<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________to___________________
Commission File Number 0-19269
SUN TELEVISION AND APPLIANCES, INC.
(Exact name of Registrant as specified in its charter)
OHIO 31-1178151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6600 PORT ROAD, GROVEPORT, OH 43125
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614)492-5600
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO___________
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT DECEMBER 31, 1996
Common shares, $.01 par value 17,419,408 shares
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SUN TELEVISION AND APPLIANCES, INC.
TABLE OF CONTENTS
PAGE NO.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Operations
for the Quarters Ended
November 30, 1996 and November 25, 1995 3
Statement of Operations
for the Nine Months Ended
November 30, 1996 and November 25, 1995 4
Balance Sheet
November 30, 1996 and March 2, 1996 5
Statement of Cash Flows
for the Nine Months Ended
November 30, 1996 and November 25, 1995 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Results of Operation and Financial Condition 9-11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUN TELEVISION AND APPLIANCES, INC.
STATEMENT OF OPERATIONS
For the quarters ended November 30, 1996 and November 25, 1995
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
November 30, November 25,
1996 1995
------------ ------------
<S> <C> <C>
Net sales and service revenues $ 181,949 $ 202,632
Cost of sales 139,842 152,212
------------ ------------
Gross profit 42,107 50,420
Selling, general and administrative 47,335 46,937
Amortization of intangibles 123 123
------------ ------------
(Loss) income from operations (5,351) 3,360
Other income (expenses):
Interest income 71 88
Interest expense (1,522) (1,151)
------------ ------------
Total other (1,451) (1,063)
------------ ------------
(Loss) income before income taxes (6,802) 2,297
Income tax (benefit) expense (2,734) 930
------------ ------------
Net (loss) income $ (4,068) $ 1,367
============ ============
Net (loss) income per share $ (.23) $ .08
============ ============
Weighted average shares outstanding 17,465 17,393
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
STATEMENT OF OPERATIONS
For the nine months ended November 30, 1996 and November 25, 1995
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
November 30, November 25,
1996 1995
------------ ------------
<S> <C> <C>
Net sales and service revenues $ 485,998 $ 550,346
Cost of sales 367,781 410,675
------------ ------------
Gross profit 118,217 139,671
Selling, general and administrative 131,210 130,854
Amortization of intangibles 370 370
Restructuring charge 2,000 --
------------ ------------
(Loss) income from operations (15,363) 8,447
Other income (expenses):
Interest income 319 442
Interest expense (3,716) (3,343)
Other -- 894
------------ ------------
Total other (3,397) (2,007)
------------ ------------
(Loss) income before income taxes (18,760) 6,440
Income tax (benefit) expense (7,542) 2,607
------------ ------------
Net (loss) income $ (11,218) $ 3,833
============ ============
Net (loss) income per share $ (.64) $ .22
============ ============
Weighted average shares outstanding 17,451 17,439
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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SUN TELEVISION AND APPLIANCES, INC.
BALANCE SHEET
November 30, 1996 and March 2, 1996
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
November 30, March 2,
1996 1996
------------ ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 19,516 $ 13,583
Trade accounts receivable, net of allowance
for doubtful accounts of $400 and $400 33,872 18,943
Income tax refundable 7,511 --
Merchandise inventory 193,730 114,777
Prepaid expenses and other 7,549 5,903
Deferred income taxes 8,118 8,116
------------ ------------
Total current assets 270,296 161,322
Property and equipment, net 108,308 100,563
Deferred income taxes 7,107 8,410
Intangible assets 14,677 15,047
------------ ------------
Total assets $ 400,388 $ 285,342
============ ============
LIABILITIES
Current liabilities:
Short-term borrowings $ 45,000 $ --
Trade accounts payable 103,651 20,100
Accrued liabilities 29,750 23,431
Income taxes payable -- 3,934
Current portion of deferred revenue 16,629 18,089
------------ ------------
Total current liabilities 195,030 65,554
Capital lease obligations 14,383 14,651
Deferred revenue, non-current 18,830 21,621
Long-term debt (Note 3) 30,000 30,000
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
500 shares authorized - none issued -- --
Common stock, $.01 par value, 30,000 shares authorized
17,419 and 17,364 shares issued and outstanding 174 174
Additional paid-in capital 88,419 88,268
Retained earnings 53,552 65,074
------------ ------------
Total stockholders' equity 142,145 153,516
------------ ------------
Total liabilities and stockholders' equity $ 400,388 $ 285,342
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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SUN TELEVISION AND APPLIANCES, INC.
STATEMENT OF CASH FLOWS
For the nine months ended November
30, 1996 and November 25, 1995
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
November 30, November 25,
1996 1995
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (11,218) $ 3,833
Adjustments to reconcile (loss) income to net cash
used by operating activities:
Depreciation and amortization 6,974 5,930
Deferred revenue (4,250) (1,319)
Deferred income taxes 1,302 428
Restructuring charge 2,000 --
Gain of sale property and equipment -- (894)
Changes in items affecting operations:
Trade accounts receivable (14,929) (14,759)
Merchandise inventory (78,953) (77,428)
Prepaid expenses and other (1,766) (61)
Trade accounts payable 83,551 69,560
Accrued liabilities 4,319 5,278
Income taxes payable/refundable (11,446) (5,204)
------------ ------------
(19,224) (22,614)
------------ ------------
Net cash (used) by operating activities (24,417) (14,636)
------------ ------------
Cash flows from financing activities:
Short-term borrowings 45,000 13,000
Reduction of capital lease obligations (268) (421)
Issuance of common stock under stock options 151 13
Dividends on common stock (305) (453)
------------ ------------
Net cash provided by financing activities 44,578 12,139
------------ ------------
Cash flows from investing activities:
Additions to property and equipment, net of disposals (14,228) (23,071)
Proceeds from sale/leaseback -- 10,446
Proceeds from the disposal of property and equipment -- 2,784
------------ ------------
Net cash (used) in investing activities (14,228) (9,841)
------------ ------------
Increase (decrease) in cash and cash equivalents 5,933 (12,338)
Cash and cash equivalents, beginning of year 13,583 16,736
------------ ------------
Cash and cash equivalents, end of period $ 19,516 $ 4,398
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,359 $ 1,369
Income taxes $ 2,830 $ 7,528
Non-cash investing and financing activities:
Capital lease $ -- $ 2,004
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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SUN TELEVISION AND APPLIANCES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements as of November 30, 1996 and November 25, 1995
of Sun Television and Appliances, Inc. (the "Company") are unaudited,
and are presented pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, Notes to the Financial
Statements which are contained in the Company's 1996 Annual Report
should be read in conjunction with these financial statements. In the
opinion of management, the accompanying unaudited financial statements
reflect all adjustments (which are of a normal recurring nature)
necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented, but are
not necessarily indicative of the results of operations for a full
fiscal year.
2. CHANGE IN FISCAL YEAR
Effective with the beginning of fiscal 1996, the Company has changed
its fiscal year end to the Saturday closest to February 28 from a
calendar month-end of February. The first nine months of fiscal 1997
had 273 days compared to 270 days in the first nine months of fiscal
1996.
3. SHORT-TERM AND LONG-TERM DEBT
As of November 30, 1996, the Company had outstanding short-term
borrowings of $45,000,000 against its reducing revolving credit
commitment. The interest rate in effect at November 30, 1996, was prime
rate, or 8.25%.
On December 20, 1996, the Company replaced the revolving line of credit
and the senior note with a collateralized credit agreement, which was
used to retire both of the existing borrowings. The new Revolving
agreement has a term of three years, due February 28, 2000, and is
collateralized by inventory. The Company may borrow up to a maximum of
$100,000,000 depending on inventory levels. Interest on borrowings will
either be prime rate +.50% or the Libor + 3%, depending on how the
Company chooses to borrow funds. The daily cash receipts of the Company
will pay down the line of credit, while daily disbursements will become
draws on the line of credit. The most restrictive covenant details the
granting of liens on most of the Company's current assets.
7
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4. SUBSEQUENT EVENT
The Company has announced a plan to close nine stores before the
current fiscal year end. The markets affected include Buffalo(3) and
Rochester(2), New York and Dayton (3) and Springfield(1), Ohio. The
closing of these stores will result in a non-recurring restructure
charge. Costs relating to the closing of the stores, including, but not
limited to, losses on disposal of merchandise and fixed assets,
employee severance costs, relocation expenses and other costs related
to the store closings, such as reductions in central distribution
employees due to fewer stores, will result in a non-recurring
restructure charge. The Company is still in the process of estimating
the total costs relating to the store closings and corporate
restructuring.
5. NEW FINANCIAL ACCOUNTING STANDARDS
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of". SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
full recoverability is questionable. The impact of adopting SFAS No.
121 was immaterial to the results of operations or financial condition
of the Company. SFAS No. 123, "Accounting for Stock-Based
Compensation," has also been adopted for fiscal year 1997. The Company
will make the required disclosure of the impact of SFAS No. 123 in the
annual report for fiscal 1997.
8
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Item 2.
SUN TELEVISION AND APPLIANCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATION AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company recorded a net loss of $4,068,000 or $.23 per share for the third
quarter ended November 30, 1996, compared to net income of $1,367,000, or $.08
per share for the quarter ended November 25, 1995. The decrease was primarily
attributable to the decline in gross sales volume as well as the decline in
gross profit dollars and rate. The gross profit percentage rate decreased from
24.9% for the third quarter ended November 25, 1995 compared to 23.1% for the
third quarter ended November 30, 1996. Selling, general and administrative
expenses have increased as a percentage of sales as compared to last year due to
the decline in sales volume combined with the additional expenses due to the
operation of additional stores in this quarter compared to the third quarter
last year.
For the nine months ended November 30, 1996, the net loss was $11,218,000 or
$.64 per share as compared to net income of $3,833,000 or $.22 per share for the
prior year. The loss of income was primarily attributable to the decrease in
sales volume and the decrease in gross profit rate as a percentage of net sales
from 25.4% for the nine months ended November 25, 1995 compared to 24.3% for the
nine months ended November 30, 1996. In addition, during the first quarter of
this year the Company had a one-time restructuring charge of $2.0 million, or
$.07 per share, principally related to severance pay.
NET SALES AND SERVICE REVENUES
Net sales and service revenues for the third quarter ended November 30, 1996
were $181,949,000, a decrease of $20,683,000 or 10.2% from the $202,632,000 for
last year's quarter ended November 25, 1995. Sales in the video category had the
largest decline of $11.4 million, while sales in major appliances dropped $4.2
million. Comparable store sales declined 16.3% from $188.9 million for the
quarter ended November 25, 1995 to $158.0 million for the quarter ended November
30, 1996.
Net sales and service revenues for the nine months ended November 30, 1996
decreased 11.7% to $485,998,000 from $550,346,000 for the nine months ended
November 25, 1995. Sales within all major product categories have declined this
year with the largest declines in color televisions, air conditioning and
computer and related accessories. Comparable store sales for this nine months
ended November 30, 1996 decreased $110.2 million to $424.4 million from $534.6
million for the comparable period last year.
Sales for both the third quarter and the nine months ended November 30, 1996
reflect not only the intensified competition in most of our markets, but also
the overall soft retail environment for the consumer electronics, computer and
appliance industry.
9
<PAGE> 10
GROSS PROFIT
Gross profit of $42,107,000 (23.1% of sales) for the third quarter of this year
represents a decrease of $8,313,000 or 16.5% from last year's third quarter
amount of $50,420,000 (24.9% of sales). The gross profit percentage reflected a
decline in most product categories this year versus last year due to the highly
competitive environment and the promotional nature of the Fall selling season.
For the first nine months of this fiscal year, gross profit of $118,217,000
(24.3% of sales) was 15.4%, or $21,454,000, lower than last year's amount of
$139,671,000 (25.4% of sales). The decline in gross profit percentage this year
versus last year was attributable to the soft retail environment in the consumer
electronics industry combined with the intense promotional environment due to
the increased number of competitors in our markets.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $47,335,000 for the quarter
ended November 30, 1996 versus $46,937,000 for last year's third quarter, an
increase of $398,000 or 0.8%. The increase in expense is primarily attributable
to the greater number of stores in operation for the full quarter this year as
compared to last year, as well as, higher advertising expense. As a percentage
of sales, selling, general and administrative expense increased to 26.0% versus
23.2% last year, and is primarily attributed to the decline in sales volume in
the third quarter versus last year.
During the first nine months of this year, selling, general and administrative
expenses increased $356,000 to $131,210,000 from $130,854,000 the prior year. As
a percentage of sales, selling, general and administrative expense was 27.0%
versus 23.8%, respectively, with the increase relating to the decline in sales
volume for the first nine months of this year versus last year.
OTHER INCOME/EXPENSES
Interest expense increased $371,000 for the third quarter and $372,000 for the
first nine months this year versus last year due to the increase in average
outstanding short-term borrowings for the same period.
INCOME TAXES
The provision for income taxes is based on the current estimate of the annual
effective tax rate for the year (40.2%) which has reduced slightly from last
year, primarily due to a decrease in the effective state tax rate.
10
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FINANCIAL CONDITION
The Company's current ratio is 1.4 as compared to 2.5 as of March 2, 1996. The
major reason for the decrease in the current ratio to 1.4 is the seasonal
increase in the trade accounts payable and is comparable to last year's third
quarter current ratio of 1.6. Inventory had increased by $78,953,000 from March
2, 1996 in preparation for the Christmas selling season, and the additional new
stores opened this year versus last year, and was largely financed by increases
in short-term borrowings and trade payables.
In December the Company signed a new revolving credit agreement (see Note 3 in
the Financial Statements) which allowed the Company to retire the existing
senior note and revolving credit borrowings. This collateralized agreement, due
in February of 2000, allows the Company to borrow a maximum of $100,000,000
depending on inventory levels.
The Company opened a store in Dayton, Ohio, in the first quarter of this year, a
store in Charleston, West Virginia, during the second quarter, and stores in
Beckley and Huntington, West Virginia, in the third quarter of this year. The
Company replaced the existing stores in North Randall, Chillicothe, and Newark,
Ohio, with larger, better located stores in the third quarter of this year. The
Company expects capital expenditures for the remainder of the year to be
approximately $1,500,000 and anticipates covering these requirements using cash
on hand, cash flow from operations, the anticipated sales of non-productive
property, and borrowings on the revolving line of credit.
The Company has announced plans to withdraw from the New York, Dayton and
Springfield, Ohio markets prior to its fiscal year end of March 1, 1997, and
will incur a fourth quarter non-recurring restructuring charge. The Company will
close three stores in suburban Buffalo, New York, two stores in suburban
Rochester, New York, three stores in the greater Dayton, Ohio area and one
location in Springfield, Ohio. The Company indicated that the nine stores to be
closed generated $74 million, or 15% of Sun's year to date consolidated sales,
and recorded a fiscal 1997 year to date operating loss of approximately $2
million, before considering corporate expense allocations.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The matters discussed above include forward-looking statements that involve
risks and uncertainties, including, but not limited to, a statement with respect
to a non-recurring restructuring charge and the impact of store closings on cash
flow. Such statements are subject to changes based on various important factors
which may be beyond the Company's control, such as, but not limited to, the
review and computation to determine the amount of the non-recurring
restructuring charge, the timing and expense associated with the store closings,
changes in consumer spending patterns, consumer preferences and overall economic
conditions, the impact of competition and pricing, changes in weather patterns,
availability of suitable stores locations at appropriate terms, ability to
develop new merchandise and ability to hire and train associates.
11
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PART II. - OTHER INFORMATION
In accordance with the instruction to Part II, the other specified items in this
part have been omitted because they are not applicable or the information has
been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Descriptions
10. Revolving Credit Agreement
11. Computation of Net (Loss)Income per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
None
12
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SUN TELEVISION AND APPLIANCES, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN TELEVISION AND APPLIANCES, INC.
(Registrant)
By /s/ Steven A. Martin
--------------------------------
Steven A. Martin, Executive Vice
President, Treasurer and Chief
Financial Officer *
Date: January 13, 1997
* Mr. Martin is the principal financial officer and has been duly authorized to
sign on behalf of the Registrant.
