charge to the Loan Account) the amount
of any honoring of any L/C and other amount for which the Borrowers, the Issuer,
or any Tranche A Lender becomes obligated on account of, or in respect to, any
L/C. Such advance shall be made whether or not a Suspension Event is then
continuing or such advance would result in an Overloan being extant. Such action
shall not constitute a waiver of the Administrative Agent's rights under Section
2.10(b) hereof.
2.21 FEES FOR L/C'S.
(a) The Borrowers shall (i) pay to the Administrative Agent ,
ratably for the account of each Tranche A Lender, a fee, on account of each L/C
procured by the Administrative Agent, quarterly in arrears, and on the Tranche A
Termination Date and on the End Date, equal to 1.5% per annum of the average
Stated Amount of all L/C's outstanding during the period in respect of which
such fee is being paid except that, following the occurrence of any Event of
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Default, such fee shall be increased by two percent (2%) per annum, and (ii) pay
to the Administrative Agent for its own account, monthly in advance, the fees
and charges set forth on EXHIBIT 2.19 hereto and all out of pocket expenses of
the Administrative Agent such as telex charges, postage, courier service and the
like, which fees and charges in each case shall be deemed fully earned upon
issuance or amendment (as applicable) of each such L/C.
(b) In addition to the fee to be paid as provided in Section
2.21(a), above, the Borrowers shall pay to the Administrative Agent (or to the
Issuer, if so requested by the Administrative Agent), on demand, all issuance,
processing, negotiation, amendment, and administrative fees and other amounts
charged by the Issuer on account of, or in respect to, any L/C.
(c) 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:
(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 any Tranche A Lender or any Issuer has an obligation to
lend 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 2.21(c)(i) or 2.21(c)(ii),
above, shall be to increase the cost to any Tranche A Lender or 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 Administrative Agent and delivery by the Administrative
Agent to the Lead Borrower of a certificate of an officer of the subject Tranche
A Lender or the subject 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
Borrowers shall immediately pay to the Administrative Agent, from time to time
as specified by the Administrative Agent, such amounts as shall be sufficient to
compensate the subject Tranche
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A Lender or the subject Issuer for such increased cost. Any Issuer's
determination of costs incurred under Section 2.21(c)(i) or 2.21(c)(ii), above,
and the allocation, if any, of such costs among the Borrowers 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 (and in the
absence of manifest error) shall be conclusive and binding on the Borrowers.
2.22 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, falsification, or the legal
effect of, any documents called for under any L/C if such
documents on their face 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 instructs any Issuer otherwise, in the particular instance, the Lead
Borrower hereby authorizes any Issuer to:
(i) Select an advising bank;
(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 the 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 Administrative Agent, any Tranche A Lender, or the Issuer shall have
any
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responsibility for any inaccuracy, interruption, error, or delay in transmission
or delivery by post, telegraph or cable, or for any inaccuracy of translation.
(e) The Administrative 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 Lead Borrower, the L/C will be
governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) The obligations of the Borrowers under this Agreement with
respect to L/C's are absolute, 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 Borrowers 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.
(h) With respect to any documentary L/C, all bills of lading
shall be assigned to or in the name of the Issuer, and all originals shall be
delivered to the Issuer, all in form and substance as is requested by the
Issuer.
2.23 CHANGED CIRCUMSTANCES.
(a) The Administrative Agent may give the Lead Borrower notice
that:
(i) The Administrative Agent has made the good faith
determination (which determination shall be final and conclusive)
on any date on which the Index
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Rate would otherwise be set that adequate and fair means do not
exist for ascertaining such rate;
(ii) The Administrative Agent shall have determined in
good faith (which determination shall be final and conclusive)
that
(A) the continuation of, or conversion of any
Tranche A Loan to, an Index Loan has been
made impracticable or unlawful by the
occurrence of a contingency that materially
and adversely affects the applicable market
or compliance by the Administrative 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
Index Loans are based shall no longer
represent the effective cost to the
Administrative 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 Administrative Agent gives the Lead
Borrower notice of an occurrence described in Section 2.23(a), then, until the
Administrative Agent notifies the Lead Borrower that the circumstances giving
rise to such notice no longer apply:
(i) The obligation of the Administrative Agent or each
Tranche A Lender to make 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 Tranche
A Loans shall be suspended.
(ii) Any notice which the Lead Borrower had given the
Administrative Agent with respect to any Index Loan, the time for
action with respect to which has not occurred prior to the
Administrative Agent's having given notice pursuant
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to Section 2.23(b), shall be deemed at the option of the
Administrative Agent to not having been given.
2.24 LENDERS' COMMITMENTS.
(a) Subject to Section 17.1 (which provides for assignments and
assumptions of commitments), each Tranche A Lender's "TRANCHE A PERCENTAGE
COMMITMENT", and "TRANCHE A DOLLAR COMMITMENT" is set forth on EXHIBIT 2.24(a).
(b) The obligations of each Tranche A Lender are several and not
joint. No Tranche A Lender shall have any obligation to make any loan or advance
under the Revolving Credit in excess of the lesser of the following:
(i) that Tranche A Lender's Tranche A Percentage
Commitment of the subject loan or advance or of Availability; and
(ii) that Tranche A Lender's unused Tranche A Dollar
Commitment.
(c) No Tranche A Lender shall have any liability to the Borrowers
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.
(d) The Tranche A Dollar Commitments, Tranche A Percentage
Commitments , and identities of the Tranche A Lenders may be changed, from time
to time by the reallocation or assignment of Tranche A Dollar Commitments and
Tranche A Percentage Commitments amongst the Tranche A Lenders or with other
Persons who become "Tranche A Lenders", provided, however 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
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 Administrative Agent with written objection, not more than five (5) Business
Days after the Administrative Agent shall have given the Lead Borrower written
notice of a proposed assignment.
(e) Upon written notice given the Lead Borrower from time to time
by the Administrative Agent, of any assignment or allocation referenced in
Section 2.24(d):
(i) The Lead Borrower, on behalf of itself and the other
Borrowers, if required by the Administrative Agent shall execute
one or more Tranche A Notes
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(which notes shall replace any Tranche A Notes theretofore
provided by the Borrowers) to reflect such changed Tranche A
Dollar Commitments, Tranche A Percentage Commitments, and
identities and shall deliver such Tranche A Notes to the
Administrative Agent (which promptly thereafter shall cancel and
deliver to the Lead Borrower the Tranche A Notes so replaced, if
any). In the event that the Administrative Agent does not require
the delivery of Tranche A Notes or that in the event that a
Tranche A 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 Administrative Agent, in lieu of
causing the Lead Borrower to execute one or more new Tranche A
Notes, may issue the Administrative Agent's Certificate
confirming the resulting Tranche A Dollar Commitments and Tranche
A Percentage Commitments.
(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 a Tranche A Lender is a signatory and any person removed as
a Tranche A Lender shall be relieved of any obligations or
responsibilities of a Tranche A Lender hereunder thereafter.
2.25 DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.
(a) Each Borrower hereby designates the Lead Borrower as that
Borrower's agent to obtain Working Capital Loans hereunder, the proceeds of
which shall be available to each Borrower for the same uses as set forth in
Section 2.1(h), above. As the disclosed principal for its agent, each Borrower
shall be obligated to the Agents and the Lenders on account of Working Capital
Loans as if made directly by the Lenders to that Borrower, notwithstanding the
manner by which such loans and advances are recorded on the books and records of
the Lead Borrower and of any other Borrower.
(b) The proceeds of each Working Capital Loan shall be deposited
in the Disbursement Account or as otherwise indicated by the Lead Borrower.
Neither the Agents nor any Lender shall have any obligation as to the
application of such proceeds.
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ARTICLE III. - - CONDITIONS PRECEDENT:
As a condition to the effectiveness of this Agreement, the establishment
of the Revolving Credit, the procurement of any L/C hereunder, the making of the
first loan under the Revolving Credit, and the making of the Tranche B Loan and
the Tranche C Loan, each of the documents respectively described in Sections 3.1
through and including 3.4 (each in form and substance satisfactory to the
Administrative Agent, the Tranche B Lender and the Tranche C Lender), shall have
been delivered to the Administrative Agent, and the conditions respectively
described in Sections 3.5 through and including 3.13, shall have been satisfied:
3.1 CORPORATE DUE DILIGENCE.
(a) A Certificate of corporate good standing issued with respect
to each Borrower 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, issued by the Secretary(ies) of State of each State in which such
Borrower's conduct of business or ownership of assets of 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 Agents, the Tranche B Lender and the Tranche C Lender.
3.3 OFFICERS' CERTIFICATES.
Certificates executed by the President, the Chief Financial Officer, or
Chief Administrative Officer of the Borrowers and stating that the
representations and warranties made by the Lead Borrower to the Administrative
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 or a Suspension Event.
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3.4 ADDITIONAL DOCUMENTS.
Such additional instruments and documents as the Agents, the Tranche B
Lender, the Tranche C Lender, or their respective counsel reasonably may require
or request including, without limitation, the following:
(a) This Agreement, duly executed.
(b) Those notifications and agreements described in Sections 7.1
and 7.2 (which relate to cash management).
(c) Tranche A Notes, if required, payable to each Tranche A
Lender in the amount of such Lender's Tranche A Dollar Commitment.
(d) Tranche B Note, payable to the Tranche B Lender in the amount
of the Tranche B Loan Ceiling.
(e) Tranche C Note, payable to the Tranche C Lender in the amount
of the Tranche C Loan Ceiling.
(f) Michaels Pledge, fully executed, and undated stock powers,
and original stock certificates.
(g) The Agent Fee Letter, the Tranche B Fee Letter, the Tranche C
Fee Letter, fully executed.
(h) The Warrant Agreement, fully executed.
(i) Warehouse Lien Waivers for Landlord States, fully executed in
form and substance satisfactory to the Collateral Agent (or a reserve is
established by the Administrative Agent within 30 days of the Closing Date in
such amount as the Collateral Agent may require).
(j) Insurance endorsements as required by Section 4.9(a) of this
Agreement.
(k) Blocked Account Agreements, fully executed.
(l) Customs Broker Agreements, fully executed, if required by the
Collateral Agent.
(m) The Guaranty, fully executed.
(n) The Guarantor Security Documents, fully executed, and undated
stock powers and original stock certificates.
3.5 REPRESENTATIONS AND WARRANTIES.
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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 DAY ONE AVAILABILITY.
After giving effect to the first funding under the Revolving Credit, the
funding of the Tranche B Loan and the funding of the Tranche C Loan and the sum
of all then held checks (if any), accounts payable which are beyond credit terms
then accorded the Borrowers, overdrafts, 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 subsequent to, such establishment,
Availability shall not be less than $10,000,000.00.
3.7 ALL FEES AND EXPENSES PAID.
All fees due at or immediately after the first funding under the
Revolving Credit, the Tranche B Loan and the Tranche C Loan, and all costs and
expenses incurred by the Agents, and each of the Lenders in connection with the
establishment of the Working Capital Loans contemplated hereby (including the
fees and expenses of counsel to each of the Agents and the Lender's Special
Counsel) shall have been paid in full.
3.8 NO SUSPENSION EVENT.
No Suspension Event shall then exist.
3.9 NO ADVERSE CHANGE.
No event shall have occurred or failed to occur, which occurrence or
failure is or could have a Material Adverse Effect upon the Borrowers' financial
condition when compared with such financial condition at August 29, 2000.
3.10 ACCOUNTS PAYABLES.
As of the Closing Date, no more than $2,000,000 of the Borrowers'
accounts payable are not within stated invoice terms (i.e. 30 days) or within
payment terms established by the Borrowers in the ordinary course of business
consistent with past practices.
3.11 DUE DILIGENCE.
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Satisfactory completion of all due diligence by each Tranche C Lender
(including, without limitation, commercial finance examinations and appraisals
of inventory), and each Tranche C Lender is satisfied (in its sole discretion)
with the results of such due diligence in all respects.
3.12 LEGAL DUE DILIGENCE.
Completion of the legal due diligence investigation by counsel to each
Agent and the Tranche B Lender and the Tranche C Lender, with results
satisfactory to each such counsel, Agent and Lender in their sole discretion in
all respects.
3.13 CLOSING DATE.
The Closing Date shall have occurred on or before September 29, 2000.
No document shall be deemed delivered to the Administrative Agent or any
Tranche A Lender until received and accepted by the Administrative Agent at its
offices in Sherman Oaks, California. No document shall be deemed delivered to
the Collateral Agent or the Tranche B Lender or Tranche C Lender until received
and accepted by each such party at its respective offices identified in Section
18.1 (Notice Provisions). Under no circumstances shall this Agreement take
effect until executed and accepted by the Agents and the Tranche B Lender and
the Tranche C Lender at its respective head office.
ARTICLE IV. - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the Working Capital Loans
contemplated herein and to induce each Lender to make loans and advances and to
provide financial accommodations under this Agreement (each of which loans shall
be deemed to have been made in reliance thereupon) the Borrowers, in addition to
all other representation, 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 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.
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(a) Each Borrower presently is and shall hereafter remain in good
standing as a Delaware corporation (in the case of the Lead Borrower) and a
California corporation (in the case of Michaels) organized under the laws 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 may be necessary, except where the
failure to so qualify would have no more than a de minimus adverse effect on the
business or assets of that Borrower.
(b) Each Affiliate is listed on EXHIBIT 4.2. The Lead Borrower
shall provide the Administrative Agent with prior written notice of any entity's
becoming or ceasing to be an Affiliate.
(c) No Borrower shall change its State of incorporation or its
taxpayer identification number.
(d) Each Borrower has all requisite corporate power and authority
to execute and deliver all Loan Documents to which the Borrower is a party and
has and will hereafter retain all requisite corporate power to perform all
Liabilities.
(e) The execution and delivery by each Borrower or by the Lead
Borrower of each Loan Document on behalf of each Borrower that is a party
thereto, such Borrower's consummation of the transactions contemplated by such
Loan Documents (including, without limitation, the creation of Collateral
Interests by such Borrower to secure the Liabilities), 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 any provision of 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.
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(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 creditor's rights by general principles of equity
(regardless of whether such principles are considered in a proceeding at law or
in equity).
4.3 TRADE NAMES.
(a) EXHIBIT 4.3 is a listing of:
(i) All names under which each Borrower has conducted
its business within the past five (5) years, and
(ii) All entities and/or persons with whom each Borrower
has consolidated or merged within the past five (5) years, 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 within the past five (5) years.
(b) The Lead Borrower will provide the Agents with not less than
twenty-one (21) days' prior written notice (with reasonable particularity) of
any change to any Borrower's name from that under which such Borrower is
conducting its business at the execution of this Agreement and such Borrower
will not effect such change unless such Borrower is then in compliance with all
provisions of this Agreement.
4.4 INFRASTRUCTURE.
(a) The Borrowers have and will maintain a sufficient
infrastructure to conduct their business as presently conducted and as
contemplated to be conducted.
(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.
(c) The conduct by the Borrowers of the Borrowers' business does
not presently infringe (nor will the Borrowers conduct their business in the
future so as to infringe) the patents, industrial designs, trademarks, trade
names, trade styles, brand names, service marks, logos,
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copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person.
4.5 INTENTIONALLY DELETED.
4.6 LOCATIONS.
(a) The Collateral, and the books, records, and papers of the
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 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 those locations listed on EXHIBIT 4.6(a) except
to:
(i) accomplish sales of Inventory in the ordinary course
of business;
(ii) move Inventory from one such location to another
such location; or
(iii) utilize such of the Collateral as is removed from
such locations in the ordinary course of business (such as motor
vehicles).
(c) No Borrower will execute any lease, commit to, or become
legally obligated to, open any additional Stores unless each of the following
conditions is satisfied with respect thereto:
(i) Such commitment or obligation is in the ordinary
course of business.
(ii) Such commitment or obligation is not, and does not
result in, a violation of this Agreement.
(iii) Not less than 30 days' prior written notice of the
opening of the subject Store is given to the Agents.
(iv) The Borrowers have used their best efforts to
obtain a landlord's waiver from the landlord of the subject
Store, which waiver is in form reasonably satisfactory to the
Collateral Agent.
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(v) Such commitment or obligation will not result in the
opening of more than the following number of Stores during the
Borrowers' fiscal year indicated:
(A) Fiscal Year 2000: 13 Stores.
(B) Fiscal Year 2001: 2 Stores plus 1
additional Store for each integer
multiple of $1,500,000 by which
Borrowers' actual Consolidated EBITDA
for Fiscal Year 2000 exceeds
$20,000,000.
(C) Fiscal Year 2002: 10 Stores plus 1
additional Store for each integer
multiple of $1,500,000 by which the
Borrowers' actual Consolidated EBITDA
for Fiscal Year 2001 exceeds
$31,000,000.
(d) The Borrowers shall use their reasonable efforts to provide
the Collateral Agent with Landlord Waivers or subordinations, in a form
acceptable to the Collateral Agent for each of the Borrowers' locations in any
of the Landlord States. The Administrative Agent, at the direction of the
Collateral Agent, shall establish an Availability Reserve for each such location
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 location.
(e) The Borrowers will not:
(i) Alter, modify, or amend any Lease except in the
ordinary course of business and in a manner that will not have a
Material Adverse Effect on the Borrowers.
(ii) Commit to close any location at which the Borrowers
maintains, offers for sales, or stores any of the Collateral,
provided, however, the Borrowers may close up to Two (2) Stores
during any Twelve (12) month period, provided further, that
there does not exist an Event of Default and there would not
exist an Event of Default after giving effect to the closure.
(f) Except as otherwise disclosed pursuant to, or permitted by,
this Section 4.6, and except for goods in control of a customs broker who has
entered into a Customs Brokers Agreement, no tangible personal property of any
of the Borrowers is in the care or custody of any
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third party or stored or entrusted with a bailee or other third party and none
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 Encumbrances listed
on EXHIBIT 4.7 and other Permitted Encumbrances.
(b) The Borrowers do not and shall not have possession of any
property on consignment to the Borrowers.
(c) The Borrowers shall not acquire or obtain the right to use
any Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an interest,
except for:
(i) Equipment which is merely incidental to the conduct
of the Borrowers' business.
(ii) Equipment, the acquisition or right to use of which
has been consented to by the Administrative Agent, which consent
may be conditioned (in the Collateral Agent's discretion) upon
the Collateral Agent's receipt of such agreement with the third
party which has an interest in such Equipment as is satisfactory
to the Collateral Agent.
4.8 INDEBTEDNESS.
(a) The Borrowers do not and shall not hereafter have any
Indebtedness with the exceptions of:
(i) Any Indebtedness on account of the Working Capital
Loans;
(ii) The Indebtedness (if any) listed on EXHIBIT 4.8,
annexed hereto;
(iii) Indebtedness secured by purchase money security
interests not otherwise described in this Section 4.8; and
(iv) Capital Leases in addition to those listed on
Exhibit 4.8 or Exhibit 4.11, for the acquisition of Equipment
not exceeding $5,000,000.00 outstanding at any one time.
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(b) The Borrowers shall not permit more than the lesser of 25% or
$2,000,000 of that portion of the aggregate of their Indebtedness for the
purchase of goods or services which is not the subject of a good faith dispute
to remain unpaid beyond stated invoice terms (i.e. 30 days) or more than then
current trade terms provided to the subject Borrower by the supplier of such
goods and services in the ordinary course of the subject Borrower's business
consistent with past practices.
4.9 INSURANCE.
(a) EXHIBIT 4.9, is a schedule of all insurance policies owned by
the Borrowers or under which the Borrowers are the named insured. Each of such
policies is in full force and effect. Neither the issuer of any such policy nor
the Borrowers are in default or violation of any such 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 satisfactory to the
Collateral Agent.
(c) All insurance carried by the Borrowers shall provide for a
minimum of Sixty (60) days' written notice of cancellation to the Agents and all
such insurance which covers the Collateral shall include an endorsement in favor
of the Collateral Agent on behalf of the Lenders, which endorsement shall
provide that the insurance, to the extent of the Collateral 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.
(d) The coverage reflected on EXHIBIT 4.9 presently satisfies the
foregoing requirements, it being recognized by the Borrowers, however, that such
requirements may change hereafter to reflect changing circumstances.
(e) The Borrowers shall furnish the Collateral Agent from time to
time with certificates or other evidence satisfactory to the Collateral Agent
regarding compliance by the Borrowers with the foregoing requirements.
(f) In the event of the failure by the Borrowers to maintain
insurance as required herein, the Administrative Agent, at its option, may
obtain such insurance, provided, however, the
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Administrative 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.
(g) The Lead Borrower shall advise the Collateral Agent of each
claim in excess of $50,000.00 made by any Borrower under any policy of insurance
which covers the Collateral and will permit the Collateral Agent, at the
Collateral Agent's option in each instance, to the exclusion of the Borrowers,
to conduct the adjustment of each such claim (and of all claims following the
occurrence of any Suspension Event). The Borrowers hereby appoint the Collateral
Agent as the Borrowers' attorney in fact to obtain, adjust, settle, and cancel
any insurance described in this section and to endorse in favor of the
Collateral 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 Collateral Agent. The Collateral Agent shall
not be liable on account of any exercise pursuant to said power except where
there has been a final judicial determination (in a proceeding in which the
Collateral Agent had an opportunity to be heard) that such exercise was
conducted in a grossly negligent manner or in willful misconduct. The
Administrative Agent shall apply any proceeds of such insurance against the
Liabilities, whether or not such have matured, in the order set forth in Section
14.6 of this Agreement.
4.10 LICENSES.
Each license, distributorship, franchise, and similar agreement issued
to the Borrowers, or to which any of the Borrowers is a party is in full force
and effect. No party to any such license or agreement is in default or violation
thereof. No Borrower has received any notice or threat of cancellation of any
such license or agreement.
4.11 LEASES.
EXHIBIT 4.11 is a schedule of all presently effective Capital Leases.
Exhibit 4.11 includes a list of all other presently effective Leases. Each of
such Leases and Capital Leases is in full force and effect. No party to any such
Lease or Capital Lease is in default or violation of any such Lease or Capital
Lease and neither the Parent nor the Borrowers have received any notice or
threat of cancellation of any such Lease or Capital Lease. The Borrowers hereby
authorize the Collateral Agent at any time and from time to time to contact any
of the Borrowers' landlords in
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order to confirm the continued compliance by any Borrower with the terms and
conditions of the Lease(s) between such Borrower and that landlord and to
discuss such issues, concerning such Borrower's occupancy under such Lease(s),
as the Collateral Agent may determine.
4.12 REQUIREMENTS OF LAW.
The Borrowers are in compliance with, and shall hereafter comply with
and use their respective assets in compliance with, all Requirements of Law
except where the failure of such compliance will not have more than a de minimus
adverse effect on such Borrower's business or assets. No Borrower has received
any notice of any violation of any Requirement of Law (other than of a violation
which has no more than a de minimus adverse effect on such Borrower's business
or assets), other than any such violations that have not been cured or otherwise
remedied.
4.13 LABOR RELATIONS.
(a) No Borrower has been and is presently a party to any
collective bargaining or other labor contract.
(b) There is not presently pending and, to the Borrowers'
knowledge, there is not threatened any of the following:
(i) Any strike, slowdown, picketing, work stoppage, or
employee grievance process;
(ii) Any proceeding against or affecting any Borrower
relating to the alleged violation of any Requirement of Law
pertaining to labor relations or National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable
governmental body, organizational activity, or other labor or
employment dispute against or affecting any Borrower, which, if
determined adversely to such Borrower could have more than a de
minimus adverse effect on such Borrower;
(iii) Any lockout of any employees by any Borrower, (and
no such action is contemplated by any Borrower); or
(iv) Any application for the certification of a
collective bargaining agent.
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(c) No event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute.
(d) Each Borrower:
(i) Has complied in all material respects with all
Requirements of Law relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant
closing.
(ii) Is not liable for the payment of more than a de
minimus amount of compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for such
Borrower's failure to comply with any Requirement of Law
referenced in Section 4.12.
4.14 MAINTAIN PROPERTIES.
Each Borrower shall:
(a) Keep the Collateral 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) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) The sale of Inventory in compliance with this
Agreement;
(ii) The disposal of Equipment which is obsolete, worn
out, or damaged beyond repair, which Equipment is replaced to
the extent necessary to preserve or improve the operating
efficiency of such Borrower; and
(iii) The turning over to the Administrative Agent of
all Receipts as provided herein.
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4.15 TAXES.
(a) 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. 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) The Borrowers have received written notice from the
respective state and local taxing authorities to which the Borrowers are subject
that such authorities have completed their respective examination of the
Borrowers' returns for all state and local income, excise, sales, and other
taxes for which the Borrowers are liable for the respective tax years referenced
on EXHIBIT 4.15, annexed hereto, and that all deficiencies, assessments, and
other amounts asserted as a result of such examinations have been fully paid or
settled. No agreement is extant which waives or extends any statute of
limitations applicable to the right of any state taxing authority to assert a
deficiency or make any other claim for or in respect to any such state taxes. 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 any
state or local taxing authority.
(c) Except as disclosed on EXHIBIT 4.15, there are no
examinations of or with respect to the Borrowers 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 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
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from employees' pay or by reason of the Borrowers' 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 to whom the Borrowers
are obligated to so file.
(e) At its option, the Administrative Agent may, but shall not be
obligated to, or at the instruction of the Collateral Agent, shall, 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 the Borrowers' Employee Benefit Plan as the Administrative Agent or
Collateral Agent, in that 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 Administrative 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 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.
4.17 ERISA.
Neither the Borrowers nor any ERISA Affiliate ever has or hereafter
shall:
(a) Violate or fail to be in full compliance with Employee
Benefit Plan maintained by the Borrowers;
(b) Fail timely to file all reports and filings required by ERISA
to be filed by the Borrowers;
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(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA);
(d) Engage in, or commit, any act such that a tax or penalty
could be imposed upon the Borrowers on account thereof pursuant to ERISA;
(e) Accumulate any material funding deficiency within the meaning
of ERISA;
(f) Terminate any Employee Benefit Plan such that a lien could be
asserted against any assets of the Borrowers on account thereof pursuant to
ERISA; or
(g) Be a member of, contribute to, or have any obligation under
any Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.
4.18 HAZARDOUS MATERIALS.
(a) The Borrowers have never:
(i) Been legally responsible for any release or threat
of release of any Hazardous Material; or
(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.
(b) The Borrowers shall:
(i) Dispose of any Hazardous Material only in compliance
with all Environmental Laws; and
(ii) Not store on any site or vessel occupied or
operated by the Borrowers and not transport or arrange for the
transport of any Hazardous Material, except if 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 Agents with written
notice upon obtaining knowledge of any incurrence of any expense or loss by any
governmental authority or other Person in connection with the assessment,
containment, or removal of any Hazardous Material, for which expense or loss the
Borrowers may be liable.
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4.19 LITIGATION.
Except as described in EXHIBIT 4.19 there is not presently pending or
threatened by or against any Borrower any suit, action, proceeding, or
investigation which, if determined adversely to such Borrower, would have more
than a de minimus adverse effect upon such Borrower's financial condition or
ability to conduct its business as such business is presently conducted or is
contemplated to be conducted in the foreseeable future.
4.20 DIVIDENDS; INVESTMENTS; CORPORATE ACTION.
The Borrowers shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrowers' capital stock other than dividends by
Michaels to the Parent;
(b) Redeem, retire, purchase, or acquire any of the Parent's
capital stock or any of the Parent's securities;
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity other
than Permitted Investments;
(d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity;
(e) Consolidate any of the Borrowers' operations with those of
any other corporation or other entity;
(f) Organize or create any Affiliate;
(g) 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;
or
(h) Acquire any assets other than in the ordinary course and
conduct of the Borrowers' business as conducted at the execution of this
Agreement.
4.21 LOANS.
The Borrowers shall not make any loans or advances to, nor acquire the
Indebtedness of, any Person, provided, however, the foregoing does not prohibit
any of the following:
(a) Advance payments made to the Borrowers' suppliers in the
ordinary course; and
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(b) Advances to the Borrowers' officers, 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.
4.22 PROTECTION OF ASSETS.
The Administrative Agent may in its discretion, and upon the instruction
of the Collateral Agent, shall from time to time, discharge any tax or
Encumbrance on any of the Collateral, or take any other action which such Agent
may deem necessary or desirable to repair, insure, maintain, preserve, collect,
or realize upon any of the Collateral. The Agents 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 that Agent has had an opportunity to be heard), from which
finding no further appeal is available, that such Agent had acted in actual bad
faith or in a grossly negligent manner. The Borrowers shall pay to the
Administrative Agent, on demand, or the Administrative Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Administrative
Agent pursuant to this Section 4.22. 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).
4.24 AFFILIATE TRANSACTIONS.
The Borrowers shall not make any payment, nor give any value to any
Affiliate except for goods and services actually purchased by the Borrowers
from, or sold by the Borrowers to, such Affiliate for a price and on terms which
shall
(a) be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and
(b) be no be less favorable to the Borrowers than those which
would have been charged and imposed in an arms length transaction.
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(c) be distributions of proceeds of Working Capital Loans to
Michaels.
4.25 FURTHER ASSURANCES.
(a) The Borrowers are not the owners of, nor have they any
interest in, any property or asset which, immediately upon the satisfaction of
the conditions precedent to the effectiveness of the credit facility
contemplated hereby (Article III) will not be subject to perfected Collateral
Interests in favor of the Collateral Agent, for the benefit of the Lenders
(subject only to Permitted Encumbrances), to secure the Liabilities.
(b) The Borrowers will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected Collateral Interest in favor of the Collateral Agent, for the
benefit of the Lenders, to secure the Liabilities (subject only to Permitted
Encumbrances).
(c) The Borrowers shall execute and deliver to the Agents such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agents may request: to carry into effect the provisions
and intent of this Agreement; to protect and perfect the Collateral Agent's
Collateral 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 required by the
Collateral Agent with respect to the recordation and/or perfection of the
Collateral Interests created or contemplated herein.
(d) The Borrowers hereby designate the Collateral Agent as and
for the Borrowers' true and lawful attorney, with full power of substitution, to
sign and file any financing statements in order to perfect or protect the
Collateral Agent's 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.
4.26 ADEQUACY OF DISCLOSURE.
(a) All financial statements furnished to the Agents and to each
Lender by the Borrowers have been prepared in accordance with GAAP consistently
applied and present fairly 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
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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 singularly or in the
aggregate.
(b) The Borrowers do not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Parent's
Consolidated financial statements furnished to the Agents and to each Lender
prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or hereafter
given the Agents and to each Lender by or on behalf of the Borrowers or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agents and to 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 could have, a
Material Adverse Effect on the financial condition of the Borrowers or any such
guarantor which has not been disclosed in writing to the Agents and to each
Lender.
4.27 NO RESTRICTIONS ON LIABILITIES.
No Borrower shall enter into or become subject to, directly or
indirectly, any agreement prohibiting or restricting (other than with respect to
Permitted Subdebt), in any manner (including, without limitation, by way of
covenant, representation, or event of default) any of the following:
(a) The granting of Collateral Interests in favor of the
Collateral Agent and the Lenders on any asset of any Borrower; or
(b) The incurrence of any of the Liabilities.
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.
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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 its
results of operations for, the periods in question.
(b) Timely provide the Agents 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 its
results of 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 sales records
of its 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 Agents and instruct such accountants to
fully cooperate with, and be available to, the Agents 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 Agents.
(e) Not change their respective fiscal years, tax identification
numbers, or state of incorporation.
5.2 ACCESS TO RECORDS.
(a) The Borrowers shall accord the Agents, Tranche B Lender and
Tranche C Lender and their respective representatives access from time to time
as the Agents, Tranche B Lender and Tranche C Lender and such representatives
may require to all properties owned by or over which any Borrower has control.
The Collateral Agent, Tranche B Lender and Tranche C Lender and such
representatives shall have the right, and the Borrowers will permit the
Collateral Agent, Tranche B Lender and Tranche C Lender and their respective
representatives from time to time as Collateral Agent, Tranche B Lender and
Tranche C Lender and their respective representatives may request, to examine,
inspect, copy, and make extracts from any and all of the
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Borrowers' books, records, electronically stored data, papers, and files. The
Borrowers shall make all of the Borrowers' copying facilities available to the
Collateral Agent, Tranche B Lender and Tranche C Lender and their respective
representatives.
(b) The Borrowers hereby authorize the Collateral Agent and the
Collateral 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 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
Collateral Agent and the Collateral 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 AGENTS.
(a) The Lead Borrower shall provide the Agents, Tranche B Lender
and Tranche C Lender with written notice promptly upon the occurrence of any of
the following events, which written notice shall be with reasonable
particularity as to the facts and circumstances in respect of which such notice
is being given:
(i) Any change in the Parent's officers.
(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 its creditors generally as the Borrowers' debts
become due.
(iv) Any failure by the Borrowers to pay rent at any of
the Borrowers' locations, which failure continues for more than
Three (3) days following the last
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day on which such rent was payable without more than a de
minimus adverse effect to the Borrowers.
(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, might have a Material Adverse Effect on the
financial condition of the Borrowers.
(b) The Lead Borrower shall:
(i) Provide the Agents, when so distributed, with copies
of any materials distributed to the shareholders of the Parent
(qua such shareholders).
(ii) Provide the Agents:
(A) When filed, copies of all filings of 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 Collateral Agent as an addressee on all
mailing lists maintained by or for the Borrowers.
(iv) At the request of the Collateral Agent, from time
to time, provide the Collateral Agent with copies of all
advertising (including copies of all print advertising and
duplicate tapes of all video and radio advertising).
(v) Provide the Agents, 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 Agents by 11:30 a.m., California
time, the more frequent of (i) weekly, each Monday for the previous week or (ii)
with each request for a Tranche A Loan, with a Borrowing Base Certificate (in
the form of EXHIBIT 5.4 as such form may be
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revised from time to time by the Collateral Agent), reflecting the Borrowers'
condition on the last Business Day of the reporting period immediately prior to
the date when furnished. Such Certificate shall be signed by an Authorized
Officer and may be sent to the Agents by facsimile transmission.
5.5 WEEKLY REPORTS.
Weekly, on Wednesday of each week (as of the then immediately preceding
Saturday) the Lead Borrower shall provide the Collateral Agent with a sales
audit report and a flash sales report (each in such form as may be specified
from time to time by the Collateral Agent), summary pages of the STS stock
ledger, and STS stock ledger pages for the Lead Borrower's Canadian Affiliate.
Such report may be sent to the Collateral Agent by facsimile transmission,
provided that the original thereof is forwarded to the Collateral Agent on the
date of such transmission. Weekly, on Monday of each week (as of the then
preceding Saturday) Lead Borrower shall provide the Agents, the Tranche A
Lenders, Tranche B Lender and Tranche C Lender a flash sales report and
Borrowing Base Certificate.
5.6 MONTHLY REPORTS.
(a) Monthly, the Lead Borrower shall provide the Collateral Agent
and at the request of a Tranche A Lender, the Tranche C Lender or Tranche B
Lender, to the Tranche A Lender,the Tranche B Lender or Tranche C Lender, as the
case may be, with original counterparts of the following (each in such form as
the Collateral Agent from time to time may specify):
(i) Within Fifteen (15) days of the end of the previous
month:
(A) A "Stock Ledger Inventory Report" and a
Certificate (signed by the Lead
Borrower's Authorized Officer)
concerning the Borrowers' Inventory.
(B) A Merchandise Management Report on which
is shown whether inventory levels are
adequate to meet sales forecasts.
(C) Summary pages of the STS Stock Ledger by
location.
(D) Report of catalogue Inventory.
(E) Report of Eligible PrePaid Inventory.
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(F) Report of Eligible Inventory of
Michaels.
(ii) Within Thirty (30) days of the end of the previous
month:
(A) Reconciliation of the above described
Inventory Report and Inventory
Certificate to Availability and to the
general ledger as of the end of the
subject month.
(B) A Gross Margin Reconciliation.
(C) A schedule of purchases from the
Borrowers' ten largest vendors (in terms
of year to date purchases), which
schedule shall be in such form as may be
satisfactory to the Collateral Agent and
shall include year to date cumulative
purchases and an aging of payables to
each such vendor.
(D) An aging of the Borrowers' accounts
payable.
(E) A Store Activity Report.
(F) The Officer's Compliance Certificate
described in Section 5.9, a copy of
which shall be sent by the Lead Borrower
to the Administrative Agent.