13
<PAGE> 1
Exhibit 10
REVOLVING CREDIT AGREEMENT
dated as of December 19, 1996
among
SUN TELEVISION AND APPLIANCES, INC.,
AS BORROWER,
THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS LENDERS,
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS ADMINISTRATIVE AGENT,
and
NATIONAL CITY COMMERCIAL FINANCE, INC.,
AS CO-AGENT
$100,000,000
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS: CONSTRUCTION ....................................... 1
1.01 Certain Definitions ............................................. 1
1.02 Construction .................................................... 18
1.03 Accounting Principles ........................................... 18
ARTICLE II THE CREDITS .................................................... 19
2.01 Revolving Credit Loans .......................................... 19
2.02 Notes ........................................................... 19
2.03 Notice of Borrowing; Making of Loans ............................ 19
2.04 Reduction of Commitment; Mandatory Prepayment;
Optional Prepayment ............................................. 23
2.05 Interest Rate ................................................... 25
2.06 Interest Payment Dates .......................................... 25
2.07 Amortization .................................................... 25
2.08 Payments ........................................................ 25
2.09 Use of Proceeds ................................................. 28
2.10 Eurodollar Rate Not Determinable; Illegality or Impropriety ..... 28
2.11 Reserve Requirements: Capital Adequacy Circumstances ............ 29
2.12 Indemnity ....................................................... 30
2.13 Sharing of Setoffs .............................................. 31
2.14 Continuation and Conversion of Loans ............................ 31
2.15 Taxes ........................................................... 32
ARTICLE III LETTERS OF CREDIT ............................................. 34
3.01 Letters of Credit ............................................... 34
3.02 Participations .................................................. 38
ARTICLE IV BORROWING BASE ................................................. 39
4.01 Condition of Lending and Assisting in Establishing or
Opening Letters of Credit ....................................... 39
4.02 Mandatory Prepayment ............................................ 39
4.03 Rights and Obligations Unconditional ............................ 39
4.04 Borrowing Base Certificate ...................................... 40
4.05 General Provisions .............................................. 40
ARTICLE V CONDITIONS OF EFFECTIVENESS,
LETTER OF CREDIT ISSUANCE AND LENDING ................................ 40
5.01 Conditions Precedent to Effectiveness ........................... 40
5.02 Conditions Precedent to Loans and Letters of Credit ............. 45
i
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PAGE
ARTICLE VI REPRESENTATIONS AND WARRANTIES ................................. 46
6.01 Organization, Good Standing, Etc ................................ 46
6.02 Authorization, Etc .............................................. 46
6.03 Governmental Approvals .......................................... 46
6.04 Enforceability of Loan Documents ................................ 46
6.05 Subsidiaries .................................................... 46
6.06 Litigation ...................................................... 47
6.07 Financial Condition ............................................. 47
6.08 Compliance with Law, Etc ........................................ 47
6.09 ERISA ........................................................... 48
6.10 Taxes, Etc ...................................................... 48
6.11 Regulation G, T, U or X ......................................... 48
6.12 Nature of Business .............................................. 49
6.13 Adverse Agreements, Etc ......................................... 49
6.14 Holding Company and Investment Company Acts ..................... 49
6.15 Permits, Etc .................................................... 49
6.16 Priority, Title ................................................. 49
6.17 Full Disclosure ................................................. 49
6.18 Operating Lease Obligations ..................................... 50
6.19 Environmental Matters ........................................... 50
6.20 Schedules ....................................................... 50
6.21 Insurance ....................................................... 50
6.22 Use of Proceeds ................................................. 51
6.23 Security Documents .............................................. 51
6.24 Financial Accounting Practices, Etc ............................. 51
6.25 No Material Adverse Effect ...................................... 51
6.26 Real Property; Leases ........................................... 51
6.27 Location of Bank Accounts ....................................... 52
6.28 No Event of Default ............................................. 52
6.29 Capitalized Leases .............................................. 52
6.30 Tradenames ...................................................... 52
6.31 Solvency ........................................................ 53
6.32 Inventory ....................................................... 53
6.33 Intellectual Property ........................................... 53
6.34 Material Contracts .............................................. 53
6.35 Labor Relations; Collective Bargaining Agreements ............... 53
6.36 Accounts ........................................................ 54
ARTICLE VII AFFIRMATIVE COVENANTS ......................................... 54
7.01 Reporting Requirements .......................................... 54
7.02 Compliance with Laws, Etc ....................................... 58
7.03 Preservation of Existence, Etc .................................. 58
ii
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PAGE
7.04 Keeping of Records and Books of Account ......................... 59
7.05 Inspection Rights ............................................... 59
7.06 Maintenance of Properties, Etc .................................. 59
7.07 Maintenance of Insurance ........................................ 59
7.08 Environmental ................................................... 60
7.09 Further Assurances .............................................. 60
7.10 Borrowing Base .................................................. 61
7.11 Change in Collateral; Collateral Records ........................ 61
7.12 Financial Accounting Practices, Etc ............................. 61
7.13 Cash Management System .......................................... 62
7.14 Landlord and Warehouse Waivers .................................. 63
7.15 Additional Subsidiaries ......................................... 63
7.16 ERISA ........................................................... 63
7.17 Beneficial Retail Installment Contract .......................... 63
ARTICLE VIII NEGATIVE COVENANTS ........................................... 63
8.01 Liens, Etc ...................................................... 63
8.02 Indebtedness .................................................... 65
8.03 Guarantees, Etc ................................................. 65
8.04 Merger, Consolidation, Sale of Assets, Etc ...................... 66
8.05 Change in Nature of Business .................................... 66
8.06 Loans, Advances and Investments, Etc ............................ 67
8.07 Dividends, Prepayments, Etc ..................................... 67
8.08 Federal Reserve Regulations ..................................... 67
8.09 Transactions with Affiliates .................................... 67
8.10 Environmental ................................................... 68
8.11 ERISA ........................................................... 68
ARTICLE IX DEFAULTS ....................................................... 68
9.01 Events of Default ............................................... 68
9.02 Consequences of an Event of Default ............................. 71
9.03 Deposit for Letters of Credit ................................... 71
9.04 Certain Remedies ................................................ 72
ARTICLE X MISCELLANEOUS ................................................... 72
10.01 Holidays ....................................................... 72
10.02 Records ........................................................ 72
10.03 Amendments and Waivers ......................................... 72
10.04 No Implied Waiver; Cumulative Remedies ......................... 73
10.05 Notices ........................................................ 74
10.06 Expenses; Taxes; Attorneys' Fees; Indemnification .............. 74
10.07 Application .................................................... 75
10.08 Severability ................................................... 76
iii
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PAGE
10.09 Governing Law .................................................. 76
10.10 Prior Understandings ........................................... 76
10.11 Duration; Survival ............................................. 76
10.12 Counterparts ................................................... 76
10.13 Assignments; Participations .................................... 76
10.14 Successors and Assigns ......................................... 79
10.15 Confidentiality ................................................ 79
10.16 Waiver of Jury Trial ........................................... 79
10.17 Right of Setoff ................................................ 80
10.18 Headings ....................................................... 80
10.19 Forum Selection and Consent to Jurisdiction .................... 80
10.20 Termination .................................................... 81
10.20A. Termination of this Agreement ................................ 81
10.20B. Termination Upon an Event of Default ......................... 81
10.20C. Maturity of Obligations Upon Termination ..................... 81
10.20D. Termination by Lenders ....................................... 82
ARTICLE XI. The Administrative Agent ...................................... 82
11.01 Appointment .................................................... 82
11.02 Nature of Duties ............................................... 83
11.03 Rights, Exculpation, Etc ....................................... 83
11.04 Reliance ....................................................... 84
11.05 Indemnification ................................................ 84
11.06A CIT Individually .............................................. 85
11.06B National City Individually .................................... 85
11.07 Successor Agent ................................................ 85
11.08 Collateral Matters ............................................. 86
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Form of Security Agreement
Exhibit B-1 - Form of Security Agreement and Mortgage -Trademarks
Exhibit C - Form of Letter of Credit
Exhibit D - Form of Borrowing Base Certificate
Exhibit E - Form of Assigment and Acceptance Agreement
Exhibit F - Form of Notice of Borrowing
Exhibit G - Form of Notice Letter
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SCHEDULES
Schedule 1.01(A) - Inventory Locations
Schedule 1.01(B) - Revolving Credit Commitment Amount
Schedule 6.05 - Description of Subsidiaries
Schedule 6.06 - Litigation
Schedule 6.09 - Plans
Schedule 6.10 - Taxes
Schedule 6.18 - Operating Lease Obligations
Schedule 6.19 - Environmental Matters
Schedule 6.21 - List of Insured Properties
Schedule 6.26 - Real Property Owned and Leased
Schedule 6.27 - Location of Bank Accounts
Schedule 6.29 - Capital Lease Obligations
Schedule 6.30 - Tradenames
Schedule 6.34 - Material Contracts
Schedule 6.35 - List of Collective Bargaining Agreements
Schedule 6.36 - Location of Books and Records; Credit Card Agreement
Schedule 8.01 - Existing Liens
Schedule 8.02 - Indebtedness
Schedule 8.03 - Guarantees
Schedule 8.06 - Investments
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<PAGE> 7
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of December 19, 1996
among SUN TELEVISION AND APPLIANCES, INC., an Ohio corporation ("the Borrower"),
the financial institutions from time to time party hereto (collectively, the
"Lenders" and individually, a "Lender"), and THE CIT GROUP/ BUSINESS CREDIT,
INC. ("CIT"), as Administrative Agent for the Lenders (in such capacity the
"Administrative Agent") and National City Commercial Finance, Inc. ("National
City"), as Co-Agent (in such capacity the "Co-Agent").
BACKGROUND
WHEREAS, the Borrower has requested the Administrative Agent,
Co-Agent and Lenders to provide the Borrower with a $100 million revolving
credit facility, including a $10 million subfacility for the issuance of letters
of credit and, subject to the terms and conditions set forth herein, the Lenders
have agreed to provide such facility.
In consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS: CONSTRUCTION
1.01 Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, respectively, unless the context hereof
otherwise clearly requires:
"Accountant's Opinion" shall have the meaning given that term in
Section 7.01(a) hereof.
"Accounts" shall mean all of the Borrower's now existing and
future: (a) accounts receivable (whether or not specifically listed on schedules
furnished to the Lenders), and any and all instruments, documents, contract
rights, chattel paper, general intangibles, including, without limitation, all
accounts created by or arising from any of the Borrower's sales of goods or
rendition of services to its customers, and all accounts arising from sales or
rendition of services made under any of the Borrower's trade names or styles,
whether or not presently in effect, or through any of the Borrower's divisions;
(b) unpaid seller's rights (including rescission, replevin, reclamation and
stoppage in transit) relating to the foregoing or arising therefrom; (c) rights
to any goods represented by any of the foregoing, including rights to returned
or repossessed goods; (d) reserves and credit balances arising hereunder; (e)
guarantees or collateral for any of the foregoing; (f) insurance policies or
rights relating to any of the foregoing; and (g) cash and non-cash proceeds of
any and all of the foregoing.
<PAGE> 8
"Affiliate" of a Person shall mean any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of is controlled by, or
is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly either to (a) vote
10% or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Agent Account" shall mean an account in the name of the
Administrative Agent designated by the Administrative Agent to the Borrower from
time to time into which the Borrower shall make all payments to the
Administrative Agent, for the account of the Administrative Agent or the
Lenders, as the case may be, under this Agreement.
"Agent Advances" shall have the meaning given that term in Section
11.08 hereof.
"Agreement" shall mean this Revolving Credit Agreement as amended,
modified, supplemented or restated from time to time.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by CIT or National City and an assignee, and accepted by
the Administrative Agent, substantially in the form of Exhibit E hereto.
"Availability" shall mean, at any time, the difference between (i)
the Current Commitment and (ii) the sum of (A) the aggregate outstanding
principal amount of all Loans and (B) the Letter of Credit Exposure.
"Bank" shall mean The Chase Manhattan Bank, N.A., its successors
or any other bank designated by the Administrative Agent to the Borrower from
time to time that is reasonably acceptable to the Borrower.
"Beneficial" shall mean any one or all of the following:
Beneficial Ohio, Inc., Beneficial Kentucky, Inc., Beneficial Consumer Discount
Company, Beneficial Credit Services of New York, Inc. and Beneficial West
Virginia Inc.
"Beneficial Contract" shall mean that certain Agreement for the
Purchase of Closed-End Contracts dated April 10, 1996 among the Borrower and
Beneficial.
"Beneficial Receivables" shall mean the obligation of Beneficial
to make payment to the Borrower for the purchase of certain installment sale
contracts pursuant to the Beneficial Contract.
"Beneficial Revisions" shall mean inclusion of provisions (i) in
the Beneficial Contract, waiving the right of set-off, (ii) in the Beneficial
Contract, specifying the timing and payment procedures for sale of installment
sales contracts, (iii) in an amendment to this Agreement providing the
Administrative Agent with a perfected first priority security interest in
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<PAGE> 9
the installment sales contracts and (iv) in either the Beneficial Contract or
this Agreement as are determined by the Administrative Agent to be reasonably
necessary or advisable in its discretion.
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA that is subject to Title IV of ERISA (other than a
Multiemployer Plan) and in respect of which the Borrower or any ERISA Affiliate
is or within the immediately preceding six (6) years was an "employer" as
defined in Section 3(5) of ERISA.
"Board" means the Board of Governors of the Federal Reserve System
of the United States.
"Book Value" shall mean as to any Inventory in respect of which
such amount is to be determined, the lower of (i) cost (as reflected in the
general ledgers of the Borrower) or (ii) market value (both cost and market
value being determined in accordance with GAAP calculated on the first in, first
out basis).
"Borrower" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Borrowing Base" shall mean an amount equal to the difference
between (i) the sum of (A) 85% of Eligible Receivables, (B) fifty-five percent
(55%) of the Book Value of Eligible Inventory from January 1 of each year
through October 31, (C) sixty percent (60%) of the Book Value of Eligible
Inventory from November 1 through December 31 and (D) Unreimbursed Draws and
Undrawn Letter of Credit Availability (in each case in the aggregate with
respect to all such unreimbursed or undrawn letters of credit) and (ii) such
reserves as the Administrative Agent, in its sole discretion, exercised
reasonably, may deem appropriate.
"Borrowing Base Certificate" shall have the meaning given that
term in Section 4.04(a) hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions are authorized or obligated to close in
New York, New York, provided, that with respect to the borrowing, payment,
conversion to or continuation of Eurodollar Loans, Business Day shall also mean
a day on which dealings in Dollars are carried on in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of the Bank's eurodollar loans are then being conducted.
"Capital Expenditures" shall mean, for any period, the sum,
without duplication, of (i) the aggregate amount of all expenditures during such
period which, in accordance with GAAP, is required to be included in property,
plant or equipment or similar fixed asset accounts plus (ii) the entire
principal amount of any debt obligations (including, without limitation,
Capitalized Lease Obligations) assumed in connection with any such expenditures.
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<PAGE> 10
"Capitalized Lease" shall mean any lease which is required under
GAAP to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate amount
which is required under GAAP to be reported as a liability on the balance sheet
of a Person as lessee under a Capitalized Lease.
"Cash Concentration Account" shall mean the deposit account
maintained by the Administrative Agent at the Cash Concentration Account Bank,
which deposit account shall be under the sole dominion and control of the
Administrative Agent, and from which all funds will be transferred to the Agent
Account pursuant to Section 7.13 hereof.
"Cash Concentration Account Agreement" shall mean an agreement, in
form and substance reasonably satisfactory to the Administrative Agent, among
the Cash Concentration Account Bank, the Borrower and the Administrative Agent
delivered to the Administrative Agent pursuant to Section 7.13 hereof, as such
Agreement may be modified and supplemented and in effect from time to time.
"Cash Concentration Account Bank" shall mean Huntington National
Bank or such other bank as the Borrower may select with the written approval of
the Administrative Agent not to be unreasonably withheld.
"Change of Control" shall mean any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
40% or more of the voting power of the then outstanding common stock of the
Borrower.
"CIT" shall have the meaning given that term in the introductory
paragraph to this Agreement.
"Closing Date" shall mean the date on which the conditions set
forth in Section 5.01 hereof shall be satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall mean all of the property (tangible and
intangible) of any Person purported to be subject to the Lien purported to be
created by any Security Document heretofore or hereafter executed by such Person
as security for all or any part of the Obligations.
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<PAGE> 11
"Collective Bargaining Agreements" shall have the meaning assigned
to that term in Section 5.01(d) (xvii) hereof.