(G) An internally prepared financial
statement of the Borrowers' financial
condition and the results of its
operations 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 store specific and on a
"consolidated" basis), cash flow and
comparison of same Store sales for the
corresponding month of the then
immediately previous year, a copy of
which shall be sent by the Lead Borrower
to the Administrative Agent.
(b) For purposes of Section 5.6(a)(i) and (a)(ii), above, the
first "previous month" in respect of which the items required by that Section
shall be provided shall be August 2000.
5.7 QUARTERLY REPORTS.
Quarterly, within Forty Five (45) days following the end of each of the
Borrowers' fiscal quarters, the Lead Borrower shall provide the Agents with the
following:
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(a) An original counterpart of a management prepared financial
statement of the Borrowers for the period from the beginning of the Borrowers'
then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
store specific and on a "consolidated" basis), statement of changes in
shareholders' equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year; and
(b) The officer's compliance certificate described in Section
5.9.
(c) A copy of the Borrowers' Report on Form 10-Q filed with the
SEC.
The Administrative Agent will provide copies of the foregoing to the
Tranche A Lenders, the Tranche B Lender and the Tranche C Lender.
5.8 ANNUAL REPORTS.
(a) Annually, within ninety (90) days following the end of the
Borrowers' fiscal year, the Lead Borrower shall furnish the Agents with the
following:
(i) An original signed counterpart of the Borrowers'
Consolidated annual financial statement, which statement shall
have been prepared by, and bear the unqualified opinion of, the
Borrowers' independent certified public accountants (i.e. said
statement shall be "certified" by such accountants) and shall
include, at a minimum (with comparative information for the then
prior fiscal year) a balance sheet, income statement, statement
of changes in shareholders' equity, and cash flows; and
(ii) The officer's compliance certificate described in
Section 5.9.
(iii) A copy of the Borrowers' Report on Form 10-K filed
with the SEC.
(b) No later than the earlier of Fifteen (15) days prior to the
end of each of the Borrowers' fiscal years or the date on which such accountants
commence their work on the preparation of the Borrowers' annual Consolidated
financial statement, the Lead Borrower shall give written notice to such
accountants (with a copy of such notice, when sent, to the Administrative Agent)
that:
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(i) Such annual financial statement will be delivered by
the Borrowers to the Agents (for subsequent distribution by the
Administrative Agent to each Lender).
(ii) It is the primary intention of the Borrowers, in
their engagement of such accountants, to satisfy the financial
reporting requirements set forth in this Article V.
(iii) The Borrowers have been advised that the Agents
and each Lender will rely thereon with respect to the
administration of, and transactions under, the credit facility
contemplated by this Agreement.
(c) Each annual statement shall be accompanied by such
accountant's certificate indicating that, in conducting the audit for such
annual statement, nothing came to the attention of such accountants to believe
that any Suspension Event had occurred during the subject fiscal year (or if one
or more had occurred, the facts and circumstances thereof).
(d) Annually, within thirty (30) days prior to the end of the
Borrowers' fiscal year, the Lead Borrower shall furnish the Agents with an
updated Business Plan.
The Administrative Agent shall provide copies of the foregoing to the
Tranche A Lenders, the Tranche B Lender and the Tranche C Lender.
5.9 OFFICERS' CERTIFICATES.
The Lead Borrower shall cause the Authorized Officer to certify, in the
form attached hereto as EXHIBIT 5.9 (the "OFFICER'S COMPLIANCE CERTIFICATE"), in
connection with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement that:
(a) Such statement was prepared in accordance with GAAP
consistently applied and presents 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 such 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
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Accounting Change) not previously specifically taken into
account in the determination of the financial performance
covenant imposed pursuant to Section 5.12.
(b) No Suspension Event has occurred or, if such an event has
occurred, its nature (in reasonable detail) and the steps (if any) being taken
or contemplated by the Borrowers 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.
The Administrative Agent shall provide copies of the foregoing to the
Tranche A Lenders, the Tranche B Lender and the Tranche C Lender upon their
request.
5.10 INVENTORIES, APPRAISALS, AND AUDITS.
(a) The Collateral 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 January of each
year and one (1) in July of each year to be undertaken, consistent with current
practice, while this Agreement is in effect (the scheduling of which shall be
subject to the Collateral Agent's discretion), conducted by such inventory
takers as are satisfactory to the Collateral Agent and following such
methodology as may be satisfactory to the Collateral Agent.
(i) The Lead Borrower shall provide the Collateral 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 ten (10) days after its completion.
(ii) The Lead Borrower shall provide the Collateral
Agent with a reconciliation of the results of each such
inventory (as well as of any other physical inventory undertaken
by the Borrowers) to the Borrowers' books and records within
thirty (30) days following the completion of such inventory.
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(iii) The Collateral Agent, in its discretion, following
the occurrence of a Suspension Event, may cause such additional
inventories to be taken as the Collateral Agent determines
(each, at the expense of the Borrowers).
(c) The Collateral Agent may obtain appraisals, from time to time
(in all events, at the Borrowers' expense) conducted by such appraisers as are
satisfactory to the Collateral Agent. The Collateral Agent contemplates
obtaining three (3) appraisals during any twelve (12) months, but may obtain
more in the event it deems it reasonably necessary in its discretion.
(d) The Collateral Agent contemplates conducting Four (4)
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, but in its discretion, may undertake such additional audits as the
Collateral Agent determines (at the Borrowers' expense).
(e) The Collateral Agent from time to time (in all events, at the
Borrowers' expense) may undertake "mystery shopping" visits to all or any of the
Borrowers' business premises. The Collateral Agent shall provide the Lead
Borrower with a copy of any non-confidential results of such mystery shopping.
The Collateral Agent shall provide copies of the foregoing to the
Tranche A Lenders, the Tranche B Lender and the Tranche C Lender upon request.
5.11 ADDITIONAL FINANCIAL INFORMATION.
(a) In addition to all other information required to be provided
pursuant to this Article V, the Lead Borrower promptly shall provide the Agents
(and any guarantor of the Liabilities) and to the Tranche A Lenders, the Tranche
B Lender and the Tranche C Lender, upon request, 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 Agents may from
time to time request from the Lead Borrower.
(b) The Lead Borrower may provide the Agents, from time to time
hereafter, with updated forecasts of the Borrowers' anticipated performance and
operating results.
(c) The Lead Borrower shall, no sooner than Ninety (90) nor later
than Sixty (60) days prior to the end of each of the Borrowers' fiscal years,
furnish the Agents with an updated
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and extended forecast which shall go out at least through the end of the then
next three fiscal years and shall include a Consolidated and consolidating
income statement, a Consolidated balance sheet, and a Consolidated statement of
cash flow, by month, each prepared in conformity with GAAP and consistent with
the Borrowers' then current practices.
(d) The Borrowers recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Agents may
obtain, develop, or receive with respect to the Borrowers are confidential to
the Agents and that, except as otherwise provided herein, the Borrowers are not
entitled to receipt of any of such appraisals, inventories, analysis, financial
information, and other materials, nor copies or extracts thereof or therefrom.
5.12 FINANCIAL PERFORMANCE COVENANTS.
The Borrowers shall observe and comply with those financial performance
covenants set forth below. Compliance with such financial performance covenants
shall be made as if no Material Accounting Changes had been made (other than any
Material Accounting Changes specifically taken into account in the setting of
such covenants). The Collateral Agent may determine the Borrowers' compliance
with such covenants based upon financial reports and statements provided by the
Lead Borrower to the Collateral Agent (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
Collateral Agent.
(a) MINIMUM INVENTORY LEVELS: At no time shall the Borrowers
suffer or permit the Cost value of Eligible Inventory to be less than
$60,000,000.00.
(b) MINIMUM EBITDA:
(i) For fiscal year ending February 3, 2001 ("FISCAL
YEAR 2000"), the Borrowers shall not suffer or permit their
Consolidated EBITDA, tested on the last day of each fiscal
quarter on a cumulative year-to-date basis for the fiscal
quarter then ended, commencing as of the second fiscal quarter
of Fiscal Year 2000, to be less than the following levels during
the periods indicated:
<TABLE>
<CAPTION>
PERIOD (FY 2000)/# QUARTERS MIN. EBITDA
--------------------------- -----------
<S> <C>
FIRST FISCAL QUARTER/1 ($5,000,000)
SECOND FISCAL QUARTER/2 ($10,000,000)
</TABLE>
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<TABLE>
<S> <C>
THIRD FISCAL QUARTER/3 ($8,500,000)
FOURTH FISCAL QUARTER/4 $16,000,000
</TABLE>
(ii) For fiscal year ending February 2, 2002 ("FISCAL
YEAR 2001"), the Borrowers shall not permit or suffer to exist a
Consolidated EBITDA, tested on the last day of each fiscal
quarter, calculated on a rolling historical twelve (12) month
basis, to be less than the following levels during the periods
indicated:
<TABLE>
<CAPTION>
PERIOD (FY 2001) MIN. EBITDA
---------------- -----------
<S> <C>
FIRST FISCAL QUARTER $16,000,000
SECOND FISCAL QUARTER $18,000,000
THIRD FISCAL QUARTER $22,000,000
FOURTH FISCAL QUARTER $29,000,000
</TABLE>
(iii) Thereafter the Borrowers shall not permit or
suffer to exist a Consolidated EBITDA, tested on the last day of
each fiscal quarter, calculated on a rolling historical twelve
(12) month basis, to be less $31,000,000.
(c) Intentionally Left Blank.
(d) CAPITAL EXPENDITURES: The Borrowers shall not permit or
suffer to exist Capital Expenditures to be more than $24,500,000 for Fiscal Year
2000. The Borrower shall not permit or suffer to exist Net Capital Expenditures
to be more than the following maxima:
(i) Fiscal Year 2001: $4,500,000 plus Fifty Percent
(50%) of the amount by which the Borrowers' actual Consolidated
EBITDA for Fiscal Year 2000 exceeds $20,000,000.
(ii) Fiscal Year 2002: $15,000,000 plus Fifty Percent
(50%) of the amount by which the Borrowers' actual Consolidated
EBITDA for Fiscal Year 2001 exceeds $31,000,000.
(e) MINIMUM ACCOUNTS PAYABLE TO INVENTORY: The Borrowers shall
not permit or suffer the ratio of its average merchandise accounts payable to
Inventory, valued at Cost, determined on an average rolling historical two (2)
month basis to be less than the following percentages during the periods
indicated:
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<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
JANUARY - JULY 37%
AUGUST - DECEMBER 40%
</TABLE>
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
the ordinary course and shall not engage in sales or other dispositions to
creditors, sales or other dispositions in bulk, and any use of any of the
Inventory in breach of any provision of this Agreement.
(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 Administrative Agent.
6.2 INVENTORY QUALITY.
All Inventory now owned or hereafter acquired by the Borrowers is and
will be of good and merchantable quality and free from defects (other than
defects within customary trade tolerances).
6.3 ADJUSTMENTS AND ALLOWANCES.
The Borrowers may grant such allowances or other adjustments to the
Borrowers' Account Debtors (exclusive of extending the time for payment of any
Account or Account Receivable, which shall not be done without first obtaining
the Collateral Agent's prior written consent in each instance) as the Borrowers
may reasonably deem to accord with sound business practice, provided, however,
the authority granted the Borrowers pursuant to this Section 6.3 may be limited
or terminated by the Collateral Agent at any time in the Collateral Agent's
discretion.
6.4 VALIDITY OF ACCOUNTS.
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(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 Collateral Agent from time to time may verify the
Receivables Collateral directly with the Borrowers' Account Debtors, such
verification to be undertaken in keeping with commercially reasonable commercial
lending standards.
(c) The Borrowers have no knowledge of any impairment of the
validity or collectibility of any of the Accounts and the Lead Borrower shall
notify the Agent of any such fact immediately after any Borrower becomes aware
of any such impairment.
(d) The Borrowers shall not post any bond to secure any
Borrowers' performance under any agreement to which any Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of any Borrower (other than to the Collateral Agent) in
the event of such Borrower's failure so to perform.
6.5 NOTIFICATION TO ACCOUNT DEBTORS.
The Collateral Agent shall have the right (after an Event of Default has
occurred) to notify any of the Borrowers' Account Debtors to make payment
directly to the Collateral 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 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; and (iii) a contact person at such depository.
(b) The Lead Borrower shall deliver the following to the
Collateral Agent, as a condition to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the Borrowers,
to each depository institution with which any DDA is maintained
(other than any Exempt DDA and the Blocked Account), in form
satisfactory to the Collateral Agent of the
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Collateral Agent's interest in such DDA or, if requested by the
Collateral Agent, control agreements with respect to each DDA.
(ii) A Blocked Account Agreement with any depository
institution at which either of the following conditions applies:
(A) Both any DDA (other than the
Disbursement Account) and the
Disbursement Account is maintained.
(B) A Blocked Account is maintained.
(c) The Borrowers will not establish any DDA hereafter (other
than an Exempt DDA) unless, contemporaneous with such establishment, the Lead
Borrower delivers the following to the Collateral Agent:
(i) Notification to the depository at which such DDA is
established if the same would have been required pursuant to
Section 7.1(b)(i) if the subject DDA were open at the execution
of this Agreement;
(ii) A Blocked Account Agreement executed on behalf of
the depository at which such DDA is established if the same
would have been required pursuant to Section 7.1(b)(ii) if the
DDA were open at the execution of this Agreement.
7.2 CREDIT CARD RECEIPTS.
(a) Annexed hereto as EXHIBIT 7.2, is a Schedule which describes
all arrangements to which the Borrowers are a party with respect to the payment
to the Borrowers of the proceeds of credit card charges for sales by the
Borrowers.
(b) The Borrowers shall deliver to the Collateral 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 of notice (in form satisfactory to the Agent), which notice
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 be directed to the
Concentration Account or as otherwise designated from time to time by the
Collateral Agent. The Borrowers shall not change such direction or designation
except upon and with the prior written consent of the Collateral Agent.
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<PAGE> 110
7.3 THE CONCENTRATION, BLOCKED, AND DISBURSEMENT ACCOUNTS.
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The "CONCENTRATION ACCOUNT": Established by the
Administrative Agent with Fleet National Bank.
(ii) The "BLOCKED ACCOUNT": Subject to Section 7.3(c),
established by the Borrowers with Bank of America, N.A. into
which deposits must be directed and from which the Borrowers
shall not make disbursements.
(iii) The "DISBURSEMENT ACCOUNT": Established by the
Borrowers with Bank of America, N.A., from which only
disbursements may be made and into which only advances under the
Revolving Credit may be deposited.
(b) The contents of each DDA (other than the Disbursement
Account) and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the
Administrative Agent's property, held for the benefit of the Lenders.
(c) Within sixty (60) days of the Closing Date, the Borrowers
shall close the Blocked Accounts and Disbursement Accounts existing on the date
of this Agreement and establish such accounts with Fleet Bank. Thereafter the
Borrowers shall not establish any Blocked Account hereafter except upon not less
than thirty (30) days written notice to the Collateral Agent and the delivery to
the Collateral Agent of a Blocked Account Agreement with respect thereto.
(d) The Borrowers shall pay all fees and charges of, and maintain
such impressed balances as may be required by the depository in which any
account is opened as required hereby (even if such account is opened by and/or
is the property of the Collateral Agent).
7.4 PROCEEDS AND COLLECTION OF ACCOUNTS.
(a) All Receipts constitute Collateral and proceeds of Collateral
and shall be held in trust by the Borrowers for the Collateral Agent, for the
benefit of the Lenders, shall not be commingled with any of the Borrowers' other
funds, and shall be deposited and/or transferred, no less frequently than daily,
only to the Blocked Account or the Concentration Account. Permitted Investments
shall be pledged to the Collateral Agent for the benefit of the Lenders.
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(b) The Borrowers shall cause the ACH or wire transfer to the
Blocked or the Concentration Account, no less frequently than daily (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 any Exempt
DDA). Each such transfer to be net of any minimum balance, not
to exceed $1,000.00, as may be required to be maintained in the
subject DDA by the bank at which such DDA is maintained and for
petty cash purposes.
(ii) The proceeds of all credit card charges not
otherwise provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the
Collateral Agent on each Business Day on which any such transfer is made.
(c) Whether or not any Liabilities are then outstanding, the
Borrowers shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of then entire ledger balance of the Blocked
Account, net of such minimum balance, not to exceed $750.00, as may be required
to be maintained in the Blocked Account by the depository which the Blocked
Account is maintained.
(d) In the event that, notwithstanding the provisions of this
Section 7.4, the Borrowers receive or otherwise have dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrowers for the
Collateral 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 Collateral Agent.
7.5 PAYMENT OF LIABILITIES.
(a) In the absence of a Liquidation, on each Business Day, the
Administrative Agent shall apply 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) in accordance with
the priorities set forth in Section 12.4, provided, however, for purposes of the
calculation of interest on the unpaid principal balance of the Loan Account,
such payment shall be deemed to have been made one (1) Business Day after such
transfer.
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(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 notice of such deposit is available to the
Administrative Agent by 2:00PM (California time) on that
Business Day.
(ii) Funds paid to the Administrative 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 notice of such payment is
available to the Agent by 2:00PM (California time) on that
Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 7.5(b)(i)) or payment (Section 7.5(b)(ii)) is
not available to the Administrative Agent until after 2:00PM
(California time) on a Business Day, such deposit or payment
shall be deemed to have been made at 9:00AM (California time) on
the then next Business Day.
(iv) All deposits to the Concentration Account and other
payments to the Administrative Agent are subject to clearance
and collection.
(c) The Administrative Agent shall transfer to the Disbursement
Account any surplus in the Concentration Account remaining after the application
towards the Liabilities referred to in Section 7.5(a), above (less those amounts
which are to be netted out, as provided therein) provided, however, in the event
that a Suspension Event has occurred and is continuing or one or more L/C's are
then outstanding then the Collateral Agent may establish a funded reserve of up
to 105% of the aggregate Stated Amounts of such L/C's. Such funded reserve shall
either be returned to the Borrowers in the event that no Suspension Event is
then continuing or applied towards the Liabilities following the occurrence of
any Event of Default described in Section 10.11 or acceleration following the
occurrence of any other Event of Default.
7.6 THE DISBURSEMENT ACCOUNT.
Except as otherwise specifically provided in, or 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 Disbursement
Account.
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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
Collateral Agent, for the benefit of the Lenders and the SwingLine Lender as
their interests may appear herein and in the other Loan Documents, a continuing
security interest in and to, and assigns to the Collateral Agent, for the
benefit of the Lenders and the SwingLine Lender, 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 Collateral Agent may in the future be granted a security
interest, is referred to herein as the "COLLATERAL"):
(a) All Accounts.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrowers' 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, Documents of
Title, 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(j)) or otherwise.
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(k) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8.1(a) through 8.1(k)), including the right
of stoppage in transit.
(l) Leasehold Interests.
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
FCC, as agent pursuant to the February 2000 Agreement, and shall continue in
full force and effect applicable to all Liabilities until all Liabilities have
been paid and/or satisfied in full, the obligation of the Lenders to make loans
and grant financial accommodations has been terminated, and the security
interest granted herein is specifically terminated in writing by a duly
authorized officer of the Collateral Agent.
ARTICLE IX. - COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT:
9.1 APPOINTMENT AS ATTORNEY-IN-FACT.
The Borrowers hereby irrevocably constitute and appoint the Collateral
Agent as the Borrowers' true and lawful attorney, with full power of
substitution, following the occurrence of an Event of Default, to convert the
Collateral into cash at the sole risk, cost, and expense of the Borrowers, but
for the benefit of the Agents, the Lenders and the SwingLine Lender. The rights
and powers granted the Collateral Agent by this 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 Collateral 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 Collateral 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 Collateral
Agent upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the
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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.
(d) Sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
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 any Borrower
is 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 Borrowers.
9.2 NO OBLIGATION TO ACT.
The Collateral 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
Collateral 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 such
exercise of 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
Collateral 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 or in actual bad faith.
ARTICLE X. - EVENTS OF DEFAULT:
The occurrence of any event described in this Article X respectively
shall constitute an "EVENT OF DEFAULT" herein. 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 Administrative Agent.
Upon the occurrence of any other Event of Default, the Administrative Agent may,
and upon the instruction of the applicable Lenders pursuant to Article XIII
declare any and all Liabilities shall become immediately due and payable. The
occurrence of any Event of
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<PAGE> 116
Default shall also constitute, without notice or demand, a default under all
other agreements between any Agent or any Lender and the Borrowers and
instruments and papers heretofore, now or hereafter given any Agent or any
Lender by the Borrowers.
10.1 FAILURE TO PAY WORKING CAPITAL LOANS.
The failure by the Borrowers to pay any amount when due with respect to
the Working Capital Loans.
10.2 FAILURE TO MAKE OTHER PAYMENTS.
The failure by the Borrowers to pay when due (or upon demand, if payable
on demand) any payment Liability other than under the Working Capital Loans.
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 provisions hereof:
<TABLE>
<CAPTION>
Section Relates to:
<S> <C>
4.3(b) Notice of Name Change
4.6 Location of Collateral
4.7 Title to Assets
4.8 Indebtedness
4.9 Insurance Policies
4.15 Pay taxes
4.20 Dividends, Investments, Corporate
Actions
4.24 Affiliate Transactions
4.25 Further Assurances
6.1 Use of Collateral
Article V Financial Performance Covenants
Section 5.12
Article VII Cash Management
</TABLE>
10.4 FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD).
(a) The failure by the Lead Borrower to provide the financial
statements and reports required by the following Sections of this Agreement
within the applicable grace period, if available as provided below, or when due
if no such grace period is then available:
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<TABLE>
<CAPTION>
NUMBER OF GRACE
SECTION REQUIREMENT GRACE PERIOD PERIODS AVAILABLE
------- ----------- ------------ -----------------
<S> <C> <C> <C>
5.4 Borrowing Base 2 days 4 per fiscal quarter
Certificate
5.5 Weekly Reports 2 days 4 per fiscal quarter
5.6 Monthly Reports 5 days 4 per fiscal year
5.7 Quarterly Reports 5 days 1 per fiscal year
5.8 Annual Statement No Grace Period No Grace Period
</TABLE>
(b) The failure by the Borrowers, upon Fifteen (15) days' written
notice by the Administrative 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,
10.3, or 10.4(a), above.
10.5 MISREPRESENTATION.
The determination by the Administrative Agent that any representation or
warranty at any time made by the Borrowers to the Agents or any Lender was not
true or complete in all material respects when given or deemed to be given.
10.6 ACCELERATION OF OTHER DEBT. BREACH OF LEASE.
(a) The occurrence of any event such that any Indebtedness of any
Borrower in excess of $300,000.00 to any creditor other than any Agent or any
Lender could be accelerated (whether or not the subject creditor or lessor takes
any action on account of such occurrence).
(b) The occurrence of any of the following with respect to Leases
on which any Borrower is the lessee or is obligated:
(i) An aggregate of more than $200,000.00 in rent is
then overdue.
(ii) Default and the expiry of any applicable grace
period with respect to not more than two (2) Leases of Stores.
(iii) Default and the expiry of any applicable grace
period of any Lease of any warehouse or distribution center.
10.7 DEFAULT UNDER OTHER AGREEMENTS.
The occurrence of any material breach or default under any agreement
(including any Loan Document other than this Loan Agreement) between any Agent
or any Lender, on the one
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hand, and any Borrower, on the other hand, or instrument given to any Agent
and/or any Lender (notwithstanding that the subject Agent or Lender may not have
exercised all or any of its rights upon default under any such other agreement,
instrument or paper.).
10.8 UNINSURED CASUALTY LOSS.
The occurrence of any (a) uninsured loss, theft, damage, or destruction
of or to any material portion of the Collateral, or (b) sale (other than sales
in the ordinary course of business) of any material portion of Collateral to
which the requisite Consent of the Lenders has not been given hereunder.
10.9 ATTACHMENT; JUDGMENT; RESTRAINT OF BUSINESS.
(a) The service of process upon any Agent or any Lender or any
Participant seeking to attach, by trustee, mesne, or other process, any funds of
any Borrower on deposit with, or assets of any Borrower in the possession of,
that Agent or any Lender or such Participant.
(b) The entry of any judgment in excess of $300,000.00 against
any Borrower, which judgment is not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within fifteen (15) days of its
entry.
(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.
10.10 BUSINESS FAILURE.
Any act by, against, or relating to any Borrower, or its property or
assets, which act constitutes the determination, by such Borrower, to initiate a
program of partial or total self-liquidation; 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 any Borrower's property;
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 any 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
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arrangement with creditors; and/or the initiation by or on behalf of such
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 the 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.
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, the effect of which could be to restrain in any material way the
conduct by that Borrower of its business in the ordinary course.
10.13 CHALLENGE TO LOAN DOCUMENTS.
(a) Any challenge by or on behalf of any Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject 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 strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
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10.14 KEY MANAGEMENT.
The death, disability, or failure of Stephen Gordon, Walter Parks, or
Cornelia Hunter at any time to exercise that authority and discharge those
management responsibilities with respect to the Borrowers as are exercised and
discharged by such Person at the execution of this Agreement.
10.15 CHANGE IN CONTROL.
Any Change in Control.
ARTICLE XI. - RIGHTS AND REMEDIES UPON DEFAULT:
Upon the occurrence of any Event of Default described in Section 10.11
and upon Acceleration, and at all times thereafter, the Collateral Agent shall
have the following rights and remedies in addition to all of the rights,
remedies, powers, privileges, and discretions available to Collateral Agent
prior to the occurrence of an Event of Default. No stay which otherwise might be
imposed pursuant to Section 362 of the Bankruptcy Code or otherwise shall stay,
limit, prevent, hinder, delay, restrict, or otherwise prevent the Collateral
Agent's exercise of any of such rights and remedies.
11.1 RIGHTS OF ENFORCEMENT.
The Collateral Agent shall have all of the rights and remedies of a
secured party upon default under the UCC, in addition to which the Collateral
Agent shall have all and each of the following rights and remedies:
(a) To give notice to any bank at which any DDA or Blocked
Account is maintained and in which Proceeds of Collateral are deposited, to turn
over such Proceeds directly to the Collateral Agent.
(b) To give notice to any of the Borrowers' customs brokers to
follow the instructions of the Collateral Agent as provided in any Customs
Brokers Agreement.
(c) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(d) To take possession of all or any portion of the Collateral.
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(e) 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.
(f) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(g) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(h) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents (without
limitation of the rights and remedies of the Administrative Agent).
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 Collateral
Agent deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit, or apply to the Collateral Agent's
disposition of the Collateral.
(b) The Collateral Agent, in the exercise of the Collateral
Agent's rights and remedies upon default, may conduct one or more going out of
business sales, in the Collateral 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 Collateral 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 Collateral 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 Collateral 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 market (in
which event the Collateral Agent shall provide the Lead Borrower with such
notice as may be practicable under the circumstances), the Collateral Agent
shall give the Lead Borrower at least ten (10) days prior written notice of the
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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 Collateral Agent's rights and remedies upon
default.
(d) The Collateral Agent and any Lender may credit bid and may
purchase the Collateral, or any portion of it, at any sale held under this
Article XI.
(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Collateral Agent on credit, the Liabilities shall not be
deemed to have been reduced as a result thereof unless and until payment is
finally received thereon by the Collateral Agent.
(f) The Collateral Agent shall disburse the proceeds of any
exercise of the Collateral Agent's Rights and Remedies to the Administrative
Agent in accordance with Section 14.5(b) for disbursement by the Administrative
Agent to the Lenders and application towards the Liabilities in accordance with
the relative priorities set forth in Section 14.6.
11.3 OCCUPATION OF BUSINESS LOCATION.
In connection with the Collateral Agent's exercise of the Collateral
Agent's rights under this Article XI, the Collateral Agent may enter upon,
occupy, and use any premises owned or occupied by any Borrower, and may exclude
the Borrowers from such premises or portion thereof as may have been so entered
upon, occupied, or used by the Collateral Agent. The Collateral Agent shall not
be required to remove any of the Collateral from any such premises upon the
Collateral Agent's taking possession thereof, and may render any Collateral
unusable to the Borrowers. In no event shall the Collateral Agent be liable to
the Borrowers for use or occupancy by the Collateral Agent of any premises
pursuant to this Article XI, nor for any charge (such as wages for the
Borrowers' employees and utilities) incurred in connection with the Collateral
Agent's exercise of the Collateral Agent's Rights and Remedies.
11.4 GRANT OF NONEXCLUSIVE LICENSE.
Each Borrower hereby grants to the Collateral Agent a royalty free
nonexclusive irrevocable license to use, apply, and affix any trademark, trade
name, logo, or the like in which that Borrower now or hereafter has rights, such
license being with respect to the Collateral
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Agent's exercise of the rights hereunder including, without limitation, in
connection with any completion of the manufacture of Inventory or sale or other
disposition of Inventory.
11.5 ASSEMBLY OF COLLATERAL.
The Collateral Agent may require the Borrowers to assemble the
Collateral and make it available to the Collateral Agent at the Borrowers' sole
risk and expense at a place or places which are reasonably convenient to both
the Collateral Agent and Borrowers.
11.6 RIGHTS AND REMEDIES.
The rights, remedies, powers, privileges, and discretions of each Agent
hereunder, under any other Loan Document or under applicable law (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 any
Agent in exercising or enforcing any of the Agent's Rights and Remedies shall
operate as, or constitute, a waiver thereof. No waiver by that 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 that Agent's Rights or Remedies, and no express or
implied agreement or transaction of whatever nature entered into between that
Agent and any person, at any time, shall preclude the other or further exercise
of the Agent's Rights and Remedies. No waiver by any 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 be deemed a continuing waiver. The Agent's
Rights and Remedies may be exercised at such time or times and in such order of
preference as each Agent 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. - TRANCHE A FUNDINGS AND DISTRIBUTIONS:
12.1 TRANCHE A FUNDING PROCEDURES.
(a) Subject to Section 12.2, the Administrative Agent shall
advise each Tranche A Lender, no later than 1:00PM (California Time) on a date
on which any Tranche A Loan is to be made. Such advice, in each instance, may be
by telephone or facsimile transmission, provided that
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if such advice is by telephone, it shall be confirmed in writing and shall
include a reference (as applicable) to the interest rate applicable to the
proposed Tranche A Loan.
(b) Subject to Section 12.2, each Tranche A Lender, by no later
than the end of business on the day on which the subject Tranche A 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 Tranche A Loan to the Administrative Agent as proceeds o advances
under the Revolving Credit.
12.2 SWINGLINE LOANS.
(a) In the event that, when a Tranche A Loan is requested and the
aggregate unpaid balance of the SwingLine Loan is less than the SwingLine Loan
Ceiling, then the SwingLine Lender may advise the Administrative Agent that the
SwingLine Lender has determined to include up to the amount of the requested
Tranche A Loan as part of the SwingLine Loan. In such event, the SwingLine
Lender shall Transfer the amount of the requested Tranche A Loan to the
Administrative Agent.
(b) The SwingLine Loan shall be converted to a Tranche A Loan in
which all Tranche A Lenders participate as follows:
(i) At any time and from time to time (but not less than
on a weekly basis), the SwingLine Lender may advise the
Administrative Agent that all of the SwingLine Loan is to be
converted to a Tranche A Loan in which all Tranche A Lenders
participate. The Administrative Agent will settle the SwingLine
Loan the earlier of (a) Wednesday of each week or (b) when the
SwingLine Loan exceeds $7,500,000.00.
(ii) At the initiation of a Liquidation, the then entire
unpaid principal balance of the SwingLine Loan shall be
converted to a Tranche A Loan in which all Tranche A Lenders
participate.
In either such event, the Administrative 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 Tranche A Loan as provided in Section 12.1.
(c) The SwingLine Lender, in separate capacities, may also be the
Administrative Agent and a Tranche A Lender.
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(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 14.6.
(ii) Determination of whether the requisite Tranche A
Lenders have Consented to action requiring such Consent.
12.3 ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS.
(a) Each Tranche A Lender shall make available to the
Administrative Agent, as provided herein, that Tranche A Lender's Tranche A
Percentage Commitment of the following:
(i) Each Tranche A Loan, up to the maximum amount of
that Tranche A Lender's Tranche A Dollar Commitment of the
Tranche A Loans.
(ii) Up to the maximum amount of that Tranche A Lender's
Tranche A Dollar Commitment of each L/C drawing (to the extent
that such L/C drawing is not "covered" by a Tranche A Loan as
provided herein).
(b) In all circumstances, the Administrative Agent may:
(i) Assume that each Tranche A Lender timely shall make
available to the Administrative Agent that Tranche A Lender's
Tranche A Percentage Commitment of each Tranche A Loan, notice
of which is provided pursuant to Section 12.1.
(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 Administrative 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 Administrative Agent makes available, a Tranche A Lender's Tranche A
Percentage Commitment of one or more Tranche A 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 amount a Tranche A
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Lender (a "DELINQUENT TRANCHE A LENDER") fails to provide to the Administrative
Agent within one (1) Business Day of written notice of such failure, then:
(i) The amount which had been made available by the
Administrative Agent is an "AGENT'S COVER".
(ii) All interest paid by the Borrowers on account of
the Tranche A Loan or coverage of the subject L/C Drawing which
consists of the Agent's Cover shall be retained by the
Administrative Agent until the Agent's Cover, with interest, has
been paid.
(iii) The Delinquent Tranche A Lender shall pay to the
Administrative Agent, on demand, interest at a rate equal to the
prevailing Federal Funds Effective Rate 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 to until repaid.
(iv) The Administrative Agent shall have succeeded 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 the
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 12.4
(which relates to ordinary course distributions) or Section 14.6
(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 Administrative Agent
to the extent to which the Administrative 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 Section 12.3(c)(iv), the Delinquent
Tranche A Lender shall be entitled to receive any payments from
the Borrowers to which the Delinquent Tranche A Lender is then
entitled, provided however there shall be
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deducted from such amount and retained by the Administrative
Agent any interest to which the Agent is then entitled on
account of Section 12.3(c)(ii), above.
(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
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 Administrative Agent the aggregate of
the following:
(i) The Agent's Cover (to the extent not previously
repaid by the Borrowers and retained by the Administrative Agent
in accordance with Subsection 12.3(c)(iv), above) with respect
to that Delinquent Tranche A Lender.
Plus
(ii) Any interest payable under Section 12.3(c)(ii),
above (which relates to interest to be paid by that Delinquent
Tranche A Lender).
Plus
(iii) All such costs and expenses as may be incurred by
the Administrative Agent in the enforcement of the
Administrative Agent's rights against such Delinquent Tranche A
Lender.
12.4 ORDINARY COURSE DISTRIBUTIONS.
(a) Except as otherwise provided in Section 14.6, below (which
relates to distributions on account of Liquidation), the Administrative Agent
promptly shall distribute to the SwingLine Lender and the respective Tranche A
Lenders, payments made by the Borrowers on account of the Tranche A Loans, to
the extent such payments are actually received and collected by the
Administrative Agent in the following order and priority:
(i) First: To the SwingLine Lender, up to the then
unpaid principal balance of the SwingLine Loans.
(ii) Second: To the Tranche A Lenders, their respective
Tranche A Percentage Commitments of such aggregate (which
amounts shall be applied by
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the Tranche A Lenders towards principal of the Net Tranche A
Loans based upon the Administrative Agent's advice with such
distribution).
(b) Weekly, on such day as may be set from time to time by the
Administrative Agent (or more frequently at the Administrative Agent's option),
the Administrative Agent and each Tranche A Lender shall settle up on amounts
advanced under the Revolving Credit and collected funds received in the
Concentration Account.
(c) The Administrative Agent shall make distributions on account
of interest as follows: (i) to the SwingLine Lender and to each Tranche A
Lender, such Person's respective Pro Rata share of interest payments on the
Tranche A Loans, (ii) to the Tranche B Lender payments of Tranche B Current Pay
Interest, and (iii) to the Tranche C Lender. In all cases the Administrative
Agent shall make distributions on account of interest when such interest is
actually received and collected by the Administrative Agent (excluding the One
Business Day settlement delay as provided for in Section 7.5(a), which shall be
for the account of the Administrative Agent only). For 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 Tranche A Loans outstanding during the
applicable period covered by the interest payment made by the Borrowers. Any net
principal reductions to the Tranche A Loans received by the Administrative 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 Administrative Agent has distributed to that
Tranche A Lender its Pro Rata share thereof.