"Credit Extension" shall mean (a) the making of any Loan by a
Lender or the Administrative Agent on behalf of the Lenders or (b) the issuance,
increase in the Stated Amount, or extension of the expiration date of any Letter
of Credit which CIT or any Lender assists the Borrower in opening or
establishing.
"Current Commitment" shall have the meaning assigned to that term
in Section 2.01 hereof.
"Depository Accounts" shall mean the lock-box or blocked
depository accounts maintained by the Borrower for the collection of the cash of
the Borrower and the proceeds from the sale of the Inventory of the Borrower.
"Depository Account Agreements" shall mean each agreement among a
Depository Bank, the Borrower and the Administrative Agent delivered to the
Administrative Agent pursuant to Section 7.13 hereof, as each such Agreement may
be modified and supplemented and in effect from time to time.
"Depository Bank" shall mean each financial institution at which a
Depository Account is maintained.
"Designated Borrowing Officer" shall mean (a) the Chairman,
President and Treasurer, of the Borrower or (b) such other officer as shall be
designated from time to time in writing by the Borrower to the Administrative
Agent .
"Designated Financial Officer" of a Person shall mean the
individual designated from time to time by the Board of Directors or governing
body performing like functions of such Person to be the chief financial officer
or Treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body performing like functions of such Person to
act in lieu of the chief financial officer or the Treasurer).
"Disbursement Account" shall mean the deposit account in the name
of the Borrower maintained at a bank in the United States designated by the
Borrower to the Administrative Agent into which there shall be deposited
proceeds of Loans and funds disbursed to the Borrower by the Administrative
Agent .
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of
the United States of America.
"Eligible Accounts Receivable" shall mean the gross amount of the
Borrower's Accounts, that at all times continue to be acceptable to the
Administrative Agent in the exercise of its reasonable business judgment, less,
without duplication, the sum of the following items:
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<PAGE> 12
(a) any returns, discounts, claims, credits and allowances of any nature
(whether issued, owing, granted or outstanding) and (b) reserves for (i) sales
to the United States of America or to any agency, department or division
thereof; (ii) foreign sales (which term excludes sales to residents of the
United States); (iii) accounts that remain unpaid more than sixty (60) days from
the due date; (iv) contras; (v) sales to any Subsidiary, or to any company
affiliated with the Borrower in any way; (vi) bill and hold (deferred shipment)
or consignment sales; (vii) sales to any customer which is (A) insolvent, (B)
the debtor in any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceedings under any federal or state law or (C)
negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts; (viii) all sales to any customer if
fifty percent (50%) or more of either (1) all outstanding invoices or (2) the
aggregate dollar amount of all outstanding invoices, are unpaid more than sixty
(60) days from due date; (ix) credit card receivables, other than the Beneficial
Receivables which may be eligible so long as such receivables do not remain
unpaid more than thirty (30) days after the date of the customer invoice and the
Administrative Agent determines that the Beneficial Contract has been amended to
reflect the Beneficial Revisions in form and substance satisfactory to the
Administrative Agent; (x) any other reasons deemed necessary by the
Administrative Agent or the Majority Lenders in its or their reasonable business
judgment and which are customary in scope and application either in the
commercial finance industry or in the lending practices of the Administrative
Agent or the Majority Lenders based upon the assessment of the Administrative
Agent or the Majority Lenders; and (xi) an amount representing, historically,
returns, discounts, claims, credits and allowances.
"Eligible Inventory" shall mean finished goods Inventory of the
Borrower which at the time of determination meets all the following
qualifications:
(i) it is lawfully owned by the Borrower and not subject to
any Lien, other than the Lien in favor of the Administrative Agent
that secures the payment of the Obligations and it is not held on
consignment and may be lawfully sold (until (A) appropriate
Uniform Commercial Code releases are obtained, Inventory bearing
the name Canon U.S.A., Inc., shall not be deemed eligible
hereunder and (B) the Administrative Agent is satisfied that Canon
U.S.A., Inc., has no right to assert a lien on any Inventory other
than invoiced by Canon U.S.A., Inc., Inventory bearing any name
including the word "Canon" shall not be deemed eligible
hereunder);
(ii) it is (A) located in the Borrower's distribution
centers, warehouses or store locations listed on Schedule 1.01(A)
hereto or (B) located in other locations in the continental United
States as the Administrative Agent shall have approved in writing
from time to time, which approval shall be given upon the Borrower
providing the Administrative Agent with evidence, reasonably
satisfactory to the Administrative Agent, of (1) the
Administrative Agent's perfected, first priority Lien on all
Inventory of the Borrower located in such locations and (2) the
absence of any other Liens on any Inventory of the Borrower
located in such locations, which evidence may include the results
of Uniform
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<PAGE> 13
Commercial Code, tax and judgment lien searches in such locations
and acknowledgment copies of Uniform Commercial Code financing
statements naming the Borrower, as debtor, and the Administrative
Agent, as secured party, filed in such locations;
(iii) it is determined in the reasonable judgment of the
Administrative Agent to be, when taken as a whole, substantially
similar in quality and mix (having regard for seasonal variations)
to the Inventory maintained by the Borrower in recent historical
operations prior to the Closing Date; and
(iv) it is Inventory that has been valued after deducting
the aggregate amount of reserves for (1) shrinkage, (2)
lay-a-ways, (3) displays, (4) rejected, defective, damaged, aged
or otherwise unsalable Inventory, (5) Inventory to be returned to
suppliers, (6) Inventory in-transit to third parties (other than
the Borrower's agents or warehouses), (7) supplies, (8)
consignment Inventory, (9) monthly rent for each location for
which the Administrative Agent has not received a Landlord Waiver
(in an amount equal to two times the monthly rent), (10) seasonal
Inventory, (11) slow moving or obsolete Inventory, (12) the amount
of all sales taxes collected by the Borrower and not yet remitted
to the authority to which such taxes are owed, (13) markdowns (to
include the Borrower's reserve for net realizable value on
computer inventory) and (14) other reserves required by the
Administrative Agent in the exercise of its reasonable business
judgment.
"Environmental Actions" shall mean any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any Governmental
Authority or any third party involving a Release (i) from or onto any of the
properties presently or formerly owned or leased by the Borrower or its
Subsidiaries or (ii) from or onto any facilities which received Hazardous
Materials from the Borrower or its Subsidiaries, or involving any violation of
any Environmental Law.
"Environmental Law" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to the
regulation and protection of human health, safety, the environment and natural
resources. Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq. ) ("CERCLA"); the Hazardous Material Transportation
Act, as amended (49 U.S.C. Section 180 et seq.); the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic
Substance Control Act, as amended (15 U.S.C. Section 2601 et seq.); the Clean
Air Act, as amended (42 U.S.C. Section 7401 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.); and their
state and local counterparts or equivalents.
"Environmental Liabilities and Costs" shall mean all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of
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<PAGE> 14
counsel, expert and consulting and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
Environmental Action relating to any Environmental condition, violation of
Environmental Law, Remedial Actions or a Release of Hazardous Materials from or
onto (i) any property presently or formerly owned by the Borrower or any of its
Subsidiaries or (ii) any facility which received Hazardous Materials generated
by the Borrower or any of its Subsidiaries.
"Environmental Lien" shall mean any Lien securing Environmental
Liabilities and Costs incurred by a Governmental Authority.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Borrower, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 41 4(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Existing Credit Facilities" shall mean (i) the Credit Agreement
dated as of September 13, 1994, by and among the Borrower, National City Bank,
Columbus and the Huntington National Bank, as Banks, and National City Bank,
Columbus, as agent for the Banks, as amended; (ii) the Purchase Agreement dated
as of September 15, 1994, between the Borrower and Teachers Insurance and
Annuity Association of America for the purchase of $20,000,000 principal amount
of 8.18% Senior Notes dues August 31, 2004, as amended; and (iii) the Purchase
Agreement between the Borrower and John Hancock Mutual Life Insurance Company
for the purchase of $10,000,000 principal amount of such notes, as amended.
"Eurodollar Base Rate" shall mean, with respect to a Eurodollar
Loan for the relevant Interest Period, the rate determined by the Administrative
Agent to be the rate at which deposits in Dollars are offered by the Bank to
first-class banks in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its eurodollar loans are
then being conducted at approximately 11:00 a.m., New York City time, three
Business Days prior to the first day of such Interest Period, in the approximate
amount of the relevant Eurodollar Loan and having a maturity equal to such
Interest Period.
"Eurodollar Loan" shall mean a Loan bearing interest at the
Eurodollar Rate.
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<PAGE> 15
"Eurodollar Rate" means with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100 of 1%):
Eurodollar Base Rate
---------------------------
1.00 - Reserve Requirements
"Event of Default" shall mean any of the Events of Default
described in Section 9.01 hereof.
"Fee Letter" shall mean the letter agreement, dated of even date
herewith between the Borrower and the Administrative Agent obligating the
Borrower to jointly and severally pay certain fees to the Administrative Agent
in connection with this Agreement, as such letter agreement may be modified,
supplemented or amended from time to time.
"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the United States at the relevant date.
"Governmental Authority" shall mean any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" of or by any Person shall mean any obligation of such
Person guaranteeing any Indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Hazardous Materials" shall mean (i) any element, compound or
chemical that is defined, listed or otherwise classified as a solid waste,
contaminant, pollutant, toxic pollutant, hazardous substance, extremely
hazardous substance, toxic substance, hazardous waste, or special waste under
any Environmental Law; (ii) petroleum and its refined fractions, (iii) any
polychlorinated biphenyls, (iv) any flammable, explosive or radioactive
materials; and (v) any other raw materials used or stored by the Borrower,
building components (including but not limited to asbestos-containing materials)
and manufactured products containing Hazardous Materials.
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<PAGE> 16
"Indebtedness" shall mean as to any Person (i) indebtedness for
borrowed money; (ii) indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices); (iii) indebtedness
evidenced by bonds, debentures, notes or other similar instruments (other than
performance, surety and appeal or other similar bonds arising in the ordinary
course of business); (iv) obligations and liabilities secured by a Lien upon
property owned by such Person, whether or not owing by such Person and even
though such Person has not assumed or become liable for the payment thereof; (v)
obligations and liabilities directly or indirectly Guaranteed by such Person;
(vi) obligations or liabilities created or arising under any conditional sales
contract or other title retention agreement with respect to property used and/or
acquired by such Person, even though the rights and remedies of the lessor,
seller and/or lender thereunder are limited to repossession of such property;
(vii) Capitalized Lease Obligations; (viii) all liabilities in respect of
letters of credit, acceptances and similar obligations created for the account
of such Person, and (ix) net liabilities of such Person under interest rate cap
agreements, interest rate swap agreements, foreign currency exchange agreements
and other hedging agreements or arrangements calculated on a basis reasonably
satisfactory to the Administrative Agent and in accordance with accepted
practice.
"Indemnified Parties" shall have the meaning given that term in
Section 10.06 hereof.
"Initial Termination Date" shall have the meaning set forth in
Section 2.01 hereof.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
the period commencing on the borrowing date for, or the date of any continuation
of or conversion for such Eurodollar Loan, as the case may be, and ending one,
two or three months thereafter as the Borrower may elect in the applicable
notice given to the Administrative Agent pursuant to Section 2.03 or Section
2.14, as appropriate; provided that (i) any Interest Period that would otherwise
end on a day that is not a Business Day shall be extended to the next succeeding
Business Day, unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day; (ii) any
Interest Period that begins on the last Business Day of a calendar month or on a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period shall end on the last Business Day of the
applicable calendar month; and (iii) no Interest Period for any Loan shall end
after the Termination Date. Interest shall accrue from and include the first
date of an Interest Period, but exclude the last day of such Interest Period.
"Inventory" shall mean all goods and merchandise of the Borrower
including, but not limited to, all finished goods, materials and supplies of
every nature used or usable in connection with the shipping, storing,
advertising or sale of such goods and merchandise, whether now owned or
hereafter acquired and all such property, the sale or disposition of which would
give rise to accounts receivable or cash.
"L/C Notice" shall have the meaning given to that term in Section
3.01(b).
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"Lease" shall mean any lease of real property to which the
Borrower is a party as lessee or lessor.
"Lenders" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Letter of Credit" shall have the meaning given to that term in
Section 3.01(a).
"Letter of Credit Application" shall have the meaning given to
that term in Section 3.01(a) hereof.
"Letter of Credit Cash Collateral Account" shall mean the deposit
account maintained at the Bank or such other bank as the Administrative Agent
may select, which deposit account shall be under the sole dominion and control
of the Administrative Agent .
"Letter of Credit Exposure" shall mean, at any time, the sum at
such time of (a) the aggregate amount of all Unreimbursed Draws under Letters of
Credit (whether or not such Letters of Credit are then outstanding) and (b) the
aggregate Undrawn Letter of Credit Availability under all outstanding Letters of
Credit.
"Letter of Credit Fee" shall have the meaning given to that term
in Section 2.08(f) hereof.
"Letter of Credit Guaranty" shall mean the guaranty delivered by
CIT to the Letter of Credit Issuer, guaranteeing the Borrower' reimbursement
obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of the Letters of
Credit, which shall be the Bank or The Dai-Ichi Kangyo Bank, Limited, New York
Branch.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loan or loans made by the
Lenders or by the Administrative Agent on behalf of the Lenders to the Borrower
or made as a result of charges made to the Loan Account, in each case pursuant
to the terms of this Agreement.
"Loan Account" shall have the meaning given that term in Section
2.08(a) hereof.
"Loan Documents" shall have the meaning given to that term in the
definition of "Related Documents" set forth in this Section 1.01 hereof.
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"Majority Lenders" shall mean, at any time, Lenders whose Pro Rata
Shares aggregate at least sixty-six and two-thirds percent (66-2/3%).
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, condition (financial or otherwise), or
properties of the Borrower, (ii) the ability of the Borrower to perform its
obligations hereunder, under the Fee Letter or under any other Related Document,
(iii) the Lien arising under the Related Documents on any Collateral, (iv) the
legality, validity or enforceability of this Agreement or any Related Document
or the Lien arising under any Related Document or (v) the aggregate value of the
property included in the calculation of the Borrowing Base.
"Material Contract" means each contract or agreement to which the
Borrower is a party which is material to the business, operations, condition
(financial or otherwise), performance, or properties of the Borrower, including,
without limitation, all agreements related to credit card receivables.
"Minority Lenders" shall have the meaning given to that term in
Section 10.03(b) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by the
Borrower or any ERISA Affiliate.
"Notes" shall mean the promissory notes of the Borrower executed
and delivered to the Lenders under this Agreement and substantially in the form
of Exhibit A hereto, as modified or restated from time to time and any
promissory note or notes issued in exchange or replacement thereof, including
all extensions, renewals, refinancings or refundings thereof in whole or part.
"Notice of Borrowing" shall have the meaning given to that term in
Section 2.03(a) hereof.
"Obligations" shall mean all indebtedness, obligations and
liabilities of the Borrower to any Lender or the Administrative Agent or the
Co-Agent incurred under or related to this Agreement, the Note, the Fee Letter
or any other Related Document, whether such indebtedness, obligations or
liabilities are direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising, including without limitation
those which are described in either of the following clauses (i) or (ii):
(i) All indebtedness, obligations (including Reimbursement
Obligations) and liabilities of any nature whatsoever, including
amounts due under Section 10.06 and Section 11.08 hereof and
similar agreements contained in the other Related Documents, from
time to time arising under
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or in connection with or evidenced or secured by this Agreement,
the Note, the Letters of Credit or any other Related Document,
including but not limited to the principal amount of Loans
outstanding, together with interest thereon (including, without
limitation, all interest that accrues after the commencement of
any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrower), the amount of the
Letter of Credit Exposure, together with interest thereon and all
expenses, fees and indemnities hereunder or under any other
Related Document. Without limitation, such amounts include all
Loans and interest thereon and the amount of all Letter of Credit
Exposure whether or not such Loans were remade or any Letters of
Credit to which such Letter of Credit Exposure relates were issued
in compliance with the terms and conditions hereof or in excess of
any Lender's obligation to lend and arrange for the issuance of
Letters of Credit hereunder or any Lender's obligation to
participate therein. If and to the extent any amounts in any
account (including the Agent Account, the Letter of Credit Cash
Collateral Account, the Depository Accounts, the Cash
Concentration Accounts or otherwise) constituting Collateral are
applied to Obligations hereunder, and any Lender or the
Administrative Agent is subsequently obligated to return or repay
any such amounts to any Person for any reason, the amount so
returned or repaid shall be deemed a Loan hereunder and shall
constitute an Obligation.
(ii) All indebtedness, obligations and liabilities from
time to time arising under or in connection with any account from
time to time maintained by the Borrower or by any Lender or the
Administrative Agent pursuant to the terms of this Agreement or
any Related Document, including but not limited to all
reimbursement obligations, service charges and interest in
connection with any overdrafts or returned items from time to time
arising in connection with any such account, or arising under or
in connection with any cash management services or other services
from time to time performed by any Lender or the Administrative
Agent pursuant to or in connection with this Agreement or any
other Related Document.
"Office" when used in connection with the Administrative Agent
shall mean its office located at 1211 Avenue of the Americas, New York, New York
10036 or at such other office or offices of the Administrative Agent as may be
designated in writing from time to time by the Administrative Agent to the
Borrower and when used in connection with the Bank or the Letter of Credit
Issuer shall mean the office of such entity designated in writing from time to
time by the Administrative Agent to the Borrower. In the event Chase shall be
the Bank or the Letter of Credit Issuer, the Office for such entity shall until
further written notice from the Administrative Agent to the Borrower be its
office located at 55 Water Street, New York, New York 10004.
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"Operating Assets" shall mean all merchandise, inventories,
furniture, fixtures and equipment (including all transportation and warehousing
equipment but excluding office equipment, point-of-sale equipment, cash
registers and data processing equipment) owned by the Borrower or any
Subsidiary.
"Operating Lease Obligations" shall mean all obligations and
indebtedness of the Borrower and its Subsidiaries in respect of leases of
property (whether real, personal or mixed) other than Capitalized Lease
Obligations.
"Operating Property" shall mean all real property and improvements
thereon owned by the Borrower or any Subsidiary and constituting, without
limitation, any store, warehouse, service center or distribution center wherever
located, provided that such term shall not include any store, warehouse, service
center or distribution center which the Borrower's board of directors declares
by resolution not to be of material importance to the business of the Borrower
and its Subsidiaries, taken as a whole.
"Other Taxes" shall have the meaning given to that term in Section
2.15.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America or of any agency thereof or obligations guaranteed as
to principal and interest by the United States of America or of any agency
thereof, in either case maturing not more than ninety (90) days from the date of
acquisition thereof by such Person; (b) deposit accounts with or certificates of
deposit and bankers' acceptances issued by any bank or trust company organized
under the laws of the United States of America or any state thereof and having
capital, surplus and undivided profits of at least $500,000,000 maturing not
more than 90 days from the date of acquisition thereof by such Person: (c)
commercial paper rated A- 1 or better or P- 1 or better by Standard & Poor's
Corporation ("S&P") or Moody's Investors Services, Inc. ("Moody's"),
respectively maturing not more than 90 days from the date of acquisition thereof
by such Person; (d) Investments in money market funds rated AAAm or AAAm-G by
S&P and Aaa by Moody's and; (e) repurchase agreements having maturities of not
more than 90 days from the date of acquisition which are entered into with a
bank or trust company described in clause (b) above and which are secured by
readily available direct obligations of the United States of America or any
agency thereof.
"Permitted Liens" shall have the meaning given that term in
Section 8.01 hereof.
"Person" shall mean an individual, corporation, partnership,
limited liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including political
subdivisions), Governmental Authority or agency, or any other entity.
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"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Potential Default" shall mean any event or condition which,
with notice or passage of time, or any combination of the foregoing, would
constitute an Event of Default.
"Prime Loan" shall mean a Loan bearing interest at the Regular
Rate.
"Prime Rate" shall mean the interest rate per annum publicly
announced from time to time by the Bank in New York, New York as its Prime Rate,
such interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate. The Prime Rate is not
intended to be the lowest rate of interest charged by the Bank to its borrower.
"Pro Rata Share" shall mean, with respect to any Lender, a
fraction (expressed as a percentage), the numerator of which shall be the amount
of such Lender's Revolving Credit Commitment and the denominator of which shall
be the aggregate amount of all of the Lenders' Revolving Credit Commitments, as
adjusted from time to time in accordance with the provisions of Section 10.13
hereof, provided that, if the Revolving Credit Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Exposure and the denominator shall be the aggregate
amount of all unpaid Loans and Letter of Credit Exposure.
"Register" shall have the meaning given that term in Section
10.08(c) hereof.
"Regular Rate" shall mean, for any day, the Prime Rate.
"Reimbursement Obligation" shall mean the obligations of the
Borrower to reimburse CIT or the Lenders for amounts payable by CIT or the
Lenders under a Letter of Credit Guaranty in respect of any payment made under
any Letter of Credit issued by the Letter of Credit Issuer, together with
interest thereon and all fees and expenses related thereto.
"Related Documents" or "Loan Documents" shall mean this
Agreement, the Note, the Letters of Credit, each Letter of Credit Application,
the Letter of Credit Guaranty, the Fee Letter, the Depository Account
Agreements, Cash Concentration Account Agreements and the credit card depository
account agreements, the Security Documents, each notice letter delivered to a
Depository Bank or other financial institution pursuant to Section 7.13, the
Assignment and Assumption and the other documents, instruments and agreements
referred to in Section 5.01 hereof, and all other instruments, agreements and
documents from time to time delivered in connection with or otherwise relating
to any Related Document.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, injection, discharging, injecting, escaping, leaching,
dumping or disposing (including
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abandonment, or discarding of barrels, containers and other closed receptacles
containing any hazardous substance, pollutant or contaminant) of a Hazardous
Material into the indoor or outdoor environment or onto or from any property
presently or formerly owned or operated by the Borrower or any of its
Subsidiaries, or at any disposed facility that received Hazardous Materials
generated by the Borrower or any of its Subsidiaries.
"Remedial Action" shall mean all actions taken to (i) monitor,
assess, evaluate, investigate, clean up, remove, remedy, treat, contain or in
any other way address Hazardous Materials in the indoor or outdoor environment;
(ii) prevent or minimize a Release or threatened Release of Hazardous Materials
so that the Release or threatened Release does not migrate or endanger or
threaten to endanger public health or welfare or the environment; or (iii)
perform pre-remedial studies and investigations and post-remedial operation and
maintenance activities, or any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" shall mean any of the events described in
Section 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
"Reserve Requirements" shall mean, for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available from time to time to any
Lender or the Affiliate of any Lender under Regulation D.
"Revolving Credit Commitment" shall mean, with respect to each
Lender the amount set forth on Schedule 1.01(B) to this Agreement or assigned to
such Lender in accordance with Section 10.13 hereof, as such amounts may be
reduced from time to time pursuant to the terms of this Agreement, and
"Revolving Credit Commitments" shall, collectively, mean the aggregate amount of
the Revolving Credit Commitments of all the Lenders, the maximum amount of which
shall not exceed $100,000,000.
"Security Agreements" shall mean the Security Agreements,
substantially in the form of Exhibit B and Exhibit B-1 hereto, made by the
Borrower in favor of the Administrative Agent, for the benefit of the Lenders,
as modified and supplemented and in effect from time to time.
"Security Documents" shall mean, collectively, the Security
Agreements executed and delivered by the Borrower, and all Uniform Commercial
Code financing statements required by this Agreement and the Security Agreements
to be filed with respect to the security interests in personal property created
pursuant to such agreements, and all other documents and
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agreements executed and delivered by the Borrower and/or its Subsidiaries in
connection with any of the foregoing documents.
"Settlement Period" shall have the meaning set forth in
Section 2.03 hereof.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is not
less than the total amount of its liabilities, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its existing debts as
they become absolute and matured, (c) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature and (e) such Person is not engaged in business or a transaction, and, is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Stated Amount" shall mean, with respect to a Letter of
Credit, the face amount thereof, drawn or undrawn, regardless of the existence
or satisfaction of any conditions or limitations on drawing.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited or general partnership, limited liability company, limited
liability partnership, trust, association or other business entity of which an
aggregate of 50% or more of the outstanding stock or other interests entitled to
vote in the election of the board of directors of such corporation (irrespective
of whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
"Syndication Date" shall mean the earlier of (i) the date
which is sixty (60) days after the date of the initial loan and (ii) the date on
which the Administrative Agent determines in its sole discretion (and notifies
the Borrower and the Lenders) that the primary syndication (and the resulting
addition of institutions as lenders pursuant to Section 10.13 hereof) has been
completed.
"Taxes" shall have the meaning given to that term in Section
2.15 hereof.
"Termination Date" shall have the meaning given that term in
Section 2.01 hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which the Borrower or any
ERISA Affiliate was a "substantial employer" as defined in Section 4001 (a)(2)
of ERISA; (iii) the imposition of an obligation on the Borrower or any
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ERISA Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination described
in Section 4041 (c) of ERISA; or (iv) the institution by the PBGC of proceedings
to terminate a Benefit Plan.
"Undrawn Letter of Credit Availability" shall mean with
respect to a Letter of Credit, at any time, the maximum amount available to be
drawn under such Letter of Credit at such time, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Unreimbursed Draws" shall mean with respect to a Letter of
Credit, at any time, the aggregate amount at such time of all payments made by
the Letter of Credit Issuer or payments made by CIT or the Lenders under a
Letter of Credit Guaranty in respect of such payments under such Letter of
Credit, to the extent not repaid by the Borrower, provided that Unreimbursed
Draws shall not include any such payments that have been charged to the Loan
Account and constitute a Loan pursuant to the terms of this Agreement.
"Unused Line Fee" shall have the meaning given to that term in
Section 2.08(e) hereof.
1.02 Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Administrative Agent include reasonable good faith
estimates by the Administrative Agent (in the case of quantitative
determinations) and reasonable good faith beliefs by the Administrative Agent
(in the case of qualitative determinations). The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The section and
other headings contained in this Agreement and the Table of Contents preceding
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any respect.
Section, subsection and exhibit references are to this Agreement unless
otherwise specified.
1.03 Accounting Principles. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP. Notwithstanding
the definition of GAAP contained in this Agreement, no change in GAAP that would
affect the method or calculation of any covenants, restrictions or standards or
definitions of terms used herein shall be given effect in such calculations
until such covenants, restrictions or standards or definitions are amended in a
manner satisfactory to the Borrower and the Majority Lenders so as to reflect
such change in GAAP.
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ARTICLE II
THE CREDITS
2.01 Revolving Credit Loans. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender severally agrees to make Loans to the Borrower at any time and from
time to time on or after the date hereof and to but not including, the
Termination Date, in an aggregate principal amount for the Borrower not
exceeding at any one time its Pro Rata Share of the Current Commitment at such
time. The "Current Commitment" at any time shall be equal to the lesser of (A)
$100,000,000, as such amount may have been reduced pursuant to the terms of this
Agreement at such time, and (B) the Borrowing Base. No Lender shall have an
obligation to make Loans hereunder or arrange for the issuance of Letters of
Credit on or after the Termination Date or which, when added to the aggregate
amount of all outstanding and contemporaneous Loans and the Letter of Credit
Exposure at such time, would cause the aggregate amount of all Loans and the
Letter of Credit Exposure at any time to exceed the Current Commitment at such
time. Notwithstanding anything to the contrary, prior to the Syndication Date,
all Loans shall be incurred and be maintained as Prime Loans. The "Termination
Date" means the date on which the Revolving Credit Commitment of each Lender
expires, which initially shall be February 28, 2000 (the "Initial Termination
Date"). Within the limits of time and amount set forth in this Section 2.01, and
subject to the provisions of this Agreement, the Borrower may borrow, repay and
reborrow hereunder.
2.02 Notes. The obligation of the Borrower to repay the unpaid
principal amount of the Loans made to it by each Lender and to pay interest
thereon shall be evidenced in part by a Note dated the date of this Agreement in
the principal amount of such Lender's Revolving Credit Commitment with the
blanks appropriately filled in. An executed Note for each Lender shall be
delivered by the Borrower to the Administrative Agent on the date of the
execution and delivery of this Agreement.
2.03 Notice of Borrowing; Making of Loans.
(a) Whenever the Borrower desires to borrow, the Borrower
shall provide notice to the Administrative Agent of such proposed borrowing (a
"Notice of Borrowing"), each such notice, to be given (i) not later than 12:00
noon (New York City time) on the date of such proposed borrowing, in the case of
a borrowing consisting of Prime Loans, or (ii) not later than 12:00 noon (New
York City time) on the third Business Day before the date of such borrowing, in
the case of a borrowing consisting of Eurodollar Loans, setting forth: (a) the
date, which shall be a Business Day, on which such borrowing is to occur, (b)
whether such Loan is requested to be a Prime Loan or a Eurodollar Loan and, if a
Eurodollar Loan, the Interest Period requested with respect thereto (which may
be one, two or three months), (c) the principal amount of the Loan being
borrowed and (d) the account information where such Loan is to be received. Such
notice shall be given by telephone or in writing by a Designated Borrowing
Officer, provided, that, if requested by the Administrative Agent, any such
telephonic notice shall be confirmed in writing by delivery to the
Administrative Agent, on or before the date on
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which such Loan is to be made, of a written notice substantially in the form of
Exhibit F hereto containing the original or facsimile signature of a Designated
Borrowing Officer. Except for a Notice of Borrowing when the Administrative
Agent will fund the related Loan pursuant to Section 2.03(e) hereof, the
Administrative Agent shall provide each Lender with prompt notice of each Notice
of Borrowing. Except as otherwise provided in Section 2.03(e), on the date
specified in such notice, each Lender shall, subject to the terms and conditions
of this Agreement, make its Pro Rata Share of such Loan in immediately available
funds by wire transfer to the Administrative Agent at its Office not later than
1:30 p.m. (New York City time). Unless the Administrative Agent determines that
any applicable conditions in Section 5.02 have not been satisfied, the
Administrative Agent shall make the funds so received from the Lenders available
to the Borrower not later than 2:30 p.m. (New York City time), on the date
specified in such notice in immediately available funds by (i) depositing such
proceeds in the Disbursement Account of the Borrower if such Disbursement
Account is located at the Bank and (ii) initiating a wire transfer of same day
funds to the Disbursement Account if such Disbursement Account is not located at
the Bank.
(b) The Administrative Agent and each Lender shall be
entitled to rely conclusively on each Designated Borrowing Officer's authority
to request a Loan on behalf of the Borrower until the Administrative Agent
receives written notice to the contrary. The Administrative Agent and the
Lenders shall have no duty to verify the authenticity of the signature appearing
on any written Notice of Borrowing and, with respect to an oral request for a
Loan, the Administrative Agent and the Lenders shall have no duty to verify the
identity of any Person representing himself as a Designated Borrowing Officer.
(c) The Administrative Agent and the Lenders shall not
incur any liability to the Borrower in acting upon any telephonic notice
referred to above which the Administrative Agent and the Lenders believe in good
faith to have been given by a Designated Borrowing Officer or for otherwise
acting in good faith under this Section 2.03 and, upon the funding of a Loan by
the Lenders (or by the Administrative Agent on behalf of the Lenders) in
accordance with this Agreement pursuant to any such telephonic notice, the
Borrower shall have effected a Loan hereunder.
(d) Each Notice of Borrowing pursuant to this Section
2.03 shall be irrevocable and the Borrower shall be bound to make a borrowing in
accordance therewith. Each Prime Loan shall be in a minimum amount of $1,000,000
and in multiples of $100,000 if in excess thereof, and each Eurodollar Loan
shall be in a minimum amount of $5,000,000 and in multiples of $1,000,000 if in
excess thereof, provided that the Borrower shall not be entitled to request any
Loan that, if made, would result in an aggregate of more than four separate
Eurodollar Loans of any Lender being outstanding hereunder at any one time.
(e) (i) Except as otherwise provided in this subsection
2.03(e), all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder nor shall
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the Revolving Credit Commitment of any Lender be increased or decreased as a
result of the default by any other Lender in that other Lender's obligation to
make a Loan requested hereunder.