(d) The Administrative Agent shall distribute fees paid on
account of the Tranche A Loans as follows:
(i) Unused Line Fee: To the Tranche A Lenders, Pro Rata,
based upon their respective Tranche A Percentage Commitments.
(ii) Tranche A Early Termination Fees to the Tranche A
Lenders, Pro Rata, based upon their respective Tranche A
Percentage Commitments.
(iii) Any fees on account of the issuance of L/Cs to the
extent distributable to the Tranche A Lenders.
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(e) No Lender shall have any interest in, or right to receive any
part of any interest which reflects "float" as described in the proviso included
in Section 7.5(a). Any such float shall be for the account of the Administrative
Agent only.
(f) No Lender shall have any interest in, or right to receive any
part of, the Agent's Fee set forth in Section 2.14 to be paid by the Borrowers
to the Administrative Agent pursuant to the Loan Agreement.
(g) Any amount received by the Administrative Agent as
reimbursement for any cost or expense (including without limitation, attorneys'
reasonable fees) shall be distributed by the Administrative Agent to that Person
which is entitled to such reimbursement as provided in this Agreement (and if
such Person(s) is (are) the Tranche A Lenders, Pro Rata based upon their
respective Tranche A Percentage Commitments at the date on which the expense, in
respect of which such reimbursement is being made, was incurred).
(h) Each distribution pursuant to this Section 12.4 is subject to
Section 12.3(c), above (which relates to Delinquent Tranche A Lenders).
(i) Except as otherwise provided in Section 14.6, below, the
Administrative Agent promptly shall distribute to the Tranche B Lender and
Tranche C Lender, as provided in this Section 12.4, payments made by the
Borrower on account of the Tranche B Obligations and Tranche C Obligations,
respectively, to the extent such payments are actually received and collected by
the Administrative Agent, or are made available to the Administrative Agent.
(j) The Administrative Agent shall distribute to the Tranche B
Lender and the Tranche C Lender the payments on account of principal of, and
interest on, the Tranche B Obligations and Tranche C Obligations (including the
Put Right Debt) as received and collected by the Administrative Agent from the
Borrowers or as made available by the Administrative Agent as the proceeds of
advances under the Revolving Credit.
(k) Any amount received by the Administrative Agent as
reimbursement for any cost or expense (including without limitation, attorneys'
reasonable fees) incurred with respect to, or on account of, the relationship
contemplated by the Loan Agreement shall be distributed to, or retained by, the
Administrative Agent, the Tranche B Lender or Tranche C Lender as provided in
this Agreement.
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ARTICLE XIII. - ACCELERATION:
13.1 ACCELERATION NOTICE BY ADMINISTRATIVE AGENT.
The Administrative Agent may give the Collateral Agent an Acceleration
Notice at any time following the occurrence of an Event of Default.
13.2 ACCELERATION NOTICE BY SUPERMAJORITY LENDERS.
The SuperMajority Lenders may give the Administrative Agent and the
Collateral 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 Tranche A Lenders are received by the
Agents within a period of five (5) consecutive Business Days.
13.3 ACCELERATION NOTICE BY THE TRANCHE B LENDER.
The Tranche B Lender may give the Administrative Agent and the
Collateral Agent an Acceleration Notice as follows:
(a) At any time following the occurrence of an Event of Default
which occurs after payment of all Tranche A Obligations and the obligation of
the Tranche A Lenders to make advances and other financial accommodations
hereunder has been terminated; or
(b) At any time following the entry of an order for relief, under
the Bankruptcy Code, with respect to any Borrower; or
(c) At any time as permitted pursuant to Section 13.4 below.
13.4 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
Administrative Agent.
(b) Upon the expiry of the relevant Standstill Period, the
Tranche B Lender may give the Administrative Agent and the Collateral Agent an
Acceleration Notice unless:
(i) If the relevant Borrower Default is a Borrowing Base
Default, the Loan Account is not in excess of the Borrowing Base
for at least Ten (10) consecutive days during the relevant
Standstill Period; or
(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; or
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(iii) If the relevant Borrower Default is a General
Default, such General Default has been duly waived by the
Administrative Agent in accordance with this Agreement; or
(iv) Acceleration has been stayed by judicial or
statutory process.
(c) In the event that the Tranche B Lender is not permitted to
give an Acceleration Notice in accordance with Section 13.4(b) above due to the
occurrence of an event described in Sections 13.4(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.
13.5 ACCELERATION NOTICE BY THE TRANCHE C LENDER.
The Tranche C Lender may give the Administrative Agent and the
Collateral Agent an Acceleration Notice as follows:
(a) At any time following the occurrence of an Event of Default
which occurs after the Tranche A Termination Date.
(b) At any time following the entry of an order for relief, under
the Bankruptcy Code, with respect to any Borrower.
(c) At any time permitted pursuant to Section 13.6 below.
13.6 ACCELERATION RIGHT OF TRANCHE C LENDER.
(a) Following the occurrence of any General Default, Extended
Borrowing Base Default, or a Tranche C Payment Default, the Tranche C Lender may
initiate a Standstill Period by written notice to the Administrative Agent.
(b) Upon the expiry of the relevant Standstill Period, the
Tranche C Lender may give the Administrative Agent and the Collateral Agent an
Acceleration Notice unless:
(i) All then due Tranche C Debt Payments (other than
those which would be due only if Tranche C Loans were
accelerated) have been paid; or
(ii) Acceleration has been stayed by judicial or
statutory process; or
(iii) If the relevant default is a General Default, such
General Default has been duly waived by the Administrative Agent
in accordance with this Agreement; or
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(iv) If the relevant default is an Extended Borrowing
Base Default, the Loan Account is not in excess of the Borrowing
Base for at least Ten (10) consecutive days during the relevant
Standstill Period;
(c) In the event that the Tranche C Lender is not permitted to
give an Acceleration Notice in accordance with Section 13.6(b) above due to the
occurrence of an event described in Sections 13.6 (b)(i)-(iv), above, then the
relevant Standstill Period shall be reset for any subsequent default which
triggers the acceleration right of the Tranche C Lender under this Section.
ARTICLE XIV. - LIQUIDATIONS
14.1 ACCELERATION.
Unless stayed by judicial or statutory process, the Administrative Agent
shall Accelerate the Liabilities within a commercially reasonable time
following:
(a) The Administrative Agent's giving of an Acceleration Notice
to the Collateral Agent as provided in Section 13.1.
(b) The Administrative Agent's receipt of an Acceleration Notice
from the SuperMajority Lenders, in compliance with Section 13.2.
(c) The Administrative Agent's receipt of an Acceleration Notice
from the Tranche B Lenders, in compliance with Sections 13.3 or 13.4.
(d) The Administrative Agent's receipt of an Acceleration Notice
from the Tranche C Lenders, in compliance with Sections 13.5 or 13.6.
14.2 INITIATION OF LIQUIDATION.
Unless stayed by judicial or statutory process, a Liquidation shall be
initiated by the Collateral Agent within a commercially reasonable time
following Acceleration of the Liabilities.
14.3 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 12.2, to a
Tranche A Loan in which all Tranche A Lenders participate.
(ii) The Administrative Agent and the Tranche A Lenders
shall "net out" each Tranche A Lender's respective contributions
towards the Tranche A
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Loans, so that each Tranche A Lender holds that Tranche A
Lender's Tranche A Percentage Commitment of the Tranche A Loans
and advances.
(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 Tranche A Percentage
Commitment of such honoring.
14.4 COLLATERAL AGENT'S CONDUCT OF LIQUIDATION.
(a) Any Liquidation shall be conducted solely by the Collateral
Agent with the advice and assistance of the Administrative Agent and the
Lenders. Without in any way limiting the sole authority of the Collateral Agent
to Liquidate Collateral in any order or manner that it deems appropriate, in its
sole discretion, in the event that the Collateral Agent has the right to
exercise its Rights and Remedies as against Inventory, Equipment and Fixtures,
the Collateral Agent shall have the right to use such Equipment and Fixtures, as
may be reasonably necessary, in the course of the Liquidation of the Inventory
prior to Liquidating such Equipment and Fixtures.
(b) The Collateral Agent may establish one or more Nominees to
"bid in" or otherwise acquire ownership to any Post Foreclosure Asset.
(c) The Collateral 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 Collateral Agent and/or the Nominee may operate, repair,
manage, maintain, develop, and dispose of any Post Foreclosure Asset in such
manner as the Collateral Agent determines as appropriate under the
circumstances.
(d) The Collateral Agent may decline to undertake or to continue
taking a course of action or to execute an action plan (whether proposed by the
Collateral Agent or by any Lender) unless indemnified to the Collateral Agent's
satisfaction by the Lenders against any and all liability and expense which may
be incurred by the Collateral Agent by reason of taking or continuing to take
that course of action or action plan.
(e) Each Lender shall execute all such instruments and documents
not inconsistent with the provisions of this Agreement or the other Loan
Documents as the Collateral 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 management and disposition of any Post Foreclosure Asset.
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14.5 DISTRIBUTION OF LIQUIDATION PROCEEDS.
(a) The Collateral 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 reasonably anticipated future expenses which
may be incurred by the Collateral Agent in the exercise of rights as a secured
creditor of the Borrowers and prior claims which the Collateral Agent
anticipates may need to be paid.
(b) The Collateral Agent shall distribute the proceeds of any
Liquidation, net of any amount deposited into such fund reserve accounts, all
reasonable costs and expenses of the Agents, any Costs of Collection of any
Agent (which shall be distributed to the Agents) and of prior claims, to the
extent available, to the Administrative Agent with such frequency as the
Collateral Agent determines.
(c) The Administrative Agent shall distribute the net proceeds of
Liquidation, as distributed to the Administrative Agent by the Collateral Agent
pursuant to Section 14.5(b), above in accordance with the relative priorities
set forth in Section 14.6.
(d) Each Lender, on the written request of the Collateral Agent
and/or any Nominee, not more frequently than once each month, shall reimburse
the Collateral Agent and/or any Nominee, ratably, for any cost or expense
reasonably incurred by the Collateral Agent and/or the Nominee in the conduct of
a Liquidation, which amount is not covered out of current proceeds of the
Liquidation, which reimbursement shall be paid over to and distributed by the
Collateral Agent.
14.6 RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION.
The relative priorities of security interests in the Collateral and to
the proceeds of a Liquidation are as follows:
(a) With respect to the Tranche A Senior Collateral:
(i) First: to the Agents on account of Costs of
Collection of the Agents with respect to, or on account of, the
Tranche A Senior Collateral; and then
(ii) Second: To the SwingLine Lender, on account of any
SwingLine loans not converted to Tranche A Loans pursuant to
Section 14.3(a); and then
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(iii) Third: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Debt; and then
(iv) Fourth: To the Tranche A Lenders, Pro Rata, to the
extent of the aggregate of all Tranche A Fees, other than the
Tranche A Early Termination Fee; and then
(v) Fifth: To the Tranche B Lender to the extent of the
Tranche B Debt; and then
(vi) Sixth: To the Tranche B Lender to the extent of the
aggregate of all Tranche B Fees, other than the Tranche B Early
Termination Fee; and then
(vii) Seventh: To the Tranche C Lender to the extent of
the Tranche C Debt; and then
(viii) Eighth: To the Tranche C Lender to the extent of
the aggregate of all Tranche C Fees, other than the Tranche C
Early Termination Fee, and then
(ix) Ninth: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Early Termination Fee; and then
(x) Tenth: To the Tranche B Lender to the extent of the
Tranche B Early Termination Fee; and then
(xi) Eleventh: To the Tranche C Lender to the extent of
the Tranche C Early Termination Fee; and then
(xii) Twelfth: To the Lenders on account of all other
Liabilities in the following order: first to the Tranche A
Lender, second to the Tranche B Lender, third to the Tranche C
Lender; and then.
(xiii) Thirteenth: To the holder of the Warrants on
account of Put Right Debt, if then or previously exercised and
outstanding.
(b) With respect to the Tranche B Senior Collateral:
(i) First: To the Agents on account of Costs of
Collection of the Agents with respect to, or on account of, the
Tranche B Senior Collateral; and then
(ii) Second: To the Tranche B Lender to the extent of
the Tranche B Debt; and then
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(iii) Third: To the Tranche B Lender to the extent of
the aggregate of all Tranche B Fees, other than the Tranche B
Early Termination Fee; and then
(iv) Fourth: To the Tranche C Lender to the extent of
the Tranche C Debt; and then
(v) Fifth: To the Tranche C Lender to the extent of the
aggregate of all Tranche C Fees, other than the Tranche C Early
Termination Fee; and then
(vi) Sixth: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Debt; and then
(vii) Seventh: To the Tranche A Lenders, Pro Rata, to
the extent of the aggregate of all Tranche A Fees, other than
the Tranche A Early Termination Fee,; and then
(viii) Eighth: To the Tranche B Lender to the extent of
the Tranche B Early Termination Fee; and then
(ix) Ninth: To the Tranche C Lender to the extent of the
Tranche C Early Termination Fee; and then
(x) Tenth: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Early Termination Fee; and then
(xi) Eleventh: To the holder of the Warrants on account
of the Put Right Debt, if then or previously exercised and
outstanding; and then
(xii) Twelfth: To the Lenders on account of all other
Liabilities in the following order: first to the Tranche B
Lender, second to the Tranche C Lender, third to the Tranche A
Lender.
(c) With respect to the Tranche C Senior Collateral:
(i) First: To the Agents on account of Costs of
Collections of the Agents with respect to, or on account of,
the Tranche C Senior Collateral.
(ii) Second: To the Tranche C Lender to the extent of
the Tranche C Debt; and then
(iii) Third: To the Tranche C Lender to the extent of
the aggregate of all Tranche C Fees, other than the Tranche C
Early Termination Fee; and then
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(iv) Fourth: To the Tranche B Lender to the extent of
the Tranche B Debt; and then
(v) Fifth: To the Tranche B Lender to the extent of the
aggregate of all Tranche B Fees, other than the Tranche B Early
Termination Fee; and then
(vi) Sixth: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Debt; and then
(vii) Seventh: To the Tranche A Lenders, Pro Rata, to
the extent of the aggregate of all Tranche A Fees, other than
the Tranche A Early Termination Fee; and then
(viii) Eighth: To the Tranche C Lender to the extent of
the Tranche C Early Termination Fee; and then
(ix) Ninth: To the Tranche B Lender to the extent of the
Tranche B Early Termination Fee; and then
(x) Tenth: To the Tranche A Lenders, Pro Rata, to the
extent of the Tranche A Early Termination Fee; and then;
(xi) Eleventh: To the holder of the Warrants on account
of the Put Right Debt, if then or previously exercised and
outstanding; and then
(xii) Twelfth: To the Lenders on account of all other
Liabilities in the following order: first, the Tranche C Lender,
second the Tranche B Lender, and third the Tranche A Lender.
ARTICLE XV. - THE AGENTS:
15.1 APPOINTMENT OF AGENT.
(a) Each Lender appoints and designates FCC as the
"Administrative Agent" hereunder and under the Loan Documents.
(b) Each Lender appoints and designates FCC and FRF as the
"Collateral Agent" hereunder and under the Loan Documents.
(c) Each Lender authorizes each Agent:
(i) To execute those of the Loan Documents and all other
instruments relating thereto to which that 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 that
Agent hereunder and in the Loan Documents and all related
documents, together with such other powers as are reasonably
incident thereto.
15.2 RESPONSIBILITIES OF AGENTS.
(a) Notwithstanding anything contained herein to the contrary,
the Collateral Agent shall have sole responsibility and authority to establish
Reserves. The Collateral Agent shall have the sole responsibility and authority
for the conduct of any Liquidation and the distribution of the proceeds of such
Liquidation to the Administrative Agent. FRF alone shall discharge all of the
responsibilities and duties vested in the Collateral Agent pursuant to the terms
of this Agreement until it resigns as Collateral Agent, and thereafter FCC, if
it has not theretofor resigned as Collateral Agent, alone shall discharge such
responsibilities any duties.
(b) The Administrative Agent shall have responsibility and
authority for the administration of the credit facilities contemplated by the
Loan Documents and for all matters for which the Collateral Agent is not
responsible. In all instances where the allocation of responsibility and
authority, as between the Collateral Agent and the Administrative Agent are in
doubt, the Administrative Agent shall be vested with such responsibility and
authority.
(c) Neither Agent shall have any duties or responsibilities to,
or any fiduciary relationship with, any Lender except for those expressly set
forth in this Agreement.
(d) Neither Agents nor any of their 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 (other
than for statements made herein or in writing by the Agents).
(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 Agreement, the Loan
Documents or any other document referred to or provided for
therein.
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(iv) Any failure by the Borrowers, or any other Person
(other than the Agent) to perform such Person's obligations
under the Loan Documents.
(e) Each 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 subject 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.
(f) Neither Agents, nor any of their directors, officers, or
employees shall be responsible for any action taken or omitted to be taken by
any other of them in connection herewith in reliance upon advice of its counsel
nor, in any other event 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.
(g) With respect to the repayment of the Liabilities, no Agent
shall have any responsibility in any event for more funds than that Agent
actually receives and collects.
(h) The Agents, in their separate capacities as Lenders, shall
have the same rights and powers hereunder as any other Lender.
(i) The Agents shall not be required to perfect any Lien in
Leasehold Interests, motor vehicles or rolling stock or responsible for any
failure to do so.
15.3 DISTRIBUTIONS BY THE AGENT.
(a) The Administrative Agent, in that Agent's reasonable
discretion based upon the Administrative Agent's 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.
(b) The Administrative Agent may disburse funds prior to
determining that the sums which the Administrative Agent expects to receive have
been finally and unconditionally paid to the Administrative Agent. If and to the
extent that the Administrative Agent does disburse funds and it later becomes
apparent that the Administrative Agent did not then receive a payment in an
amount equal to the sum paid out, then any Lender to whom the Administrative
Agent made
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the funds available, on demand from the Administrative Agent, shall refund to
the Administrative Agent the sum paid to that Person.
(c) If, in the opinion of any Agent, the distribution of any
amount received by that Agent might involve that Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then that Agent may
refrain from making distribution until that 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 such Lender is
entitled to any distribution hereunder, to constitute such distribution and
Second, shall be shared with the other Lenders as if distributed pursuant to
(and shall be deemed as distributions under) Section 14.6.
(e) Each Lender acknowledges that the crediting of the
Liabilities 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 the Administrative Agent to any
Lender.