(ii) Notwithstanding any other provision of this
Agreement, and in order to reduce the number of fund transfers among the
Borrower, the Lenders and the Administrative Agent, the Borrower, the Lenders
and the Administrative Agent agree that the Administrative Agent may (but shall
not be obligated to), and the Borrower and the Lenders hereby irrevocably
authorize the Administrative Agent to, fund, on behalf of the Lenders, Loans
pursuant to Section 2.01 hereof, subject to the procedures for settlement set
forth in subsection 2.03(f) hereof; provided, however, that (a) the
Administrative Agent shall in no event fund such Loans if the Administrative
Agent shall have received written notice from the Majority Lenders on the
Business Day prior to the day of the proposed Loan that one or more of the
conditions precedent contained in Section 5.02 hereof will not be satisfied on
the day of the proposed Loan, and (b) the Administrative Agent shall not
otherwise be required to determine that, or take notice whether, the conditions
precedent in Section 5.02 hereof have been satisfied.
(iii) Unless (A) the Administrative Agent has
notified the Lenders that the Administrative Agent, on behalf of the Lenders,
will fund a particular Loan pursuant to subsection 2.03(e)(ii) hereof, or (B)
the Administrative Agent shall have been notified by any Lender on the Business
Day prior to the day of a proposed Loan that such Lender does not intend to make
available to the Administrative Agent such Lender's Pro Rata Share of the Loan
requested on such day, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such day and the
Administrative Agent, in its sole discretion, may, but shall not be obligated
to, cause a corresponding amount to be made available to the Borrower on such
day. If the Administrative Agent makes such corresponding amount available to
the Borrower and such corresponding amount is not in fact made available to the
Administrative Agent by such Lender, the Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Administrative Agent, at the customary rate set by
the Administrative Agent for the correction of errors among banks for three
Business Days and thereafter at the Regular Rate. During the period in which
such Lender has not paid such corresponding amount to the Administrative Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Related Document, the amount so advanced by the Administrative Agent to
the Borrower shall, for all purposes hereof, be a Loan made by the
Administrative Agent for its own account. Upon any such failure by a Lender to
pay the Administrative Agent, the Administrative Agent shall promptly thereafter
notify the Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent for its own account.
(iv) Nothing in this subsection 2.03(e) shall be
deemed to relieve any Lender from its obligation to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Administrative Agent or
the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
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(f) (i) With respect to all periods for which the
Administrative Agent has funded Loans pursuant to subsection 2.03(e) hereof,
within fifteen (15) days after the last day of each calendar month, or such
shorter period as it may from time to time select (any such month or shorter
period being herein called a "Settlement Period"), the Administrative Agent
shall notify each Lender of the average daily unpaid principal amount of the
Loans outstanding during such Settlement Period. In the event that such amount
is greater than the average daily unpaid principal amount of the Loans
outstanding during the Settlement Period immediately preceding such Settlement
Period (or, if there has been no preceding Settlement Period, the amount of the
Loans made on the date of such Lender's initial funding), each Lender shall
promptly make available to the Administrative Agent its Pro Rata Share of the
difference in immediately available funds. In the event that such amount is less
than such average daily unpaid principal amount, the Administrative Agent shall
promptly pay over to each other Lender its Pro Rata Share of the difference in
immediately available funds. In addition, if the Administrative Agent shall so
request at any time when a Potential Default or an Event of Default shall have
occurred and be continuing, or any other event shall have occurred as a result
of which the Administrative Agent shall determine that it is desirable to
present claims against the Borrower for repayment, each Lender shall promptly
remit to the Administrative Agent or, as the case may be, the Administrative
Agent shall promptly remit to each Lender, sufficient funds to adjust the
interests of the Lenders in the then outstanding Loans to such an extent that,
after giving effect to such adjustment, each Lender's interest in the then
outstanding Loans will be equal to its Pro Rata Share thereof. The obligations
of each Lender under this subsection 2.03(f) shall be absolute and
unconditional. Each Lender shall only be entitled to receive interest on its Pro
Rata Share of the Loans which have been funded by such Lender.
(ii) In the event that any Lender fails to make any
payment required to be made by it pursuant to subsection 2.03(f)(i) hereof, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from the
date such payment was due until the date such amount is paid to the
Administrative Agent, at the customary rate set by the Administrative Agent for
the correction of errors among banks for three Business Days and thereafter at
the Regular Rate. During the period in which such Lender has not paid such
corresponding amount to the Administrative Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Related Document, the
amount so advanced by the Administrative Agent to the Borrower shall, for all
purposes hereof, be a Loan made by the Administrative Agent for its own account.
Upon any such failure by a Lender to pay the Administrative Agent, the
Administrative Agent shall promptly thereafter notify the Borrower of such
failure and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent for its own account. Nothing in this subsection 2.03(f)(ii)
shall be deemed to relieve any Lender from its obligation to fulfill its
Revolving Credit Commitment hereunder or to prejudice any rights that the
Borrower or the Administrative Agent may have against any Lender as a result of
any default by such Lender hereunder.
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2.04 Reduction of Commitment; Mandatory Prepayment; Optional
Prepayment.
(a) Optional Reduction of the Commitment. (i) Subject to
Section 2.04(e) hereof, the Borrower may at any time or from time to time and
without penalty or premium reduce the Revolving Credit Commitments of the
Lenders to an amount not less than the sum of the unpaid principal amount of all
Loans then outstanding plus the principal amount of all Loans not yet made as to
which notice has been given by the Borrower under Section 2.03 hereof plus the
Letter of Credit Exposure at such time plus the Stated Amount of all Letters of
Credit not yet issued as to which a request has been made unless the request is
withdrawn and the Letter of Credit is not issued by the Letter of Credit Issuer
under Section 3.01 hereof. Any reduction shall be in an amount which is an
integral multiple of $10,000,000. Reduction of the Revolving Credit Commitments
of the Lenders shall be made by providing not less than two Business Days'
written notice (which notice shall be irrevocable) to such effect to the
Administrative Agent (which notice the Administrative Agent shall promptly
transmit to each Lender). Reductions of the Revolving Credit Commitments of the
Lenders are irrevocable and may not be reinstated. Each such reduction shall
reduce the Revolving Credit Commitment of each Lender proportionately in
accordance with its Pro Rata Share.
(ii) Mandatory Termination of Commitment. On the date
which is sixty (60) days after the occurrence of a Change of Control, the
Revolving Credit Commitments of all Lenders shall automatically terminate,
provided that the Revolving Credit Commitments shall not terminate if, before
the 60th day after the occurrence of a Change of Control, all Lenders notify the
Administrative Agent that they have elected not to terminate their Revolving
Credit Commitments. Nothing contained in this Section 2.04(a)(ii) shall affect
the rights of the Administrative Agent and the Lenders in the event of a failure
by the Borrower to comply with Section 8.04 hereof.
(b) Mandatory Prepayment.
(i) Exceeding Current Commitment. If at any time the
Current Commitment is less than the aggregate unpaid principal amount of the
Loans then outstanding plus the Letter of Credit Exposure at such time, the
Borrower shall prepay an amount of the Loans not less than the amount of such
difference or, if the Loans then outstanding are less than the amount of such
difference, provide cash collateral, or other collateral acceptable to the
Administrative Agent in its sole discretion, to the Administrative Agent in an
amount equal to 105% of such excess, which cash collateral shall be deposited
and held in the Letter of Credit Cash Collateral Account until such time as such
excess no longer exists. Any such prepayment will not otherwise reduce the
Revolving Credit Commitments of the Lenders. Concurrently with any notice of
reduction of the Revolving Credit Commitments of the Lenders, the Borrower shall
give notice to the Administrative Agent of any mandatory prepayment which notice
shall specify a prepayment date no later than the effective date of such
reduction of the Revolving Credit Commitments of the Lenders.
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(ii) Other Mandatory Prepayments. The Administrative
Agent shall on each Business Day apply funds deposited in the Agent Account to
the payment, in whole or in part, of the Obligations outstanding. To the extent
that sale proceeds referred to in Section 8.04 hereof are required to be a
mandatory prepayment, such prepayment shall be made under this subsection (ii).
(c) Optional Prepayment. The Borrower may at any time or
from time to time prepay, in whole or in part, any or all Loans then
outstanding. Any partial prepayment of a Eurodollar Loan shall not reduce the
aggregate principal amount of such Eurodollar Loan to less than $5,000,000.
(d) Prepayment Penalty. All prepayments of Loans under
this Section 2.04 shall be without premium or penalty, except that any
prepayment of Eurodollar Loans shall be subject to the provisions of Section
2.12 hereof.
(e) Termination Fee. Notwithstanding the foregoing, the
Borrower agrees that if the Revolving Credit Commitments are terminated in whole
(whether such termination is optional or mandatory, including after the
occurrence of an Event of Default) at any time prior to the second anniversary
date of the Closing Date, the Borrower shall pay to the Administrative Agent,
for the account of each Lender, on the date of such termination (together with
any payments of principal, interest, fees or other amounts payable hereunder on
such date), an early termination fee as follows:
(i) one percent (1%) from the Closing Date through
the date one year from the Closing Date, except as specified in (ii) below;
(ii) $750,000 from the Closing Date through the date
six months from the Closing Date, if the Borrower is acquired and/or merges with
another and CIT commits to a competitive financing (that is, on substantially
the same terms and conditions as committed to by a competing institution in
connection with such acquisition/merger) and CIT is not selected and $0 if CIT
is so selected, determines not to commit, or commits on a noncompetitive basis;
or
(iii) one-half of one percent (1/2 of 1%) from the
date one year and one day from the Closing Date through the date two years from
the Closing Date.
The early termination fee shall be calculated (in the case of
(i) and (iii) above) by multiplying the applicable percentage above by the daily
unpaid principal amount of the Loans plus the Letter of Credit Exposure from the
Closing Date through the date of repayment and the product thereof shall be
multiplied by a fraction the numerator of which is the number of days from the
date of repayment to the date three years from the Closing Date and the
denominator is 360.
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2.05 Interest Rate.
(a) Each Prime Loan shall bear interest at a rate per
annum for each day until paid equal to the Regular Rate plus .50% for such day.
(b) Each Eurodollar Loan shall bear interest at a rate
per annum equal to the Eurodollar Rate plus 3% for the Interest Period in effect
for such Eurodollar Loan.
2.06 Interest Payment Dates. The Borrower shall pay interest
on the unpaid principal amount of each Loan from the date of such Loan until
such principal amount shall be paid in full, which interest shall be payable (i)
if such Loan is a Prime Loan, monthly in arrears on the first day of each month,
commencing January 1, 1997, and (ii) if such Loan is a Eurodollar Loan, on the
last day of the Interest Period of such Eurodollar Loan. After maturity of any
principal amount of any Loan (by acceleration, at scheduled maturity or
otherwise), interest on such amount shall be due and payable on demand.
2.07 Amortization. To the extent not due and payable earlier
pursuant to the terms of this Agreement, the entire unpaid principal amount of
each of the Loans shall be due and payable on the Termination Date.
2.08 Payments.
(a) Time, Place and Manner. All payments and prepayments
to be made in respect of principal, interest, fees or other amounts due from the
Borrower hereunder, under the Fee Letter, the Note or any other Related Document
shall be payable at or before 12:00 Noon, New York City time, on the day when
due without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived. Such payments shall be made to the Administrative Agent
for the account of the Administrative Agent, CIT or the Lenders, as the case may
be, at the Agent Account in Dollars in funds immediately available at the Bank's
Office without setoff, counterclaim or other deduction of any nature. The
Administrative Agent shall maintain a loan account (the "Loan Account") on its
books in the name of the Borrower in which the Borrower will be charged with
Loans made by the Administrative Agent or the Lenders to the Borrower hereunder
and with any other Obligations. The Borrower and the Lenders hereby authorize
the Administrative Agent to, and the Administrative Agent may, from time to time
charge the Loan Account with any interest, fees, expenses and other Obligations
that are due and payable under this Agreement or any Related Document. The
Borrower and the Lenders confirm that any charges which the Administrative Agent
may so make to the Loan Account as herein provided will be made as an
accommodation to the Borrower and solely at the Administrative Agent's
discretion and shall constitute a Loan to the Borrower funded by the
Administrative Agent on behalf of the Lenders and subject to subsections 2.03(e)
and 2.03(f) of this Agreement. Each of the Lenders and the Borrower agree that
the Administrative Agent shall have the right to make such charges regardless of
whether any Event of Default or Potential Default shall have occurred and be
continuing or whether any of the conditions precedent in Section 5.02 have been
satisfied. The Loan Account will be credited upon receipt of "good funds" in
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the Agent Account with all amounts actually received by the Administrative Agent
from the Borrower or others for the account of the Borrower. Interest on all
Loans and all fees that accrue on a per annum basis shall be computed on the
basis of the actual number of days elapsed in the period during which interest
or such fee accrues and a year of 360 days. In computing interest on any Loan,
the date of the making of such Loan shall be included and the date of payment
shall be excluded; provided, however, that if a Loan is repaid on the same day
in which it is made, one day's interest shall be paid on such Loan.
(b) Periodic Statements. The Administrative Agent shall
provide the Lenders and the Borrower promptly after the end of each calendar
month a summary statement (in the form from time to time used by the
Administrative Agent) of (A) the opening and closing daily balances in the Loan
Account during such month, (B) the amounts and dates of all Loans made during
such month, (C) the amounts and dates of all payments on account of the Loans
made during such month and each Lender's interest in the Loans, (D) the amount
of interest accrued on the Loans during such month, (E) any Letters of Credit
issued by the Letter of Credit Issuer during such month, specifying the Stated
Amount thereof, (F) the amount of charges to the Loan Account or Loans to be
made during such month to reimburse CIT, the Lenders or the Letter of Credit
Issuer for drawings made under Letters of Credit or payments made by CIT or the
Lenders under the Letter of Credit Guaranty, and (G) the amount and nature of
any charges to the Loan Account made during such month on account of interest,
fees and expenses and other Obligations. All entries on any such statement
shall, 30 days after the same is sent, be presumed to be correct and shall
constitute prima facie evidence of the information contained in such statement,
subject to the Borrower's and each Lender's express right to rebut such
presumption by conclusively demonstrating the existence of any error on the part
of the Administrative Agent.
(c) Apportionment of Payments. Except as otherwise
provided in this subsection, aggregate principal and interest payments shall be
apportioned among all outstanding Loans to which such payments relate and
payments of the fees required to be paid by the Borrower under this Agreement
and the Fee Letter to the Administrative Agent and the Co-Agent (except as to
Administrative Agent's annual agent fee specified in the Fee Letter) shall be
apportioned ratably and to the extent separately agreed to by the Administrative
Agent and any Lender. All payments shall be remitted to the Administrative Agent
and all such payments and any other amounts, including, without limitation,
proceeds of Collateral received by the Administrative Agent from or as to the
Borrower shall be applied subject to the provisions of this Agreement first, to
pay principal of and interest on any Loans funded by the Administrative Agent on
behalf of the Lenders (including, without limitation, under Section 11.08
hereof) and any fees, expense reimbursements or indemnities then due to the
Administrative Agent from the Borrower; second, to pay any fees, expense
reimbursements or indemnities then due to the Lenders or the Letter of Credit
Issuer hereunder; third, to pay interest due in respect of Loans and
Unreimbursed Draws under Letters of Credit; and fourth, to pay, prepay or
provide cash collateral, if then required, in respect of principal of Loans and
Letter of Credit Exposure. The Administrative Agent shall promptly distribute to
each Lender at its primary address set forth on the appropriate signature page
hereof, or at such other address as such Lender may designate in
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writing, such funds as it may be entitled to receive. The foregoing
apportionment of payments is solely for the purpose of determining the
obligations of the Borrower hereunder and, notwithstanding such apportionment,
any Lender may on its books and records allocate payments received by it in a
manner different from that contemplated hereby. No such different allocation
shall alter the rights and obligations of the Borrower under this Agreement
determined in accordance with the apportionments contemplated by this Section
2.08(c). To the extent that the Borrower make a payment or payments to the
Administrative Agent or the Administrative Agent receives any payment or other
amount, which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause then, to the
extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Administrative Agent
.
(d) Interest Upon Events of Default. To the extent
permitted by law, after there shall have occurred and so long as there is
continuing an Event of Default pursuant to Section 9.01, all principal,
interest, fees, indemnities or any other Obligations of the Borrower hereunder,
under the Fee Letter or under any Note or any other Related Document (and
including interest accrued under this subsection 2.08(d)) shall compound on a
daily basis as provided in this subsection 2.08(d) and shall bear interest for
each day until paid (before and after judgment), payable on demand, at a rate
per annum of 3% above the Prime Rate for such day, such interest rate to change
automatically from time to time effective as of the announced effective date of
each change in the Prime Rate.