(f) In the event that a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Administrative Agent is
to be repaid or disgorged, then each Lender to which any such distribution shall
have been made shall repay, to the Administrative Agent which had made such
distribution, that Lender's ratable share of the amount so adjudged or
determined to be repaid or disgorged.
15.4 DISPUTE RESOLUTION.
Any dispute among the Lenders and/or any Agent concerning the
interpretation, administration, or enforcement of the financing arrangements
contemplated by this or any other Loan Agreement or the interpretation or
administration of this or any other Loan Agreement 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,
Massachusetts, to the jurisdiction of which courts all parties hereto hereby
submit.
15.5 DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS.
The Administrative Agent will forward to each Lender and the Collateral
Agent, promptly after the Administrative Agent's receipt thereof, a copy of each
notice or other document
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furnished to the Administrative Agent pursuant to this Agreement, including
monthly, quarterly, and annual financial statements received from the Borrowers
pursuant to Article V of this Agreement, other than any of the following
(provided that the failure of the Administrative Agent to distribute notices or
other documents in accordance with this Agreement will not subject the
Administrative Agent to any liability):
(a) Routine communications associated with requests for Tranche A
Loans and/or the issuance of L/C's.
(b) Routine or nonmaterial communications.
(c) Any notice or document required by any of the Loan Documents
to be furnished to the Lenders by the Borrowers.
Any notice or document of which the Administrative Agent has knowledge
that such notice or document had been forwarded to the Lenders other than by the
Administrative Agent.
15.6 CONFIDENTIAL INFORMATION.
(a) Each Lender will maintain, as confidential, all of the
following:
(i) Proprietary approaches, techniques, and methods of
analysis which are applied by any Agent in the administration of
the credit facility contemplated by this Agreement.
(ii) Proprietary forms and formats utilized by any Agent
in providing reports to the Lenders pursuant hereto, which forms
or formats are not of general currency.
(iii) Confidential information provided by the Borrowers
pursuant to the Loan Documents, other than any information which
becomes known to the general public through services other than
that Lender.
(b) 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.
Each Agent shall be entitled to rely upon any certificate, notice or
other document (including any cable, telegram, telex, or facsimile) reasonably
believed by that Agent to be genuine
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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 that Agent. As to any matters not expressly provided for in
this Agreement, any Loan Document, or in any other document referred to therein,
each 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 AGENTS AND OTHER LENDERS.
(a) Each Lender represents to all other Lenders and to each Agent
that such Lender:
(i) Independently and without reliance on any
representation or act by any 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.
(ii) Has relied upon that Lender's review of the Loan
Documents by that Lender and by counsel to Lender as that Lender
deemed appropriate under the circumstances.
(b) Each Lender agrees that such Lender, independently and
without reliance upon any 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.
(c) Each Agent, in the discharge of that Agent's 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 an Agent
hereunder (as to which, see Section 15.5), no Agent shall have any affirmative
duty or responsibility to provide any Lender with any credit or other
information concerning any Person, which information may come into the
possession of that Agent or any Affiliate of that Agent.
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(e) Each Lender, at such Lender's request, shall have reasonable
access to all nonpriviledged documents in the possession of an Agent, which
documents relate to that Agent's performance of its duties hereunder.
15.9 INDEMNIFICATION.
Without limiting the liabilities of the Borrowers under any this or any
of the other Loan Documents, each Lender shall indemnify each Agent, ratably,
for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including attorneys' reasonable fees and expenses and other
out-of-pocket expenditures) which may at any time be imposed on, incurred by, or
asserted against that 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 terms hereof or thereof or of any such other documents, provided,
however, 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 an
Agent as to which a final judicial determination has been or is made (in a
proceeding in which that Agent has had an opportunity to be heard) that the
subject Agent had acted in a grossly negligent manner, in actual bad faith, or
in willful misconduct.
15.10 RESIGNATIONS OF AGENTS.
(a) The Administrative Agent may resign at any time by giving
sixty (60) days prior written notice thereof to the Lenders and to the
Collateral Agent. Upon receipt of any such notice of resignation, the Lenders
shall have the right to appoint a successor Administrative Agent by Combined
Majority Consent Plus (and if no Event of Default has occurred, with the consent
of the Lead Borrower not to be unreasonably withheld or delayed). If no
successor Administrative Agent shall have been so appointed and shall have
accepted such appointment within thirty (30) days after the giving of notice by
the resigning Administrative Agent, then the resigning Administrative Agent may
appoint a successor Administrative Agent, which shall be a financial institution
having a combined capital and surplus in excess of $250,000,000. The consent of
the Lead Borrower otherwise required by this Section 15.10 shall not be required
if an Event of Default has occurred.
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(b) Any Collateral Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Lenders and to the Administrative
Agent. In the event of the resignation of one Collateral Agent, the surviving
Collateral Agent shall act as the sole Collateral Agent. In the event that both
Collateral Agents resign, or the surviving Collateral Agent subsequently
resigns, the Lenders shall have the right to appoint a successor Collateral
Agent by Consent of the Majority Lenders Plus and Tranche C Consent.
(c) 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.
(d) After any retiring Agent's resignation, the provisions of
this Agreement and of all other Loan Documents 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 AGENTS - CONSENTS - AMENDMENTS - WAIVERS:
16.1 ADMINISTRATION OF CREDIT FACILITIES.
(a) Except as otherwise specifically provided in this Agreement
(including without limitation this Article XVI), each Agent may take any action
with respect to the credit facility contemplated by the Loan Documents as that
Agent determines to be appropriate, provided, however, that such Agent is not
under any affirmative obligation to take any action which it is not required by
this Agreement or the Loan Documents specifically to so take.
(b) Except as specifically provided in the following Sections of
this Agreement, whenever a Loan Document or this Agreement provides that action
may be taken or omitted to be taken in an Agent's discretion, that 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
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<TABLE>
<S> <C>
16.2 Majority Consent
16.3 Combined Majority Consent Plus
16.4 SuperMajority Consent
16.5 Combined SuperMajority Consent
Plus
16.6 Unanimous Tranche A Consent
16.7 Combined Unanimous Consent
16.8 Tranche B Consent
16.9 Tranche C Consent
16.10 Unanimous Tranche A Consent and
Tranche B Consent
16.11 SuperMajority Consent, Tranche B
Consent and Tranche C Consent
16.12 SwingLine Lender Consent
16.13 Agent's Consent
</TABLE>
(c) The rights granted to the Tranche A Lenders in those sections
referenced in Section 16.1(b) shall not otherwise limit or impair any Agent's
exercise of its discretion under the Loan Documents. By way of non-exclusive
example, the Administrative Agent in its discretion, without any Consent of the
Tranche A Lenders, may undertake any of the following:
(i) If a Suspension Event shall have occurred and be
continuing, the Administrative Agent (among other things) may
suspend the Revolving Credit in accordance with the relevant
provisions of the Loan Agreement (whereupon any further Tranche
A Loans shall be made and L/C's shall be issued, amended, or
renewed in the sole discretion of the Administrative Agent as
long as such Suspension Event exists and is continuing).
(ii) If an Event of Default has occurred, the
Administrative Agent (among other things) may
(A) Increase the rate of interest as
provided in, and to the extent permitted
by, the Loan Agreement; and/or
(B) Give an Acceleration Notice to the
Collateral Agent as provided in Section
13.1.
(d) The Lenders agree that any advance under the Revolving Credit
which results in a Permissible Overloan may be made by the Administrative Agent
in its discretion without the
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Consent of the Lenders and that each Lender shall be bound thereby, provided
that under such circumstances, a Permissible Overloan may not be outstanding for
more than sixty (60) consecutive days, unless the Combined SuperMajority Lenders
Plus, acting by Combined SuperMajority Consent Plus, otherwise agree to extend
such period.
16.2 ACTIONS REQUIRING MAJORITY CONSENT.
Majority Consent is required for the amendment of, or waiver of
compliance with, any provision of the Loan Documents or of this Agreement, other
than as described in the following Sections of this Agreement.
<TABLE>
<CAPTION>
ACTIONS DESCRIBED IN SECTION TYPE OF CONSENT REQUIRED
---------------------------- ------------------------
<S> <C>
16.3 Combined Majority Consent Plus
16.4 SuperMajority Consent
16.5 Combined SuperMajority Consent
Plus
16.6 Unanimous Tranche A Consent
16.7 Combined Unanimous Consent
16.8 Tranche B Consent
16.9 Tranche C Consent
16.10 Unanimous Tranche A Consent and
Tranche B Consent
16.11 SuperMajority Consent, Tranche B
Consent and Tranche C Consent
16.12 SwingLine Lender Consent
16.13 Agent's Consent
</TABLE>
16.3 ACTIONS REQUIRING COMBINED MAJORITY CONSENT PLUS.
None of the following may take place without Combined Majority Consent
Plus:
(a) Amendment or waiver of the effect of any provision of Article
III of the Loan Agreement.
(b) Amendment of, or waiver of a breach of or compliance with,
any covenant or warranty included in any Loan Document, other than any financial
performance covenant referenced in Section 5.12 of the Agreement and other than
Section 4.6(c) (as to which, see Section 16.5).
16.4 ACTIONS REQUIRING SUPERMAJORITY LENDER CONSENT.
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None of the following may take place without SuperMajority Consent:
(a) If a Suspension Event shall have occurred and be continuing,
the SuperMajority Lenders, acting by SuperMajority Consent, may direct the
Administrative Agent to suspend the making of Tranche A Loans (including any
Permissible Overloans) as provided in, and to the extent permitted by, the Loan
Agreement (whereupon, as long as such Suspension Event exists and is continuing,
Tranche A Loans shall be made and L/C's shall be issued, amended, or renewed
only with SuperMajority Consent).
(b) If an Event of Default has occurred and not been duly waived
by the requisite number of Lenders, the SuperMajority Lenders may direct the
Administrative Agent to:
(i) Give the Collateral Agent an Acceleration Notice in
accordance with Section 13.2; or
(ii) Increase the rate of interest with respect to
Tranche A Loans to the default rate of interest as provided in,
and to the extent permitted by, this Agreement.
(c) Any increase in the interest rate or fees chargeable with
respect to the Tranche B Loan or Tranche C Loan, or the default rate with
respect to either.
16.5 ACTIONS REQUIRING COMBINED SUPERMAJORITY CONSENT PLUS.
None of the following may take place without Combined SuperMajority
Consent Plus:
(a) Those actions, with respect to Permissible Overloans which
are described in Section 16.1(d) as being subject to Combined SuperMajority
Consent Plus.
(b) To permit Permissible Overloans to be outstanding for more
than sixty (60) consecutive days more than twice during any twelve (12) month
period.
(c) Amendment of, or waiver of a breach of or compliance with,
Section 4.6(c), 4.8(b) or any financial performance covenant included in Section
5.12 of this Agreement.
(d) Any amendment of the "Events of Default" which are included
in the Loan Agreement.
(e) Any release of a material portion of the Collateral in
connection with or in order to facilitate a Liquidation.
(f) Any amendment to Section 2.10(k)(iii).
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16.6 ACTIONS REQUIRING UNANIMOUS TRANCHE A CONSENT.
None of the following may take place without Unanimous Tranche A
Consent:
(a) Increase in any Tranche A Lender's Tranche A Dollar
Commitment or Tranche A Percentage Commitment (other than by reason of the
application of Section 15.10 (which deals with NonConsenting Tranche A Lenders)
or Section 16.1 (which deals with assignments and participations).
(b) Decrease in any interest rate or Tranche A Fee payable to the
Tranche A Lenders on account of the Tranche A Loans.
(c) Extension of the Tranche A Maturity Date.
(d) Forgiveness of all or any portion of the Tranche A Debt.
(e) Any change in the definitions of "Majority Consent" and
"SuperMajority Consent".
16.7 ACTIONS REQUIRING OR DIRECTED BY COMBINED UNANIMOUS CONSENT
None of the following may take place without Combined Unanimous Consent:
(a) 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, as 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
Collateral Agent of any Reserve in the Collateral Agent's
administration of the Revolving Credit as otherwise permitted by
this Agreement.
(ii) The foregoing shall not prevent the Administrative
Agent, in its administration of the Revolving Credit, from
restoring any component of the Borrowing Base which had been
lowered by the Administrative Agent back to the value of such
component, as stated in this Agreement or to an intermediate
value.
(b) Any release of any Person obligated on account of the
Liabilities.
(c) The making of any Tranche A Loan which, when made, results in
an Overloan and is not a Permissible Overloan, provided, however, that
(i) No Consent shall be required in connection with the
making of any Tranche A Loan to "cover" any honoring of a
drawing under any L/C; and
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(ii) Each Lender recognizes that subsequent to the
making of a Tranche A 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 Administrative Agent
(such as a drop in Collateral value).
(d) The waiver of the obligation of the Borrowers to reduce the
unpaid principal balance of loans under the Revolving Credit to an amount which
does not exceed a Permissible Overloan or to eliminate an Overloan.
(e) Any amendment of Section 2.10, Section 12.4, Section 14.6 or
this Article XVI.
(f) Amendment of any of the following Definitions:
(i) "Appraised Liquidation Value"
(ii) "Change in Control"
(iii) "Combined Majority Consent Plus"
(iv) "Combined SuperMajority Consent Plus"
(v) "Combined Unanimous Consent"
(vi) "Consent"
(vii) "Majority Consent"
(viii) "Permissible Overloan"
(ix) "Protective Advances"
(x) "Standstill Period"
(xi) "Tranche A Ceiling"
(xii) "Tranche A Debt"
(xiii) "Tranche A Loan"
(xiv) "Tranche A Obligations"
(xv) "Tranche A Senior Collateral"
(xvi) "Unanimous Tranche A Consent"
(g) Any release of a material portion of Collateral other than in
connection with or in order to facilitate a Liquidation.
(h) Any amendment to, or waiver of, Section 10.11.
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16.8 ACTIONS REQUIRING TRANCHE B CONSENT.
None of the following may take place without the Consent of the Tranche
B Lender.
(a) Extension of the Tranche B Maturity Date.
(b) Decrease in any interest rate or Tranche B Fee payable to the
Tranche B Lender on account of the Tranche B Debt.
(c) Any increase in the Base Margin or Index Margin, or fees
chargeable, with respect to the Tranche A Loans or any increase in the interest
rate or fees chargeable with respect to the Tranche C Loan, or the default rate
with respect to either.
(d) Forgiveness of all or any portion of the Tranche B Debt or
Tranche B Fees.
(e) Any change to the following Definitions:
(i) "Eligible Assignee" (solely as to assignability
of Tranche B Debt)
(ii) "Extended Borrowing Base Default"
(iii) "General Default"
(iv) "Permitted SubDebt"
(v) "Tranche B Ceiling"
(vi) "Tranche B Consent"
(vii) "Tranche B Debt"
(viii) "Tranche B Loans"
(ix) "Tranche B Obligations"
(x) "Tranche B Payment Default"
(xi) "Tranche B Senior Collateral"
(xii) "Tranche C Ceiling"
(xiii) "Tranche C Debt"
(xiv) "Tranche C Obligations"
(xv) "Tranche C Payment Default"
(xvi) "Tranche C Senior Collateral"
(xvii) "Tranche C Termination Date"
16.9 ACTIONS REQUIRING TRANCHE C CONSENT.
None of the following may take place without Tranche C Consent.
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(a) Amendment or waiver of any provision of Article III of the
Loan Agreement.
(b) Extension of the Tranche C Maturity Date.
(c) Decrease in any interest rate or Tranche C Fee payable to the
Tranche C Lender.
(d) Any increase in the Base Margin or Index Margin, or fees
chargeable, with respect to the Tranche A Loans or any increase in the interest
rate or fees chargeable with respect to the Tranche B Loan, or the default rate
with respect to either.
(e) Forgiveness of all or any portion of the Tranche C Debt or
Tranche C Fees.
(f) Any change to the following Definitions:
(i) "Eligible Assignee" (solely as to assignability
of Tranche C Debt)
(ii) "Extended Borrowing Base Default"
(iii) "General Default"
(iv) "Permitted SubDebt"
(v) "Tranche B Ceiling"
(vi) "Tranche B Debt"
(vii) "Tranche B Loans"
(viii) "Tranche B Obligations"
(ix) "Tranche B Payment Default"
(x) "Tranche B Senior Collateral"
(xi) "Tranche C Ceiling"
(xii) "Tranche C Debt"
(xiii) "Tranche C Loans"
(xiv) "Tranche C Obligations"
(xv) "Tranche C Payment Default"
(xvi) "Tranche C Senior Collateral"
(xvii) "Tranche C Termination Date"
(g) Amendment to, or waiver of, the following Sections of this
Agreement: Sections 10.1, 10.3(inclusive only of Sections 4.3(b), 4.6, 4.7, 4.8,
4.20, 4.24, 5.1, subsection 5.12(d) of Article V, and Article VII), 10.5, 10.10,
10.13, 10.14.
16.10 INTENTIONALLY LEFT BLANK.
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16.11 ACTIONS REQUIRING SUPERMAJORITY CONSENT, TRANCHE B CONSENT AND
TRANCHE C CONSENT.
None of the following may take place without SuperMajority Consent,
Tranche B Consent and Tranche C Consent:
(a) Increase in the amounts the Borrowers are permitted to spend
for Capital Expenditures pursuant to Section 5.12(c).
(b) Increase in the minimum thresholds for EBITDA set forth in
Section 5.12(b).
(c) Any change in this Section 16.11.
16.12 ACTIONS REQUIRING SWINGLINE LENDER CONSENT.
No action, amendment, or waiver of compliance with, any provision of the
Loan Documents or of this Agreement which affects the SwingLine Lender in its
capacity as the SwingLine Lender may be undertaken without the Consent of the
SwingLine Lender.
16.13 ACTIONS REQUIRING AGENTS' CONSENT.
(a) No action, amendment, or waiver of compliance with, any
provision of the Loan Documents or of this Agreement which affects an Agent in
its capacity as an Agent may be undertaken without the written consent of that
Agent.
(b) No action referenced herein which affects the rights, duties,
obligations, or liabilities of an Agent shall be effective without the written
consent of that Agent.
(c) No reduction of any fee due any Agent shall be effective
without the written consent of that Agent.