(e) Unused Line Fee. From and after the Closing Date
until the Termination Date, the Borrower shall pay to the Administrative Agent,
an unused line fee (the "Unused Line Fee") accruing at the rate of three-eighths
of one percent (3/8 of 1%) per annum, on the excess, if any, of the aggregate
Revolving Credit Commitments over the sum of the Loans and Letter of Credit
Exposure (computed on an average daily basis) outstanding from time to time. All
Unused Line Fees shall be payable monthly in arrears on the last day of each
month commencing December 31, 1996.
(f) Letter of Credit Fees. From and after the Closing
Date until the Termination Date, the Borrower shall pay to the Administrative
Agent, a letter of credit fee (the "Letter of Credit Fee") accruing at the rate
of one and one-half percent (1.50%) on the face amount of each letter of credit
payable on the date of issuance. All Letter of Credit Fees shall be payable
monthly in arrears on the first day of each month commencing January 1, 1997.
The Borrower shall also pay the customary letter of credit fees and charges of
CIT and the Letter of Credit Issuer for the administration, issuance, amendment
and processing of any Letters of Credit issued by the Letter of Credit Issuer.
Promptly following the Administrative Agent's receipt of any Letter of Credit
Fees described above, the Administrative Agent shall pay to each Lender its Pro
Rata Share of the amount of the Letter of Credit Fees received by the
Administrative Agent.
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(g) The Borrower shall pay to the Administrative Agent
the fees set forth in the Fee Letter at the times set forth in the Fee Letter.
All fees under this Agreement, the Fee Letter and the other Related Documents
may be charged to the Borrower's Loan Account and are non-refundable under all
circumstances (except for a computational error agreed to by the Borrower and
the Administrative Agent).
2.09 Use of Proceeds. The Borrower hereby covenants,
represents and warrants that, the proceeds of the Loans will be used (i) to
repay in full the existing Indebtedness of the Borrower under the Existing
Credit Facilities outstanding on the Closing Date and (ii) for other working
capital and general corporate purposes. The Borrower hereby covenants,
represents and warrants that the proceeds of the Letters of Credit will be used
(A) to import Inventory in the ordinary course of the Borrower's business and
(B) for general corporate purposes, including but not limited to workers
compensation insurance and general liability insurance programs.
2.10 Eurodollar Rate Not Determinable; Illegality or
Impropriety.
(a) In the event and on each occasion, that on or before
the day on which the Eurodollar Rate is to be determined for a borrowing that is
to include Eurodollar Loans, the Administrative Agent has determined in good
faith that, or has been advised by the Bank that, the Eurodollar Rate cannot be
determined for any reason or the Eurodollar Rate will not adequately and fairly
reflect the cost of maintaining Eurodollar Loans or Dollar deposits in the
principal amount of the applicable Eurodollar Loans are not available in the
interbank Eurodollar market where the Eurodollar and foreign currency and
exchange operations in respect of the Bank's Eurodollar loans are then being
conducted, the Administrative Agent shall, as soon as practicable thereafter,
give written notice of such determination to the Borrower and the other Lenders.
In the event of any such determination, any request by the Borrower for a
Eurodollar Loan pursuant to Section 2.03 shall, until the Administrative Agent
shall have advised the Borrower and the other Lenders that the circumstances
giving rise to such notice no longer exist, be deemed to be a request for a
Prime Loan. Each determination by the Administrative Agent hereunder shall be
conclusive and binding absent manifest error.
(b) In the event that it shall be unlawful or improper
for any Lender to make, maintain or fund any Eurodollar Loan as contemplated by
this Agreement, then such Lender shall forthwith give notice thereof to the
Administrative Agent and the Borrower describing such illegality or impropriety
in reasonable detail. Effective immediately upon the giving of such notice, the
obligation of such Lender to make Eurodollar Loans shall be suspended for the
duration of such illegality or impropriety and, if and when such illegality or
impropriety ceases to exist, such suspension shall cease, and such Lender shall
notify the Administrative Agent and the Borrower. If any such change shall make
it unlawful or improper for any Lender to maintain any outstanding Eurodollar
Loan as a Eurodollar Loan, such Lender shall, upon the happening of such event,
notify the Administrative Agent and the Borrower, and the Borrower shall
immediately, or if permitted by applicable law, rule, regulation, order, decree,
interpretation, request or directive, no later than the date permitted thereby,
convert each such Eurodollar Loan into a Prime Loan.
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2.11 Reserve Requirements: Capital Adequacy Circumstances.
(a) Notwithstanding any other provision herein, if any
change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose any tax on or change the basis of taxation of payments to the
Letter of Credit Issuer or any Lender or any Affiliate of a Lender of the
principal of or interest on any Eurodollar Loan made by such Lender or of any
amounts payable hereunder (other than taxes imposed on the overall net income of
the Letter of Credit Issuer or such Lender or such Affiliate by the jurisdiction
in which the Letter of Credit Issuer or such Lender or such Affiliate has its
principal office or by any political subdivision or taxing authority therein),
or shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by the Letter of Credit Issuer or such Lender or Affiliate of
such Lender (except any such reserve requirement that is reflected in Reserve
Requirements) or shall impose on the Letter of Credit Issuer or such Lender or
such Affiliate any other condition affecting this agreement or any Eurodollar
Loans made by such Lender or any Letter of Credit Issuer and the result of any
of the foregoing shall be to increase the cost to the Letter of Credit Issuer or
such Lender of making or maintaining any Eurodollar Loan or issuing any Letter
of Credit or to reduce the amount of any sum received or receivable by the
Letter of Credit Issuer or such Lender hereunder (whether of principal, interest
or otherwise) in respect thereof by an amount deemed by the Letter of Credit
Issuer or such Lender to be material then the Borrower shall pay to the Letter
of Credit Issuer or such Lender such additional amount or amounts as will
compensate the Letter of Credit Issuer or such Lender for such additional costs
incurred or reduction suffered. Any amount or amounts payable by the Borrower to
the Letter of Credit Issuer or any Lender in accordance with the provisions of
this Section 2.11 (a) shall be paid by the Borrower to the Letter of Credit
Issuer or such Lender within ten (10) days after receipt by the Borrower from
the Letter of Credit Issuer or such Lender of a statement setting forth in
reasonable detail the amount or amounts due and the basis for the determination
from time to time of such amount or amounts, which statement shall be conclusive
and binding absent manifest error.
(b) If the Letter of Credit Issuer or any Lender shall
have reasonably determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Letter of Credit Issuer or by such
Lender (or any lending office of such Lender) or by any Affiliate of such
Lender, as the case may be, with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has the effect of reducing the rate of return on the
Letter of Credit Issuer's or such Lender's capital or on the capital of such
Lender's Affiliate, as the case may be, as a consequence of the Letter of Credit
Issuer's obligations or such Lender's obligations under this Agreement and the
Related Documents to a level below that which the Letter of Credit Issuer or
such Lender or such Lender's Affiliate, as the case may be, could have
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achieved but for such adoption, change or compliance (taking into consideration
the Letter of Credit Issuer's or such Lender's policies or such Lender's
Affiliate's policies, as the case may be, with respect to capital adequacy) by
an amount deemed by the Letter of Credit Issuer or such Lender to be material,
then, from time to time, the Borrower shall reimburse the Letter of Credit
Issuer or such Lender for such reduction. Any amount or amounts payable by the
Borrower to the Letter of Credit Issuer or any Lender in accordance with the
provisions of this Section 2.11 (b) shall be paid by the Borrower to the Letter
of Credit Issuer or such Lender within ten (10) days after receipt by the
Borrower from the Letter of Credit Issuer or such Lender of a statement setting
forth (i) in reasonable detail the amount or amounts due, (ii) the basis for the
determination from time to time of such amount or amounts and (iii) that such
amount(s) have been determined in good faith, which statement shall be
conclusive and binding absent manifest error.
(c) The Letter of Credit Issuer or any Lender may demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period;
provided that the Letter of Credit Issuer or such Lender shall provide to the
Borrower a certificate setting forth in reasonable detail the basis on which
such demand is made. The protection of this Section 2.11 shall be available to
the Letter of Credit Issuer or any Lender regardless of any possible contention
of the invalidity or inapplicability of the law, rule, regulations, guideline or
other change or condition which shall have occurred or been imposed.
2.12 Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender actually sustains or incurs as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article V, (b) any
failure by the Borrower to borrow any Eurodollar Loan hereunder or to convert
any Prime Loan into a Eurodollar Loan after notice of such borrowing or
conversion has been given pursuant to Section 2.03 or Section 2.14, as the case
may be, (c) any payment, prepayment (mandatory or optional) or conversion of a
Eurodollar Loan required by any provision of this Agreement or otherwise made on
a date other than the last day of the Interest Period applicable thereto, (d)
any default in payment or prepayment of the principal amount of any Eurodollar
Loan or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, by notice of prepayment or otherwise), or (e)
the occurrence of any Event of Default, including, in each such case, any loss
(including, without limitation, loss of margin) or reasonable expense sustained
or incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss
or reasonable expense shall include but not be limited to an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid or converted or not
borrowed or converted (based on the Eurodollar Rate applicable thereto) for the
period from the date of such payment, prepayment, conversion or failure to
borrow or convert on the last day of the Interest Period for such Loan (or, in
the case of a failure to borrow or convert, the last day of the Interest Period
for such Loan that would have commenced on the date of such failure to borrow or
convert) over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in re-employing
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the funds so paid, prepaid or converted or not borrowed or converted for such
Interest Period. A certificate of any Lender setting forth in reasonable detail
any amount or amounts that such Lender is entitled to receive pursuant to this
Section 2.12 and the basis for the determination of such amount or amounts shall
be delivered to the Borrower and shall be conclusive and binding absent manifest
error.
2.13 Sharing of Setoffs.
Each Lender agrees that if it shall, through the exercise of a
right of banker's lien, setoff or counterclaim against the Borrower or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar law
or otherwise, or by any other means, obtain payment (voluntary or involuntary)
in respect of any Obligation as a result of which the aggregate unpaid amount of
the Obligations owing to it shall be proportionately less than the aggregate
unpaid amount of the Obligations owing to any other Lender, it shall
simultaneously purchase from such other Lender at face value a participation in
the Obligations owing to such other Lender, so that the aggregate unpaid amount
of the Obligations and participations in Obligations held by each Lender shall
be in the same proportion to the aggregate unpaid amount of all Obligations
owing to such Lender prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the aggregate unpaid amount of all
Obligations outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.13 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustments restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in an Obligation deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with respect to any and
all moneys jointly and severally owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a loan directly to the Borrower in
the amount of such participation.
2.14 Continuation and Conversion of Loans. Subject to Section
2.03 and Section 2.10 hereof, the Borrower shall have the right, at any time,
(i) on three (3) Business Days' prior irrevocable written or telecopy notice to
the Administrative Agent, to continue any Eurodollar Loan or any portion thereof
into a subsequent Interest Period or, after the Syndication Date, to convert any
Prime Loan or portion thereof into a Eurodollar Loan, or (ii) on one (1)
Business Day's prior irrevocable written or telecopy notice to the
Administrative Agent, to convert any Eurodollar Loan or portion thereof into a
Prime Loan, subject to the following:
(A) in the case of a continuation of a
Eurodollar Loan or portion thereof as such or a conversion of
a Prime Loan or portion thereof into a Eurodollar Loan, (1) no
Event of Default or Potential Default shall have occurred and
be continuing at the time of such continuation or conversion
and (2) Eurodollar Loans resulting from this Section 2.14
shall be limited in number as provided in Section 2.03(d);
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(B) in the case of a continuation or
conversion of less than all Loans, the aggregate principal
amount of any Eurodollar Loan continued or converted shall not
be less than $5,000,000 and in multiples of $1,000,000 if in
excess thereof;
(C) each conversion shall be effected by the
Lenders by applying the proceeds of the new Loan to the Loan
(or portion thereof) being converted; and, in the case of a
conversion from a Eurodollar Loan to a Prime Loan, accrued
interest on the Eurodollar Loan (or portion thereof) being
converted shall be jointly and severally paid by the Borrower
at the time of conversion;
(D) if the new Loan made in respect of a
conversion shall be a Eurodollar Loan, the first Interest
Period with respect thereto shall commence on the date of
conversion;
(E) no portion of any Loan shall be
continued or converted to a Eurodollar Loan with an Interest
Period ending later than the Termination Date; and
(F) if any conversion of a Eurodollar Loan
shall be effected on a day other than the last day of an
Interest Period, the Borrower shall reimburse each Lender on
demand for any loss incurred or to be incurred by it in the
reemployment of the funds released by such conversion as
provided in Section 2.12 hereof.
In the event that the Borrower shall not give notice to continue any Eurodollar
Loan into a subsequent Interest Period, such Loan (unless repaid) shall
automatically become a Prime Loan at the expiration of the then current Interest
Period.
2.15 Taxes.
(a) All payments made by the Borrower hereunder, under
the Note or under any Loan Document will be made without setoff, counterclaim,
deduction or other defense. All such payments shall be made free and clear of
and without deduction for any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees,
withholdings, restrictions or conditions of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any jurisdiction (whether pursuant to
United States Federal, state, local or foreign law) or by any political
subdivision or taxing authority thereof or therein, and all interest, penalties
or similar liabilities, excluding taxes on the overall net income of the Lenders
or the Letter of Credit Issuer (such nonexcluded taxes are hereinafter
collectively referred to as the "Taxes"). If the Borrower shall be required by
law to deduct or to withhold any Taxes from or in respect of any amount payable
hereunder, (i) the amount so payable shall be increased to the extent necessary
so that after making all required deductions and withholdings (including Taxes
on amounts payable to the Lenders or the Letter of Credit Issuer pursuant to
this
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sentence) the Lenders or the Letter of Credit Issuer receive an amount
equal to the sum they would have received had no such deductions or withholdings
been made, (ii) the Borrower shall make such deductions or withholdings, and
(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxation authority in accordance with applicable law. Whenever any
Taxes are payable by the Borrower, as promptly as possible thereafter, the
Borrower shall send the Lenders, the Letter of Credit Issuer and the
Administrative Agent an official receipt showing payment. In addition, the
Borrower agrees to pay any present or future taxes, charges or similar levies
which arise from any payment made hereunder (other than related to the net
income of a Lender) or from the execution, delivery, performance, recordation or
filing of, or otherwise with respect to, this Agreement, the Note, the Letters
of Credit or any other Loan Document (hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify the Lenders and the
Letter of Credit Issuer for the amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.15) paid by any Lender or the Letter of
Credit Issuer and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid within 30 days from the date on
which such Lender or such Letter of Credit Issuer makes written demand.
(c) Each Lender which is a foreign person (i.e., a Person
other than a United States Person for United States Federal income tax purposes)
hereby agrees that:
(i) it shall, no later than the Closing Date (or, in
the case to a Lender which becomes a party hereto pursuant to Section
10.13 hereof after the Closing Date, the date upon which such Lender
becomes a party hereto) deliver to the Borrower through the Administrative
Agent:
(a) two accurate and complete signed originals
of Form 4224, or
(b) two accurate and complete signed originals
of Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the account of
its lending installation under this Agreement free from withholding of United
States Federal income tax;
(ii) if at any time such Lender changes its lending
installation or installations or selects an additional lending
installation it shall, at the same time or reasonably promptly thereafter,
deliver to the Borrower through the Administrative Agent in replacement
for, or in addition to, the forms previously delivered by it hereunder:
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(a) if such changed or additional lending
installation is located in the United States, two accurate and
complete signed originals of Form 4224, or
(b) otherwise, two accurate and complete signed
originals of Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the account of
such changed or additional lending installation under this Agreement free from
withholding of United States Federal income tax; and
(iii) it shall, promptly upon the Borrower's reasonable
request to that effect, deliver to the Borrower such other forms or
similar documentation as may be required from time to time by any
applicable law, treaty, rule or regulation in order to establish such
Lender's tax status for withholding purposes.
(d) If the Borrower fails to perform its obligations
under this Section 2.15, the Borrower shall indemnify the Lenders and the Letter
of Credit Issuer for any incremental taxes, interest or penalties that may
become payable as a result of any such failure.