16.14 MISCELLANEOUS ACTIONS.
(a) Notwithstanding any other provision of the within Agreement,
no single Lender independently may exercise any right of action or enforcement
against or with respect to the Borrower, including, without limitation, any
right of set-off, except with Combined Unanimous Consent.
(b) Each Agent shall be fully justified in failing or refusing to
take action under this Agreement or any Loan Document on behalf of any Lender
unless that Agent shall first
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(i) Receive such clear, unambiguous, written
instructions as the Agent deems appropriate; and
(ii) Be indemnified to that Agent's satisfaction by the
Lenders against any and all liability and expense which may be
incurred by that Agent by reason of taking or continuing to take
any such action, unless such action had been grossly negligent,
in willful misconduct, or in bad faith.
(c) Each Agent may establish reasonable procedures for the
providing of direction and instructions from the Lenders to that Agent.
16.15 NONCONSENTING TRANCHE A LENDER.
(a) In the event that a Tranche A Lender (in this Section 16.15,
a "NONCONSENTING TRANCHE A LENDER") does not provide its Consent to a proposal
by the Administrative 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, below, of the NonConsenting Tranche A
Lender's commitment hereunder on fifteen (15) days written notice to the
Administrative 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(in the case in which the Borrowers have
theretofore furnished a Tranche A Note to the NonConsenting Tranche A Lender),
only if the NonConsenting Tranche A Lender delivers the Tranche A Note held by
the NonConsenting Tranche A Lender to the Administrative Agent:
(i) Such NonConsenting Tranche A Lender's Pro Rata share
of the principal and interest of the Tranche A Loans to the date
of such assignment;
(ii) All Tranche A Fees due to the NonConsenting Tranche
A Lender to the date of such assignment; and
(iii) Any out-of-pocket costs and expenses for which the
NonConsenting Tranche A Lender is entitled to reimbursement from
the Borrowers.
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(c) In the event that the NonConsenting Tranche A Lender fails to
deliver to the Administrative Agent the Tranche A Note held by the NonConsenting
Tranche A Lender, if any, as provided in Section 16.10(b), then:
(i) The amount otherwise to be Transferred to the
NonConsenting Tranche A Lender shall be Transferred to the
Administrative Agent and held by the Administrative Agent,
without interest, to be turned over to the NonConsenting Tranche
A Lender upon delivery of the Tranche A Note held by that
NonConsenting Tranche A Lender;
(ii) The Tranche A 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 "Tranche A Lender"; and
(iv) The Tranche A Lender(s) which have Transferred the
amount to the Administrative Agent as described above shall have
succeeded 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, and unless such Tranche A Lender agrees to an
alternate distribution, the NonConsenting Tranche A Lender's commitment
hereunder shall be divided among such Tranche A Lenders, Pro Rata based upon
their respective Tranche A Loan Commitments, with the Administrative Agent
coordinating such transaction.
(e) The Administrative Agent shall coordinate the retirement of
the Tranche A Note held by the NonConsenting Tranche A Lender and the issuance
of Tranche A Notes to those Tranche A Lenders which "take-out" such
NonConsenting Tranche A Lender, provided, however, no processing fee otherwise
to be paid as provided in Section 17.2(b) shall be due under such circumstances.
ARTICLE XVII. - ASSIGNMENT BY LENDERS:
17.1 ASSIGNMENTS AND ASSUMPTIONS.
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(a) Except as provided herein, each Lender (in this Section 17.1,
an "ASSIGNING LENDER") may assign to one or more Eligible Assignees (in this
Section 17.1, each an "ASSIGNEE LENDER") all or a portion of that Lender's
interests, rights and obligations under this Agreement and the Loan Documents
(including, in the case of Tranche A Lenders, all or a portion of its Tranche A
Commitment) and the same portion of the loans at the time owing to it, and of
the note held by the Assigning Lender, provided that, in the case of an
Assigning Lender that is a Tranche A Lender:
(i) The Administrative 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 resulting Tranche A Lender's
having a Tranche A Dollar Commitment of less than the "minimum
hold" amount specified in Section 17.1(a)(iii) or if there would
be more than Five (5) Tranche A Lenders.
(ii) Each such assignment shall be of a constant, and
not a varying, percentage of all the rights and obligations
under this Agreement of Assigning Lenders that are Tranche A
Lenders.
(iii) Following the effectiveness of such assignment,
the Tranche A Lender's Dollar Commitment of the Assigning Lender
that is a Tranche A Lender (if not an assignment of all of such
Tranche A Lender's Commitment) shall not be less than
$10,000,000.00 (i.e., the "minimum hold").
17.2 ASSIGNMENT PROCEDURES.
This Section 17.2 describes the procedures to be followed in connection
with an assignment effected pursuant to this Article XVII and permitted by
Section 17.1.
(a) The parties to such an assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance substantially in the
form of EXHIBIT 17.1, annexed hereto (an "ASSIGNMENT AND ACCEPTANCE").
(b) The Assigning Lender shall deliver to the Administrative
Agent, with such Assignment and Acceptance, the Note held by the subject
Assigning Lender and the Administrative Agent's processing fee of $5,000.00,
provided, however, no such processing fee
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shall be due where the Assigning Lender is one of the Lenders at the initial
execution of this Agreement.
(c) The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and, in the case of an Assigning
Lender that is a Tranche A Lender, a register or similar list (the "REGISTER")
for the recordation of the names and addresses of the Tranche A Lenders and of
the Tranche A Percentage Commitment and Tranche A Dollar Commitment of each
Tranche A Lender. The Register shall be available for inspection by the Tranche
A Lenders at any reasonable time and from time to time upon reasonable prior
notice. In the absence of manifest error, the entries in the Register shall be
conclusive and binding on all Tranche A Lenders. The Administrative Agent and
the Tranche A Lenders may treat each Person whose name is recorded in the
Register as a "Tranche A Lender" hereunder for all purposes of this Agreement.
(d) 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.
17.3 EFFECT OF ASSIGNMENT.
(a) From and after the effective date specified in an Assignment
and Acceptance which has been executed, delivered, and recorded (which effective
date the Administrative 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 Loan Documents (and to any
amendments thereof) as fully as if the
Assignee Lender had executed each.
(B) Shall have the rights of a Lender
hereunder, except in the case in which
the Assigning Lender is a Tranche A
Lender, in which case the Assignee
Lender shall have the rights of a
Tranche A Lender hereunder to the extent
of the Tranche A Dollar Commitment and
Tranche A Percentage 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 Loan
Documents, except in the case in which the Assigning Lender is a
Tranche A Lender, in which case the Assignee Lender shall be
released from its obligations under this Agreement and the Loan
Documents to the extent of the Commitment assigned by such
Assignment and Acceptance.
(iii) The Administrative Agent shall undertake to obtain
and distribute replacement Notes to the subject Assigning Lender
and Assignee Lender.
(b) By executing and delivering an Assignment and Acceptance, the
parties thereto confirm to and agree with each other and with all parties to
this Agreement as to those matters which are set forth in the subject Assignment
and Acceptance.
ARTICLE XVIII. - NOTICES:
18.1 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) shall be made to the following
addresses, each of which may be changed upon seven (7) days prior written notice
to all others given by certified mail, return receipt requested:
If to the Administrative Agent:
Fleet Capital Corporation
15260 Ventura Boulevard, Suite 400
Sherman Oaks, California 91403
Attn: Loan Portfolio Manager
Fax: 818-382-4291
With copy to:
Orrick, Herrington & Sutcliffe, LLP
777 South Figueroa St, 32nd floor
Los Angeles, California 90017
Attn: Gary D. Samson, Esq.
Fax: 213-612-2499
If to the Collateral Agent:
Fleet Retail Finance Inc.
40 Broad Street
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Boston, Massachusetts 02109
Attn: James J. Ward, Director
Fax: 617-434-4312
With a copy to:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Peter J. Antoszyk, Esquire
Fax: 617-856-8201
If to Tranche A Lenders:
As provided in its Notice Address
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:
Brown Rudnick Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Peter J. Antoszyk, Esquire
Fax: 617 856-8201
If to the Tranche C Lender:
Enhanced Retail Funding, LLC
40 Broad Street
Boston, Massachusetts 02109
Attention: David Spector
Fax: 617-422-6573
and
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 1004
Attention: Michael Gatto, Vice President
Fax: 212-902-3757
With a copy to:
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Salans Hertzfeld Heilbronn Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Mark B. Joachim, Esq.
Fax: 212-261-3037
If to the Borrowers, c/o of the Lead Borrower:
Restoration Hardware, Inc.
4040 Civic Center Drive, Suite 410
San Rafael, California 94903
Attention: Chief Financial Officer
Fax: 415-472-5364
With a copy to:
Brobeck, Phleger & Harrison, LLP
12390 El Camino Real San Diego, CA 92130
Attention: Maria K. Pum, Esq.
Fax: 858-720-2555
18.2 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 three (3) hours prior to the close of
customary business hours of the recipient, when delivered.
Otherwise, at the opening of the then next 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 three (3) hours prior to the close of customary business
hours of the recipient, one (1) hour after being sent.
Otherwise, at the opening of the then next 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 XIX. - TERM:
19.1 TERMINATION OF TRANCHE A REVOLVING CREDIT.
The Revolving Credit shall remain in effect (subject to suspension as
provided in Section 2.5(h) hereof) until the Tranche A Termination Date.
19.2 ACTIONS ON TERMINATION.
On the Tranche A Termination Date, the Borrowers shall pay the
Administrative Agent (whether or not then due), in immediately available funds,
all then Liabilities including, without limitation: the entire balance of the
Loan Account (including the unpaid principal balance of the Tranche A Loans and
the SwingLine Loan) and the unpaid balance of the Tranche B Obligations and
Tranche C Obligations; any then remaining fees due to the Agents or the Lenders;
any payments due on account of the indemnification obligations included in
Section 2.10(i); and all unreimbursed costs and expenses of the Agents and of
the Lenders, including reasonable attorneys' fees and expenses (including the
fees and expenses of Lenders' Special Counsel) for which the Borrowers as are
responsible; and shall make such arrangements concerning any L/C's then
outstanding are reasonably satisfactory to the Administrative Agent. Until such
payment, all provisions of this Agreement, other than those contained in Article
II which place an obligation on the Agent or Tranche A 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 Collateral Agent of the Collateral
Interests granted the Collateral Agent by the Borrowers hereunder may be upon
such conditions and indemnifications as the Agent may require.
ARTICLE XX. - GENERAL:
20.1 PROTECTION OF COLLATERAL.
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The Collateral 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 Collateral Agent.
20.2 PUBLICITY.
The Agents or any Lender may issue a "tombstone" notice of the
establishment of the credit facility contemplated by this Agreement and may make
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 Agents or any Lender.
20.3 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
Agents and each Lender and their respective successors and assigns, provided,
however, no trustee or other fiduciary appointed with respect to the Borrowers
shall have any rights hereunder. In the event that the Agents 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 assignor shall thereupon be
discharged and relieved from its duties and obligations hereunder.
20.4 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.
20.5 AMENDMENTS; COURSE OF DEALING.
(a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrowers and the Agents 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
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failure by the Agents or any Lender to give notice to the Lead Borrower 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 to the manner by which Availability is determined shall obligate the
Agents 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. Subject to Article XVI, 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 an Agent then by a duly authorized officer thereof). Any modification,
amendment, or waiver provided by any Agent shall be in reliance upon all
representations and warranties theretofore made to that Agent by or on behalf of
the Borrowers (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.
20.6 POWER OF ATTORNEY.
In connection with all powers of attorney included in this Agreement,
the Borrowers hereby grant unto the Agents full power 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 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 Agents 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 Agents.
20.7 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, consistent, however, with the provisions of this
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Agreement. The Borrowers shall remain liable for any deficiency remaining
following such application.
20.8 INCREASED COSTS.
If, as a result of 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:
(a) 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 Administrative Agent or any Lender
under this Agreement (except for taxes on the Administrative Agent or any Lender
based on net income or capital imposed by the jurisdiction in which the
principal or lending offices of the Administrative Agent or that Lender are
located);
(b) 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;
(c) Imposes on any Lender any other condition with respect to any
Loan Document; or
(d) 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 that Lender in respect of any loan, advance or
financial accommodation by an amount which that Lender deems to be material,
then upon written notice from the Administrative Agent, 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
Borrowers shall forthwith pay to the Administrative Agent, for the benefit of
the subject Lender, upon receipt of such notice, that amount which shall
compensate the subject Lender for such additional cost or reduction in income.
20.9 COSTS AND EXPENSES OF THE AGENT.
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The Borrowers shall pay from time to time on demand all Costs of
Collection and all reasonable costs, expenses, and disbursements of (including
attorneys' reasonable fees and expenses) which are incurred by the Agents in
connection with the preparation, negotiation, execution, and delivery of this
Agreement and of any other Loan Documents, and all other reasonable costs,
expenses, and disbursements which may be incurred in connection with or in
respect to the credit facility contemplated hereby or which otherwise are
incurred with respect to the Liabilities.
(a) The Borrowers shall pay from time to time on demand all
reasonable costs and expenses (including attorneys' reasonable fees and
expenses) incurred by the Tranche B Lender and Tranche C Lender to such Lenders'
Special Counsel and, following the occurrence of any Event of Default, by the
Tranche A Lenders to such Lenders' Special Counsel.
(b) The Borrowers authorize the Administrative Agent to pay all
such fees and expenses and in the Administrative Agent's discretion, to add such
fees and expenses to the Loan Account.
(c) The undertaking on the part of the Borrowers in this Section
20.9 shall survive payment of the Liabilities and/or any termination, release,
or discharge executed by the Administrative Agent in favor of the Borrowers,
other than a termination, release, or discharge which makes specific reference
to this Section 20.9.
20.10 COPIES AND FACSIMILES.
This Agreement and all documents which relate thereto, which have been
or may be hereinafter furnished to an Agent or any Lender may be reproduced by
that Lender or by that Agent by any photographic, microfilm, xerographic,
digital imaging, or other process, and such Person making such reproduction may
destroy any document so reproduced. 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.
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20.11 MASSACHUSETTS LAW.
This Agreement and all rights and obligations hereunder, including
matters of construction, validity, and performance, shall be governed by the law
of The Commonwealth of Massachusetts.
20.12 CONSENT TO JURISDICTION.
(a) Each Borrower agrees that any legal action, proceeding, case,
or controversy against the Borrowers with respect to any Loan Document may be
brought in the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, 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) 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 Lead Borrower at 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 competent jurisdiction.
(e) Each Borrower agrees that any action commenced by any
Borrower asserting any claim arising under or in connection with this Agreement
or any other Loan Document shall be brought solely in the Superior Court of
Suffolk County Massachusetts or in the United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, and that such Courts shall have
exclusive jurisdiction with respect to any such action.
20.13 INDEMNIFICATION.
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The Borrowers shall indemnify, defend, and hold the Agents and each
Lender and any Participant and any of their respective employees, officers, or
agents (each, an "INDEMNIFIED PERSON") harmless of and from any claim brought or
threatened against any Indemnified Person by the Borrowers, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys'
reasonable fees, expenses, and disbursements in connection therewith) on account
of the relationship of any Borrower or of any other guarantor or endorser of the
Liabilities (each of claims which may be defended, compromised, settled, or
pursued by the Indemnified Person with counsel selected by the Indemnified
Person, but at the expense of the Borrowers) other than any claim as to which a
final determination is made in a judicial proceeding (in which the 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. This indemnification shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Administrative Agent in favor of the Borrowers, other than a
termination, release, or discharge duly executed on behalf of the Administrative
Agent which makes specific reference to this Section 20.13.
20.14 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) Unless otherwise specifically provided for herein, interest
and any fee or charge which is stated as a per annum percentage shall be
calculated based on a 360 day year and actual days elapsed.
(b) Words in the singular include the plural and words in the
plural include the singular.
(c) Cross references to Sections in this Agreement begin with the
Article in which that Section appears and then the Section to which reference is
made. (For example, a reference to "Section 5.6" is to subsection 6, which
appears in Article V of this Agreement).
(d) 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.
(e) The words "includes" and "including" are not limiting.
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(f) Text which follows the words "including, without limitation"
(or similar words) is illustrative and not limitational.
(g) 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.
(h) 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.
(i) The words "may not" are prohibitive and not permissive.
(j) The word "or" is not exclusive.
(k) 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).
(l) Terms which are defined in one section of any Loan Document
are used with such definition throughout the instrument in which so defined.
(m) The symbol "$" refers to United States Dollars.
(n) 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.
(o) References to "this Agreement" or to any other Loan Document
is to the subject instrument as amended to the date on which application of such
reference is being made.
(p) Except as otherwise specifically provided, all references to
time are to Boston time.
(q) 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
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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".
(r) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 20.15
hereof, provided, however, 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.
20.15 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 Collateral Agent.
(c) The security interests created by this Agreement secure all
Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs, expenses, and disbursements incurred by
the Agents and, to the extent provide herein, each Lender, in connection with
such Person's relationship(s) with the Borrowers shall be borne by the
Borrowers.
(e) Unless otherwise explicitly provided herein, the
Administrative Agent's consent to any action of the Borrowers which is
prohibited unless such consent is given may be given or refused by the
Administrative Agent in its sole discretion and without reference to Section
2.19 hereof.
20.16 PARTICIPATIONS.
Each Lender may sell participations to one or more financial
institutions (a "PARTICIPANT") all or a portion of such Lender's rights and
obligations under this Agreement, provided that no such participation shall
include any provision which accords the Person purchasing such participation
with the right, vis a vis the Agents, to consent to any action,
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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 Agents to any Person other than a Lender.
20.17 RIGHT OF SET-OFF.
Any and all deposits or other sums at any time credited by or due to the
Borrowers from the Agents or any Lender or any Participant or from any Affiliate
of any of the foregoing, and any cash, securities, instruments or other property
of the Borrowers in the possession of any of the foregoing, 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 each Agent and such Lender or any
Participant or such Affiliate and may be applied or set off against the
Liabilities and against such obligations at any time, whether or not such are
then due and whether or not other collateral is then available to that Agent or
that Lender.
20.18 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 Section 4 of the Federal Reserve Act (12 U.S.C. Section
341) from pledging all or any portion of that Lender's interest and rights under
this Agreement, provided, however, neither such pledge nor the enforcement
thereof shall release the pledging Lender from its obligations hereunder or
under any of the Loan Documents.