ARTICLE III
LETTERS OF CREDIT
3.01 Letters of Credit.
(a) General. In order to assist the Borrower in
establishing or opening documentary and standby letters of credit, which shall
not have expiration dates that exceed one year from the date of issuance (the
"Letters of Credit") with the Letter of Credit Issuer, the Borrower has
requested CIT to join in the applications for such Letters of Credit, and/or
guarantee payment or performance of such Letters of Credit and any drafts or
acceptances thereunder through the issuance of a Letter of Credit Guaranty,
thereby lending CIT's credit to that of the Borrower, and CIT has agreed to do
so. These arrangements shall be handled by CIT subject to the terms and
conditions set forth below. CIT shall have no obligation to arrange for the
issuance of Letters of Credit on or after the Termination Date or which, when
added to the aggregate amount of all outstanding and contemporaneous Loans and
the Letter of Credit Exposure at such time, would cause the amount of all Loans
and the Letter of Credit Exposure at any time to exceed the Current Commitment
at such time. In addition, CIT shall not be required to be the issuer of any
Letter of Credit. The Borrower will be the account party for any application for
a Letter of Credit, which shall be substantially in the form of Exhibit C hereto
or on a computer transmission system approved by CIT and the Letter of Credit
Issuer or such other written form or computer transmission system or such other
form as may from time to time be approved by the Letter of Credit Issuer and
CIT, and shall be duly completed in a manner acceptable to CIT, together with
such other certificates, agreements, documents and other papers and information
as the Letter of Credit Issuer or CIT may request (the "Letter of Credit
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Application"). In the event of any conflict between the terms of the Letter of
Credit Application and this Agreement, for purposes of this Agreement, the terms
of this Agreement shall control.
(i) The aggregate Letter of Credit Exposure shall not
exceed $10,000,000. In addition, changes or modifications of the Letters of
Credit by the Borrower and/or the Letter of Credit Issuer of the terms and
conditions thereof shall in all respects be subject to the prior approval of CIT
in the exercise of its reasonable discretion, provided, however, that (x) the
expiry date of all Letters of Credit shall be no later than 15 days prior to the
Termination Date unless on or prior to 15 days prior to the Termination Date
such Letters of Credit shall be cash collateralized in an amount equal to at
least 105% of the Stated Amount of such Letters of Credit, (y) the Letters of
Credit and all documentation in connection therewith shall be in form and
substance satisfactory to CIT and the Letter of Credit Issuer, and (z) Letters
of Credit shall not be issued for the benefit of domestic trade creditors in
connection with the purchase of Inventory by the Borrower.
(ii) The Administrative Agent shall have the right,
without notice to the Borrower, to charge the Loan Account with the amount of
any and all indebtedness, liability or obligation of any kind (including
indemnification for breakage costs, capital adequacy and reserve requirement
charges) incurred by the Administrative Agent, CIT or the Lenders under the
Letter of Credit Guaranty at the earlier of (x) payment by CIT or the Lenders
under the Letter of Credit Guaranty, or (y) with respect to any Letter of Credit
which is not cash collateralized as provided in this Agreement, the occurrence
of an Event of Default. Any amount charged to the Loan Account shall be deemed a
Loan hereunder made by the Lenders to the Borrower, funded by the Administrative
Agent on behalf of the Lenders and subject to subsections 2.03(e) and (f). Any
charges, fees, commissions, costs and expenses charged to CIT for the account of
the Borrower by the Letter of Credit Issuer in connection with or arising out of
Letters of Credit issued pursuant to this Agreement or out of transactions
relating thereto will be charged to the Loan Account in full when charged to or
paid by CIT and any such charges by CIT to the Loan Account shall be conclusive
and binding on the Borrower and the Lenders absent manifest error. Each of the
Lenders and the Borrower agrees that the Administrative Agent shall have the
right to make such charges regardless of whether any Event of Default or
Potential Default shall have occurred and be continuing or whether any of the
conditions precedent in Section 5.02 have been satisfied.
(iii) The Borrower agrees to unconditionally indemnify
the Administrative Agent, the Co-Agent, CIT and each Lender and to hold the
Administrative Agent, CIT and each Lender harmless from any and all loss, claim
or liability incurred by the Administrative Agent, CIT or any such Lender
arising from any transactions or occurrences relating to Letters of Credit
established or opened for the Borrower's account and any drafts or acceptances
thereunder, and all Obligations thereunder, including any such loss or claim due
to any action taken by the Letter of Credit Issuer, other than for any such
loss, claim or liability arising out of the gross negligence or willful
misconduct of the Administrative Agent, the Co-Agent, CIT or any Lender as
determined by a final judgment of a court of competent jurisdiction.
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(iv) The Borrower further agrees to hold the
Administrative Agent, CIT and each Lender harmless from any errors or omission,
negligence or misconduct by the Letter of Credit Issuer. The Borrower's
unconditional obligation to the Administrative Agent, CIT and each Lender
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of the Administrative Agent 's, the Co-Agent,
CIT's or such Lender's gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction. The Borrower agrees that
any charges incurred by CIT for the Borrower's account by the Letter of Credit
Issuer shall be conclusive and binding on the Borrower absent manifest error and
may be charged to the Loan Account.
(v) None of the Administrative Agent, the Co-Agent, CIT,
the Letter of Credit Issuer or any of the Lenders shall be responsible for the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereof even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipments, or failure or omission to
ship any or all of the goods referred to in the Letters of Credit or documents;
any deviation from instructions; delay, default, or fraud by the shipper and/or
anyone else in connection with any such goods or the shipping thereof; or any
breach of contract between the shipper or vendors and the Borrower. Furthermore,
without being limited by the foregoing, none of the Administrative Agent, the
Co-Agent, CIT, the Letter of Credit Issuer or any of the Lenders shall be
responsible for any act or omission with respect to or in connection with any
goods covered by Letters of Credit.
(vi) The Borrower agrees that any action taken by the
Administrative Agent, the Co-Agent, CIT, the Letter of Credit Issuer or any
Lender, if taken in good faith, under or in connection with the Letters of
Credit, the guarantees, the drafts or acceptances or the goods purported to be
represented by any documents, shall be binding on the Borrower (with respect to
the Letter of Credit Issuer, the Administrative Agent, the Co-Agent, CIT and
the Lenders) and shall not put the Administrative Agent, the Co-Agent, CIT or
the Lenders in any resulting liability to the Borrower. In furtherance thereof,
CIT shall have the full right and authority to clear and resolve any questions
of non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery orders: to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; all in CIT's sole name, and the Letter of Credit Issuer shall be
entitled to comply with and honor any and all such documents or instruments
executed by or received solely from CIT, all without any notice to or any
consent from the Borrower.
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(vii) Without CIT's express consent in writing or through
a computer transmission, the Borrower agrees: (x) not to execute any
applications for steamship or airway guaranties, indemnities or delivery orders;
to grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances or documents; or to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; and (y) after the occurrence of an Event of Default which is not
cured within any applicable grace period, if any, or waived by the
Administrative Agent, not to (A) clear and resolve any questions of
non-compliance of documents, or (B) give any instructions as to acceptances or
rejection of any documents or goods.
(viii) The Borrower agrees that any necessary and
material import, export or other license or certificates for the import or
handling of Inventory required to be obtained by the Borrower will have been
promptly procured; all foreign and domestic governmental laws and regulations
applicable to the Borrower in regard to the shipment and importation of
Inventory or the financing thereof will have been timely and fully complied
with, and any certificates in that regard that CIT may at any time reasonably
request will be promptly furnished. In this connection, the Borrower represents
and warrants that all shipments made under any such Letters of Credit are in
compliance with the laws and regulations of the countries in which the shipments
originate and terminate except where all instances of such non-compliance taken
together will not have a Material Adverse Effect. As between the Borrower, on
the one hand, and the Administrative Agent, the Co-Agent, CIT, the Lenders and
the Letter of Credit Issuer, on the other hand, the Borrower assumes all risk,
liability and responsibility for, and agree to pay and discharge, all present
and future local, state, federal or foreign taxes, duties, or levies. As between
the Borrower, on the one hand, and the Administrative Agent, CIT, the Lenders
and the Letter of Credit Issuer, on the other hand, any embargo, restriction,
laws, customs or regulations of any country, state, city, or other political
subdivision, where such Inventory is or may be located, or wherein payments are
to be made, or herein drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Borrower's risk, liability and responsibility.
(ix) Upon any payments made to the Letter of Credit
Issuer under the Letter of Credit Guaranty, CIT or the Lenders, as the case may
be, shall, without prejudice to its rights under this Agreement (including that
such unreimbursed amounts shall constitute Loans hereunder), acquire by
subrogation any rights, remedies, duties or obligations granted or undertaken by
the Borrower to the Letter of Credit Issuer in any Letter of Credit Application,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Administrative Agent and apply in
all respects to the Administrative Agent and shall be in addition to any rights,
remedies, duties or obligations contained herein.
(x) In the event that the Borrower is required to provide
cash collateral for any Letter of Credit, the Borrower shall deposit such cash
collateral in the Letter of Credit Cash Collateral Account, which cash
collateral shall be held in the Letter of Credit Cash
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Collateral Account until either all Obligations have been paid in full in cash
or cash collateral is no longer required under the terms of this Agreement.
(b) Request for Issuance. The Borrower may from time to
time, upon notice (an "L/C Notice") not later than 12:00 noon, New York City
time, at least three Business Days in advance, request CIT to assist the
Borrower in establishing or opening a Letter of Credit by delivering to the
Administrative Agent, with a copy to the Letter of Credit Issuer, a Letter of
Credit Application, together with any necessary related documents. CIT shall not
provide support, pursuant to the Letter of Credit Guaranty, if the
Administrative Agent shall have received written notice from the Majority
Lenders on the Business Day immediately preceding the proposed issuance day for
such Letter of Credit that one or more of the conditions precedent in Section
5.02 will not have been satisfied on such date, and neither CIT nor the
Administrative Agent shall otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in Section 5.02 have been
satisfied.
3.02 Participations.
(a) Purchase of Participations. Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit in accordance
with the procedures set forth in Section 3.01, each Lender (other than CIT)
shall be deemed to have irrevocably and unconditionally purchased and received
from CIT, without recourse or warranty, an undivided interest and participation,
to the extent of such Lender's Pro Rata Share, in all obligations of CIT with
respect to such Letter of Credit (including, without limitation, all Undrawn
Letter of Credit Availability and Reimbursement Obligations of the Borrower with
respect, thereto pursuant to the Letter of Credit Guaranty or otherwise).
(b) Sharing of Letter of Credit Payments. In the event
that CIT makes any payment in respect of the Letter of Credit Guaranty and the
Borrower shall not have repaid such amount to the Administrative Agent for the
account of CIT, the Administrative Agent shall charge the Loan Account in the
amount of the Reimbursement Obligation, in accordance with Section 3.01(a)(ii)
hereof.
(c) Obligations Irrevocable. The obligations of a Lender
to make payments to the Administrative Agent for the account of the
Administrative Agent or CIT with respect to a Letter of Credit shall be
irrevocable, not subject to any qualification or exception whatsoever and shall
be made in accordance with, but not subject to, the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Related Documents;
(ii) the existence of any claim, set off, defense
or other right which the Borrower may have at any time against a
beneficiary named in a Letter of
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Credit or any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), the Administrative Agent, Letter of
Credit Issuer, any Lender, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between the Borrower or any other party and the beneficiary named in any
Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Related
Documents;
(v) any failure by the Administrative Agent to
provide any notices required pursuant to this Agreement relating to Letters
of Credit; or
(vi) the occurrence of any Event of Default or
Potential Default.
ARTICLE IV
BORROWING BASE
4.01 Condition of Lending and Assisting in Establishing or
Opening Letters of Credit. CIT and the other Lenders shall have no obligation to
make a Loan or assist in establishing or opening a Letter of Credit to the
extent that the aggregate unpaid principal amount of the Loans and the Letter of
Credit Exposure exceeds, or after giving effect to a requested Credit Extension
would exceed, the Current Commitment at such time.
4.02 Mandatory Prepayment. Concurrently with the delivery of
any Borrowing Base Certificate, the Borrower shall give notice to the
Administrative Agent of any mandatory prepayment pursuant to Section 2.04(b)(i),
which notice shall specify a prepayment date no later than the earlier of the
date on which such Borrowing Base Certificate is given and the date on which
such Borrowing Base Certificate is required to be provided to the Lenders.
4.03 Rights and Obligations Unconditional. Without limitation
of any other provision of this Agreement, the rights of the Administrative
Agent, CIT and the Lenders and the obligations of the Borrower under this
Article IV are absolute, unconditional and the Administrative Agent, CIT and the
Lenders shall not be deemed to have waived the condition set forth in Section
4.01 hereof or their right to payment in accordance with Section 4.02 hereof in
any circumstance whatever, including but not limited to circumstances wherein,
the Administrative Agent or the Lenders (knowingly or otherwise) make an advance
hereunder in excess of the Borrowing Base.
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4.04 Borrowing Base Certificate.
(a) By 12:00 noon, New York City time five (5) Business
Days after the Saturday of each week (and on any other date on which the
Administrative Agent reasonably requests), the Borrower shall furnish to the
Administrative Agent a certificate ("Borrowing Base Certificate") substantially
in the form attached hereto as Exhibit D, certified as true and correct by a
Designated Financial Officer, setting forth the Borrowing Base and the other
information required therein as of the Borrower's close of business on the
Saturday of the preceding week, together with such other information with
respect to the Accounts and Inventory of the Borrower as the Administrative
Agent may reasonably request.
(b) In the event of any dispute about the eligibility of
any asset for inclusion in the Borrowing Base or the valuation thereof, the
Administrative Agent's good faith judgment shall control.
(c) The Borrowing Base set forth in a Borrowing Base
Certificate shall be effective from and including the date such Borrowing Base
Certificate is duly received by the Administrative Agent to but not including
the date on which a subsequent Borrowing Base Certificate is duly received by
the Administrative Agent, unless the Administrative Agent disputes the
eligibility of any asset for inclusion in the Borrowing Base or the valuation
thereof by notice of such dispute to the Borrower, in which case the value of
such asset shall, at the discretion of the Borrower, either not be included in
the Borrowing Base or be included in the Borrowing Base with a value reasonably
acceptable to the Administrative Agent.
(d) Each Borrowing Base Certificate shall be accompanied
by backup schedules showing the derivation thereof and containing such detail
and such other and further information as the Administrative Agent may
reasonably request from time to time.
4.05 General Provisions. Notwithstanding anything to the
contrary in this Article IV, in no event shall any single element of value or
asset be counted twice in determining the Borrowing Base.
ARTICLE V
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
5.01 Conditions Precedent to Effectiveness. This Agreement
shall become effective as of the Business Day when each to the following
conditions precedent shall have been satisfied and the obligation of any Lender
to make the initial Loan hereunder or the obligation of CIT or any Lender to
assist the Borrower in obtaining the issuance of the initial Letter of Credit
hereunder shall be subject to the satisfaction of the following conditions
precedent:
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(a) Payment of Fees, Etc. The Borrower shall have paid all
fees, costs, expenses and taxes then payable by the Borrower including, without
limitation, those due and payable pursuant to Sections 2.08 and 10.06 hereof.
The Borrower shall have paid to counsel to the Administrative Agent all fees and
other client charges due to such counsel on the Closing Date.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Article VI of this Agreement and in
each other Loan Document and certificate or other writing delivered to the
Administrative Agent, the Lenders or the Letter of Credit Issuer pursuant hereto
or thereto or prior to the Closing Date shall be correct in all material
respects on and as of the Closing Date as though made on and as of such date;
and no Potential Default or Event of Default shall have occurred and be
continuing on the Closing Date or would result from this Agreement becoming
effective in accordance with its terms.
(c) Legality. The making of the initial Loans and the issuance
of the initial Letter of Credit shall not contravene any law, rule or regulation
applicable to CIT, the Lenders or the Letter of Credit Issuer.