20.19 MAXIMUM INTEREST RATE.
Regardless of any provision of any Loan Document, neither the Agents nor
any Lender shall be entitled to contract for, charge, 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."
20.20 WAIVERS.
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(a) Each Borrower (and all guarantors, endorsers, and sureties of
the Liabilities) make each of the waivers included in Section 20.20(b), below,
knowingly, voluntarily, and intentionally, and understands that Agents and each
Lender, in establishing the facilities 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, is 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,
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 ANY AGENT OR ANY LENDER IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR
AGAINST ANY AGENT OR ANY LENDER OR IN WHICH ANY 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 ANY BORROWER OR ANY OTHER PERSON AND EACH AGENT OR EACH
LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY
SUCH CASE OR CONTROVERSY).
(iv) The benefits or availability of any stay,
limitation, hindrance, delay, or restriction (including, without
limitation, any automatic stay which otherwise might be imposed
pursuant to Section 362 of the Bankruptcy Code) with respect to
any action which the Agents may or may become entitled to take
hereunder.
(v) 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
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Administrative Agent, could be reduced or claimed to be paid
otherwise than in accordance with the tenor of and written terms
of such Liability.
(vi) Any claim to consequential, special, or punitive
damages.
20.21 THE BUYOUT.
(a) The Tranche C Lender may (but shall not be obligated to)
cause the assignment to the Tranche C Lender (or the Tranche C Lender's
designee), by the Tranche A Lenders and the Tranche B Lender, of all (but not
less than all) right, title, and interest in, to, arising under, or in respect
of the Tranche A Obligations and the Tranche B Obligations upon five (5)
Business Days prior written notice given to the Administrative Agent and the
Tranche B Lender at any time after expiration of the Standstill Period initiated
by the Tranche C Lender pursuant to Section 13.6 of this Agreement. Such notice
from the Tranche C Lender to the Administrative Agent and the Tranche B Lender
shall be irrevocable.
(b) On the date specified by the Tranche C Lender in such notice
(which shall not be less than Five (5) Business Days, nor more than Ten (10)
Business Days, after the receipt of the notice specified in Section 20.21(a)
above by the Administrative Agent and the Tranche B Lender, the Tranche A
Lenders and the Tranche B Lender shall effect such assignments by the execution,
by the Tranche A Lenders and the Tranche B Lender, of an Assignment and
Acceptance (in the form annexed hereto as EXHIBIT 17.1) in exchange for the
Transfer of payment, in immediately available funds, of the amount of the
Tranche A Obligations and the Tranche B Obligations (excluding the Tranche A
Early Termination Fee and Tranche B Early Termination Fee) as of the date on
which such assignment is made and, in the event one or more L/C's are then
outstanding, an amount equal to fund a reserve of 105% of the aggregate Stated
Amounts of such L/C's. Any amounts remaining in such reserve after expiry of all
outstanding L/C's shall be returned to the Tranche C Lender. If after the date
of any such assignment, the Tranche C Lender receives (in accordance with the
relative priorities set forth in Section 14.6) any amounts in respect of the
Tranche A Early Termination Fee or the Tranche B Early Termination Fee, the
Tranche C Lender shall pay over any such amounts to the Administrative Agent.
Additionally, the Administrative Agent may condition such assignment of the
Tranche A Obligations and the Tranche B Obligations upon receipt of an
indemnification from the Tranche C Lender to the Administrative Agent and the
Tranche A Lenders for any reasonable out-of-pocket
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cost, damage or expense (including reasonable attorneys' fees and legal
expenses) in connection with any commissions, fees, costs or expenses related to
any issued and outstanding L/C's, any checks or other payments provisionally
credited to the Loan Account and/or as to which the Tranche A Lenders have not
yet received final and indefeasible payment, and any other cash management
services provided by the Administrative Agent to the Borrowers.
(c) Such assignment shall be expressly made without
representation or warranty of any kind by the Tranche A Lenders or the Tranche B
Lender or the Agents as to the Working Capital Loans or otherwise and without
recourse to the Tranche A Lenders or the Tranche B Lender or the Agents, except
for the representations contained in the Assignment and Acceptance Agreement.
(d) In the event that the Tranche C Lenders do not commence the
good faith exercise of rights and remedies within Thirty (30) days from the
BuyOut to realize full payment of the Liabilities, the Tranche C Lenders shall
pay to the Tranche A Lenders and Tranche B Lenders all interest and fees such
Lenders would have earned had the BuyOut not occurred, as and when such interest
and fees are paid by the Borrowers.
20.22 COUNTERPARTS.
This Agreement may be executed in any number of separate counterparts,
each of which shall, conclusively and separately, constitute one agreement.
20.23 AMENDMENT AND RESTATEMENT.
This Agreement amends and restates in full that certain Fifth
Amended and Restated Loan and Security Agreement dated February 2, 2000,
among the Borrowers and Fleet Capital Corporation, as a lender and as
agent for the lenders referenced therein (the "FEBRUARY 2000
AGREEMENT"). On the Closing Date, all loans outstanding under the
February 2000 Agreement shall become Tranche A Loans to the Borrowers
under this Agreement, of the same type and amount, and the Tranche A
Loans by each of the Tranche A Lenders shall be adjusted according to
their Tranche A Percentage Commitment hereunder.
Intentionally Left Blank
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<TABLE>
<CAPTION>
RESTORATION HARDWARE, INC. THE MICHAELS FURNITURE COMPANY,
("Lead Borrower" and a "Borrower") INC. (a "Borrower")
<S> <C>
By: By:
------------------------------- ---------------------------------
Print Name: Print Name:
----------------------- -------------------------
Title: Title:
---------------------------- ------------------------------
FLEET CAPITAL CORPORATION THE CIT GROUP/BUSINESS CREDIT, INC.
("Administrative Agent") ("Co-Administrative Agent")
By: By:
------------------------------- ---------------------------------
Print Name: Print Name:
----------------------- -------------------------
Title: Title:
---------------------------- ------------------------------
FLEET RETAIL FINANCE INC. FLEET CAPITAL CORPORATION
("Collateral Agent") ("Collateral Agent")
By: By:
------------------------------- ---------------------------------
Print Name: James J. Ward Print Name:
----------------------- -------------------------
Title: Director Title:
---------------------------- ------------------------------
FLEET CAPITAL CORPORATION THE CIT GROUP/BUSINESS CREDIT, INC.
(a "Tranche A Lender") ( a "Tranche A Lender")
By: By:
------------------------------- ---------------------------------
Print Name: Print Name:
----------------------- -------------------------
Title: Title:
---------------------------- ------------------------------
</TABLE>
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<PAGE> 174
<TABLE>
<CAPTION>
BACK BAY CAPITAL FUNDING, LLC ENHANCED RETAIL FUNDING, LLC
(the "Tranche B Lender") (a "Tranche C Lender")
<S> <C>
By: By:
------------------------------- ---------------------------------
Print Name:Kristan M. O'Connor Print Name:
----------------------- -------------------------
Title: Vice President Title:
---------------------------- ------------------------------
GOLDMAN SACHS CREDIT PARTNERS L.P.
(a "Tranche C Lender")
By:
---------------------------------
Print Name:
-------------------------
Title:
------------------------------
</TABLE>
Signature pages to Loan Agreement
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<PAGE> 175
EXHIBIT 2.9(b)
FORM OF TRANCHE B PROMISSORY NOTE
Boston, Massachusetts
September 27, 2000
FOR VALUE RECEIVED, RESTORATION HARDWARE, INC., a Delaware corporation
(a "BORROWER" and the "LEAD BORROWER" on behalf of the other Borrows identified
in the Loan Agreement, defined below), and THE MICHAELS FURNITURE COMPANY, INC.,
a California corporation (a "BORROWER" and, together with the Lead Borrower, the
"BORROWERS") hereby unconditionally promise to pay to the order of BACK BAY
CAPITAL FUNDING, LLC, a Delaware limited liability company (the "PAYEE"), at the
offices of Payee at 40 Broad Street, Boston, Massachusetts 02109 or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of FIVE MILLION DOLLARS ($5,000,000.00) in lawful money of the
United States of America and in immediately available funds, on June 30, 2003
(the "TRANCHE B MATURITY DATE").
Borrowers hereby further promise to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate (as hereinafter
defined). Such interest shall be paid in like money at said office or place from
the date hereof, commencing October 1, 2000 and on the first day of each month
thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default or termination of the Loan
Agreement shall be payable upon demand.
The unpaid principal balance hereof shall bear interest, until repaid,
fixed at Fifteen and One Half Percent (15.5%) per annum (determined based upon a
360-day year and actual days elapsed), payable as follows:
(i) Subject to subparagraph (b) below, interest on the
unpaid principal shall be payable monthly in arrears, on the
first Business Day of each month, and on Tranche B Maturity
Date.
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(ii) The Borrowers shall have the option to pay all or a
portion of the interest payable in excess of 12.5% per annum by
adding such excess amount to the principal balance hereunder,
monthly, on the first Business Day of each month, commencing
October 1, 2000. The Lead Borrower shall give the Payee an
irrevocable notice that it will exercise such right at least
three (3) Business Days prior to any date on which an interest
payment is due pursuant to subparagraph (a), above, as to which
such right is to exercised. The aggregate balance of interest
added to the principal balance hereof shall bear interest at the
rate of 12.5% per annum and shall be payable in accordance with
subparagraph (a) above.
(iii) Following the occurrence of any Event of Default
(and whether or not an Agent exercises such Agent's rights on
account thereof), interest shall accrue at the rate of 17.5% per
annum, and be payable in accordance with subparagraphs (a) and
(b) above.
In no event shall the interest charged hereunder exceed the maximum
permitted under the laws of the Commonwealth of Massachusetts or other
applicable law.
The term "LOAN AGREEMENT" shall mean the Loan and Security Agreement,
dated of even date herewith, between and among Fleet Capital Corporation, as
Administrative Agent for the Lenders identified therein, Fleet Retail Finance
Inc. and Fleet Capital Corporation, as Collateral Agents, the Payee, the Tranche
C Lender and the Borrowers, as the Loan Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meaning assigned thereto in the Loan Agreement.
This Note is issued pursuant to, and subject to the terms of, the Loan
Agreement to evidence the Tranche B Loan by Payee to Borrowers. This Note is
secured by the Collateral described in the Loan Agreement and all notes,
guarantees, security agreements and other agreements, documents and instruments
now or at any time hereafter executed and/or delivered by Borrowers or any other
party in connection therewith and is entitled to all of the benefits and rights
thereof and of the other Loan Documents. At the time any payment is due
hereunder, at its
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option, Payee may charge the amount thereof to any account of Borrowers
maintained by Payee, subject to the terms of the Loan Agreement.
If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, the Payee shall have all rights and remedies of Payee under
the Loan Documents, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently.
Borrowers (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agree that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consent to any
one or more extensions or postponements of time of payment, release, surrender
or substitution of collateral security, or forbearance or other indulgence,
without notice or consent. The pleading of any statute of limitations as a
defense to any demand against Borrowers is expressly hereby waived by Borrowers.
Upon any Event of Default or termination or non-renewal of the Loan Agreement,
Payee shall have the right, but not the obligation to setoff against this Note
all money owed by Payee to Borrowers.
Payee shall not be required to resort to any Collateral for payment, but
may proceed against Borrowers and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Loan Documents and any dispute arising in connection herewith or therewith shall
be governed by the internal laws of the Commonwealth of Massachusetts (without
giving effect to principles of conflicts of law).
Borrowers irrevocably consent and submit to the non-exclusive
jurisdiction of the Suffolk County Superior Court of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts and waives any objection based on venue or forum non
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conveniens with respect to any action instituted therein arising under this Note
or any of the other Loan Documents or in any way connected with or related or
incidental to the dealings of Borrowers and Payee in respect of this Note or any
of the other Loan Documents or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agrees that any dispute arising out of the
relationship between Borrowers and Payee or the conduct of such persons in
connection with this Note or otherwise shall be heard only in the courts
described above (except that Payee shall have the right to bring any action or
proceeding against Borrowers or its property in the courts of any other
jurisdiction which Payee deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrowers or its
property).
BORROWERS HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OR ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN BORROWERS AND
PAYEE IN RESPECT OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the Board
of Directors and by any necessary vote or consent of the stockholders of
Borrowers. Borrowers hereby authorize Payee to complete this Note in any
particulars according to the terms of the loan evidenced hereby.
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<PAGE> 179
This Note shall be binding upon the successors and assigns of Borrowers
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Borrowers" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby. This Note shall be deemed
an instrument under seal.
ATTEST: RESTORATION HARDWARE, INC.
By:
Name:
Title:
------------------------------------
[Corporate Seal]
ATTEST: THE MICHAELS FURNITURE COMPANY, INC.
By:
Name:
Title:
------------------------------------
[Corporate Seal]
6
<PAGE> 180
EXHIBIT 2.9(c)
FORM OF TRANCHE C PROMISSORY NOTE
Boston, Massachusetts
September 27, 2000
FOR VALUE RECEIVED, RESTORATION HARDWARE, INC., a Delaware corporation
(a "BORROWER" and the "LEAD BORROWER" on behalf of the other Borrowers
identified in the Loan Agreement, defined below), and THE MICHAELS FURNITURE
COMPANY, INC., a California corporation (a "BORROWER" and, together with the
Lead Borrower, the "BORROWERS") hereby unconditionally promise to pay to the
order of ________________, a __________ (the "PAYEE"), at the offices of Payee
at __________________________________ or at such other place as the Payee or any
holder hereof may from time to time designate, the principal sum of
____________________ DOLLARS ($___________) in lawful money of the United States
of America and in immediately available funds, on December 31, 2001 (the
"TRANCHE C MATURITY DATE").
Borrowers hereby further promise to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate (as hereinafter
defined). Such interest shall be paid in like money at said office or place from
the date hereof, commencing October 1, 2000 and on the first day of each month
thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default or termination of the Loan
Agreement shall be payable upon demand.
The unpaid principal balance hereof shall bear interest, until repaid,
fixed at Sixteen Percent (16.0%) per annum (determined based upon a 360-day year
and actual days elapsed), payable as follows:
(i) Interest on the unpaid principal shall be payable
monthly in arrears, on the first day of each month, and on the
Tranche C Maturity Date.
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(ii) Following the occurrence of any Event of Default
(and whether or not an Agent exercises such Agent's rights on
account thereof), interest shall accrue at the rate of Eighteen
Percent (18.0%) per annum.
In no event shall the interest charged hereunder exceed the maximum
permitted under the laws of the Commonwealth of Massachusetts or other
applicable law.
The term "LOAN AGREEMENT" shall mean the Loan and Security Agreement,
dated of even date herewith, between and among Fleet Capital Corporation, as
Administrative Agent for the Lenders identified therein, Fleet Retail Finance
Inc. and Fleet Capital Corporation, as Collateral Agents, The CIT Group/Business
Credit, Inc., a co-administrative agent for the Lenders identified therein,
Goldman Sachs Credit Partners L.P., Enhanced Retail Funding, LLC, the Tranche B
Lender and the Borrowers, as the Loan Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meaning assigned thereto in the Loan Agreement.
This Note is issued pursuant to, and subject to the terms of, the Loan
Agreement to evidence the Tranche C Loan by Payee to Borrowers. This Note is
secured by the Collateral described in the Loan Agreement and all notes,
guarantees, security agreements and other agreements, documents and instruments
now or at any time hereafter executed and/or delivered by Borrowers or any other
party in connection therewith and is entitled to all of the benefits and rights
thereof and of the other Loan Documents. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Borrowers maintained by Payee, subject to the terms of the Loan Agreement.
If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, the Payee shall have all rights and remedies of Payee under
the Loan Documents, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently.
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Borrowers (i) waive diligence, demand, presentment, protest and notice
of any kind, (ii) agree that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consent to any
one or more extensions or postponements of time of payment, release, surrender
or substitution of collateral security, or forbearance or other indulgence,
without notice or consent. The pleading of any statute of limitations as a
defense to any demand against Borrowers is expressly hereby waived by Borrowers.
Upon any Event of Default or termination or non-renewal of the Loan Agreement,
Payee shall have the right, but not the obligation to setoff against this Note
all money owed by Payee to Borrowers.
Payee shall not be required to resort to any Collateral for payment, but
may proceed against Borrowers and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Loan Documents and any dispute arising in connection herewith or therewith shall
be governed by the internal laws of the Commonwealth of Massachusetts (without
giving effect to principles of conflicts of law).
Borrowers irrevocably consent and submit to the non-exclusive
jurisdiction of the Suffolk County Superior Court of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts and waives any objection based on venue or forum non conveniens
with respect to any action instituted therein arising under this Note or any of
the other Loan Documents or in any way connected with or related or incidental
to the dealings of Borrowers and Payee in respect of this Note or any of the
other Loan Documents or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort, equity
or otherwise, and agrees that any dispute arising out of the relationship
between Borrowers and Payee or the conduct of such persons in connection with
this Note or otherwise shall be heard only in the courts described above (except
that Payee shall have the right to bring any action or proceeding against
Borrowers or its property in the courts of any other jurisdiction which Payee
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrowers or its property).
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<PAGE> 183
BORROWERS HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OR ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN BORROWERS AND
PAYEE IN RESPECT OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the Board
of Directors and by any necessary vote or consent of the stockholders of
Borrowers. Borrowers hereby authorize Payee to complete this Note in any
particulars according to the terms of the loan evidenced hereby.
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<PAGE> 184
This Note shall be binding upon the successors and assigns of Borrowers
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Borrowers" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby. This Note shall be deemed
an instrument under seal.
RESTORATION HARDWARE, INC.
[Corporate Seal]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE MICHAELS FURNITURE COMPANY, INC.
[Corporate Seal]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
172
<PAGE> 185
EXHIBIT 2.24(a)
SCHEDULE OF TRANCHE A
DOLLAR COMMITMENTS AND PERCENTAGE COMMITMENTS
<TABLE>
<CAPTION>
TRANCHE A PERCENTAGE
LENDER TRANCHE A DOLLAR COMMITMENT COMMITMENT
------ --------------------------- --------------------
<S> <C> <C>
Fleet Capital Corporation 60,000,000.00 60%
The CIT Group/Business Credit, Inc. $40,000,000.00 40%
TOTAL REVOLVING CREDIT $100,000,000.00 100%
COMMITMENT (TRANCHE A LOAN CEILING)
</TABLE>
173