(d) Delivery of Documents. The Administrative Agent shall have
received on or before the Closing Date the following, each in form and substance
satisfactory to the Administrative Agent and, unless indicated otherwise, dated
the Closing Date:
(i) a Note payable to the order of each Lender, duly
executed by the Borrower;
(ii) the Security Agreements, duly executed by the
Borrower;
(iii) appropriate financing statements on Form UCC-1,
duly executed by the Borrower to be duly filed in such office or
offices as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interests
purported to be created by the Security Documents;
(iv) certified copies of requests for copies or
information on Form UCC-11, listing all effective financing
statements which name as debtor the Borrower, tax liens and
judgment liens and which are filed in the offices referred to in
paragraph (iii) above, together with copies of such financing
statements, none of which, except as otherwise agreed to in
writing by the Administrative Agent, shall cover any of the
Collateral;
(v) a copy of the resolutions adopted by the Board of
Directors of the Borrower, certified as of the Closing Date by
authorized officers thereof, authorizing (A) in the case of the
Borrower, the borrowings hereunder and the transactions
contemplated by the Loan Documents to which the Borrower is or
will be a party, and (B) the execution, delivery and performance
by the Borrower
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of each Loan Document and the execution and delivery of the other
documents to be delivered by the Borrower in connection
therewith;
(vi) a certificate of an authorized officer of the
Borrower, certifying the names and true signatures of the
officers of the Borrower authorized to sign each Loan Document to
which the Borrower is or will be a party and the other documents
to be executed and delivered by the Borrower in connection
therewith, together with evidence of the incumbency of such
authorized officers;
(vii) a certificate, dated as of a date not more than
10 Business Days prior to the Closing Date, of the appropriate
official(s) of the state of incorporation and each state of
foreign qualification of the Borrower, certifying as to the
subsistence in good standing of, and the payment of taxes by, the
Borrower in such states and listing all charter documents of the
Borrower on file with such official(s), together with
confirmation by telephone or telegram (where available) on the
Closing Date from such official(s) as to such matters;
(viii) a copy of the charter of the Borrower
certified as of a date not more than 10 days prior to the Closing
Date by the appropriate official(s) of the state of incorporation
of the Borrower and as of the Closing Date by an authorized
officer of the Borrower;
(ix) a copy of the by-laws of the Borrower, certified
as of the Closing Date by an authorized officer of the Borrower;
(x) an opinion of Porter Wright Morris & Arthur and
an opinion of Kirkland & Ellis in form and substance satisfactory
to the Administrative Agent as to such matters as the
Administrative Agent may request;
(xi) a certificate of the Designated Financial
Officer the Borrower certifying as to the matters set forth in
subsection (b) of this Section 5.01;
(xii) a copy of the financial statements and
projections of the Borrower and its Subsidiaries referred to in
Section 6.07 hereof together with a certificate of the Designated
Financial Officer of the Borrower setting forth all pending and
to the knowledge of the Borrower, threatened litigation or claims
and all guarantees and other contingent liabilities of the
Borrower and its Subsidiaries in an amount in excess of $250,000;
(xiii) a Borrowing Base Certificate current as of the
close of business on a date not earlier than December 13, 1996,
certified by the Designated Financial Officer of the Borrower;
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(xiv) a certificate of an authorized officer of the
Borrower certifying the names and true signatures of those
officers of the Borrower that are authorized to provide Notices
of Borrowing and all other notices under this Agreement and the
Loan Documents;
(xv) a copy of each Material Contract certified as a
true and correct copy thereof by the Designated Financial Officer
of the Borrower;
(xvi) a copy of monthly financial statement
projections for the fiscal year ending March 1, 1997;
(xvii) copies, certified as true and correct by a
Designated Financial Officer of the Borrower, of any collective
bargaining agreements or any other similar agreement or
arrangements covering the employees of the Borrower or any of its
Subsidiaries (collectively, the "Collective Bargaining
Agreements");
(xviii) a certificate of insurance evidencing
insurance on the property of the Borrower as is required by
Section 7.07 of this Agreement, naming the Administrative Agent
as additional insured and loss payee, using a long form loss
payee endorsement, for all insurance maintenance by the Borrower;
(xix) the Borrower's most recent management letter or
(if no management letter has been issued) the equivalent prepared
by the Borrower's independent accountants;
(xx) the Fee Letter duly executed by CIT and the
Borrower; and
(xxi) such other agreements, instruments, approvals,
opinions and other documents as the Administrative Agent may
reasonably request.
(e) Proceedings; Receipt of Documents. All proceedings in
connection with the transactions contemplated by this Agreement and the Related
Documents and all documents incidental thereto, shall be satisfactory to the
Administrative Agent and its special counsel, and the Administrative Agent and
such special counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents, in form
and substance reasonably satisfactory to the Administrative Agent, as the
Administrative Agent or such special counsel may reasonably request.
(f) Cash Management System. The cash management system of
the Borrower shall be satisfactory to the Administrative Agent. In addition, the
Administrative Agent shall have received (1) an original notice letter for each
Depository Bank listed on Schedule 6.27 which will be sent to each such
Depository Bank, (2) a credit card bank depository account agreement, in form
and substance satisfactory to the Administrative Agent, duly
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executed by the Borrower and each credit card servicer and (3) a Cash
Concentration Account Agreement executed by the Borrower and the Cash
Concentration Account Bank.
(g) Audit. The Administrative Agent shall have completed
and shall be satisfied (in its sole discretion) with the results of an audit of
the Accounts, Inventory, assets and liabilities and books and records of the
Borrower and the Borrower shall have paid all fees and expenses payable in
connection with such audit.
(h) Appraisal. The Administrative Agent shall have
received a report on the Inventory of the Borrower, prepared by Alco Capital
Group, Inc., which report shall be in form and substance satisfactory to the
Administrative Agent.
(i) Lien Priority. The Lien in favor of the
Administrative Agent pursuant to the Related Documents shall be a valid and
perfected first priority Lien on the Collateral, which shall be subject to no
other Liens except for Permitted Liens.
(j) Compliance. The Administrative Agent shall have
received evidence reasonably satisfactory to the Administrative Agent of the
Borrower's compliance with all Environmental Laws, ERISA, tax and labor matters.
(k) Legal Restraints/Litigation. On the Closing Date,
there shall be no (1) litigation, investigation or proceeding (judicial or
administrative) pending or, to the knowledge of the Borrower or threatened,
against the Borrower or its Subsidiaries, or their assets, by any agency,
division or department of any county, city, state or federal government arising
out of the transactions contemplated by the Loan Documents, (2) injunction, writ
or restraining order restraining or prohibiting the transactions contemplated
pursuant to the transactions contemplated by the Loan Documents, or (3) suit,
action, investigation or proceeding (judicial or administrative) pending or, to
the knowledge of the Borrower, threatened against the Borrower or its
Subsidiaries, or its assets, which could have a Material Adverse Effect.
(l) Absence of Material Adverse Change. The
Administrative Agent shall be satisfied that there is an absence of any material
adverse change in the financial condition, business, prospects, assets or
operations of the Borrower, excluding defaults under the Existing Credit
Facilities (it being understood and agreed that any adverse change in the terms,
conditions, assumptions or projections (to the extent projections have been
delivered and deemed acceptable by the Agent and then there is an adverse change
which affects such previously delivered projections) supplied to the
Administrative Agent by the Borrower may be construed by the Administrative
Agent as a material adverse change).
(m) Waivers. The Administrative Agent shall have received
such landlord and warehouse waivers as it deems advisable.
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(n) Pay-off of Existing Facilities. The Administrative
Agent shall be satisfied in all respects with the "pay proceeds" letter from the
existing lenders under the Existing Credit Facilities.
5.02 Conditions Precedent to Loans and Letters of Credit. In
addition to the requirements of Section 5.01 hereof, the obligation of each
Lender to make any Loan and the obligation of CIT or any Lender to assist the
Borrower in obtaining the issuance of any Letter of Credit is subject to the
fulfillment, in a manner satisfactory to the Agent, of each of the following
conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid
all fees, costs, expenses and taxes then payable by the Borrower pursuant to
Sections 2.08 and 10.06 hereof.
(b) Representations and Warranties; No Event of Default.
The following statements shall be true, and the submission by the Borrower to
the Administrative Agent of a Notice of Borrowing with respect to a Loan and the
Borrower's acceptance of the proceeds of such Loan, or the submission by the
Borrower to the Administrative Agent and the Letter of Credit Issuer of an L/C
Notice with respect to a Letter of Credit and the issuance of such Letter of
Credit shall be deemed to be a representation and warranty by the Borrower on
the date of such Loan and the date of the issuance of such Letter of Credit
that, (i) the representations and warranties contained in Article VI of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Administrative Agent, the Lenders and the Letter of Credit
Issuer pursuant hereto on or prior to the date of such Loan or Letter of Credit
are correct in all material respects on and as of such date as though made on
and as of such date (except for representations and warranties which relate to a
specific date) and; (ii) no Potential Default or Event of Default has occurred
and is continuing or would result from the making of the Loan to be made on such
date or the issuance of the Letter of Credit to be issued on such date.
(c) Legality. The making of such Loan or the issuance of such
Letter of Credit shall not contravene any law, rule or regulation applicable to
CIT, the Lenders or the Letter of Credit Issuer.
(d) Borrowing Notice. The Administrative Agent shall have
received a Notice of Borrowing pursuant to Section 2.03 hereof no later than
12:00 noon (New York City time) three (3) Business Days prior to the date of the
proposed borrowing with respect to a Eurodollar Loan or on the date of a
proposed borrowing of a Prime Loan or an L/C Notice and a Letter of Credit
Application pursuant to Section 3.01 hereof not later than 12:00 noon (New York
City time) three Business Days prior to the proposed date of issuance of a
Letter of Credit.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the
Administrative Agent and the Lenders as follows:
6.01 Organization, Good Standing, Etc. The Borrower and each
of its Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its organization, (ii) has all
requisite power and authority to conduct its business as now conducted and as
presently contemplated and (in the case of the Borrower) to make the borrowings
hereunder and to consummate the transactions contemplated hereby and (iii) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except, with
respect to this clause (iii), where all instances of such failure to qualify
taken together will not have a Material Adverse Effect.
6.02 Authorization, Etc. The execution, delivery and
performance by the Borrower of each Loan Document to which it is a party, (i)
has been duly authorized by all necessary corporate action, (ii) does not and
will not contravene its charter or by-laws any other applicable law or any
contractual restriction binding on or otherwise affecting it or any of its
properties or result in a default under any agreement or instrument to which the
Borrower is a party or by which the Borrower or its properties may be subject,
(iii) does not and will not result in or require the creation of any Lien (other
than pursuant to any such Loan Document) upon with respect to any of its
properties, and (iv) does not and will not result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to its operations or any of its properties.
6.03 Governmental Approvals. No authorization, consent,
approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority is or will be necessary in connection with the execution and delivery
by the Borrower of the Loan Document to which it is a party, consummation of the
transactions therein contemplated, performance of or compliance with the terms
and conditions thereof or to ensure the legality, validity, enforceability and
admissibility in evidence thereto, except for the filings and recordings in
respect of the Liens created pursuant to the Security Documents.
6.04 Enforceability of Loan Documents. This Agreement is, and
each other Loan Document to which the Borrower is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
6.05 Subsidiaries. Schedule 6.05 hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding capital stock of each Subsidiary of the Borrower in existence on
the Closing Date. All shares of such stock owned by
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the Borrower or one or more of its Subsidiaries, as indicated in such Schedule,
are owned free and clear of all Liens, except for the Liens in favor of the
Administrative Agent that secure payment of the Obligations. There are no
options, warrants or other rights to acquire shares of capital stock of any
Subsidiary of the Borrower.
6.06 Litigation. Except as set forth on Schedule 6.06 hereto,
there is no pending or, to the knowledge of the Borrower, threatened action,
suit or proceeding requesting damages in an amount in excess of $1,000,000
affecting the Borrower or any of its Subsidiaries before any court or other
Governmental Authority or any arbitrator in existence on the Closing Date. There
is no pending or, to the knowledge of the Borrower, threatened action, suit or
proceeding affecting the Borrower or any of its Subsidiaries before any court or
other Governmental Authority or any arbitrator which may have a Material Adverse
Effect.
6.07 Financial Condition.
(a) Historical Statements. The Borrower has heretofore
furnished to the Lenders a balance sheet of the Borrower for the fiscal year
ended March 1996 and the related statements of operations and cash flows for the
fiscal year then ended, as examined and reported on by Coopers & Lybrand,
independent certified public accountants, and a balance sheet and related
statements of operations and cash flows of the Borrower for and as of the end of
the six-month period ended August 31, 1996, as certified by a Designated
Financial Officer of the Borrower. Such financial statements (including the
notes thereto) present fairly, in all material respects, the financial condition
of the Borrower as of the end of such fiscal year and such six month period and
the results of its operations and the cash flows for the fiscal year and such
six month period then ended, all in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal year except as disclosed therein.
Except as disclosed in the Schedules hereto, the Borrower does not have any
material contingent liabilities (including liabilities for taxes), unusual
forward or long term commitments or unrealized or anticipated losses from
unfavorable commitments.
(b) The Borrower has heretofore furnished to the Lenders
month-to-month projections of the Borrower for the twelve months ending March
1, 1997 and will furnish month-to-month projections for the twelve months ending
February 28, 1998 and such projections have been, in the case of 1997 and will
be in the case of 1998, prepared in accordance with the standard set forth in
the second sentence of Section 6.17 hereof.
6.08 Compliance with Law, Etc. Each of the Borrower and its
Subsidiaries is not in violation of its charter or by-laws, any law (including
but not limited to violations pertaining to the conduct of its business or the
use, maintenance or operation of the real and personal properties owned or
possessed by it) or any term of any material agreement or instrument binding on
or otherwise affecting it or any of its properties, except, in the case of
violations of law, where all such violations taken together will not have a
Material Adverse Effect and, except in the case of violations of the terms of
the Existing Credit Facilities.
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6.09 ERISA. (i) Each Plan is in substantial compliance with
the applicable provisions of ERISA and the Code, (ii) no Termination Event has
occurred nor is reasonably expected to occur with respect to any Benefit Plan,
(iii) the most recent annual report (Form 5500 Series) with respect to each
Plan, including Schedule B (Actuarial Information) thereto, copies of which have
been filed with the Internal Revenue Service, is complete and correct in all
material respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse change in
such funding status, (iv) no Benefit Plan had an accumulation or waived funding
deficiency or permitted decreases which would create a deficiency in its funding
standard account within the meaning of Section 412 of the Code at any time
during the previous 60 months, and (v) no Lien imposed under the Code or ERISA
exists or is likely to arise on account of any Benefit Plan within the meaning
of Section 412 of the Code. Neither the Borrower nor any of their respective
ERISA Affiliates has incurred any withdrawal liability under ERISA with respect
to any Multiemployer Plan, and the Borrower is not aware of any facts indicating
that the Borrower or any of its ERISA Affiliates may in the future incur any
such withdrawal liability. Except as required by Section 4980B of the Code or as
disclosed on Schedule 6.09, the Borrower does not maintain a welfare plan (as
defined in Section 3(1) of ERISA) which provides benefits or coverage after a
participant's termination of employment. Neither the Borrower nor any of their
respective ERISA Affiliates have incurred any liability under the Worker
Adjustment and Retraining Notification Act. All Plans in existence on the
Closing Date are set forth on Schedule 6.09 hereto.
6.10 Taxes, Etc. All tax returns required to be filed by the
Borrower and its Subsidiaries have been properly prepared, executed and filed.
All taxes, assessments, fees and other governmental charges upon the Borrower
and its Subsidiaries or upon any of their respective properties, income, sales
or franchises which are shown thereon as due and payable have been paid, unless
payment thereof is being contested in good faith by appropriate proceedings
which stay the imposition of any penalty, fine or Lien resulting from the
non-payment thereof and with respect to which, adequate reserves therefor are
being maintained. The reserves and provisions for taxes, if any, on the books of
the Borrower are adequate for all open years and for its current fiscal period.
Except as set forth on Schedule 6.10, the Borrower does not know of any proposed
additional assessment or basis for any material assessment for additional taxes
(whether or not reserved against). The federal income tax liabilities of the
Borrower and its Subsidiaries have been finally determined by the Internal
Revenue Service, or the time for audit has expired, for all fiscal periods
ending on or prior to February 28, 1993 and all such liabilities (including all
deficiencies assessed following audit) have been satisfied.
6.11 Regulation G, T, U or X. The Borrower is not and will not
be engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G, T, U or X issued by
the Board), and no proceeds of any Loan will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
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6.12 Nature of Business. The Borrower is not engaged in any
business other than the operation of stores selling a variety of consumer
electronics, home appliances and related items.
6.13 Adverse Agreements, Etc. Neither the Borrower nor any of
its Subsidiaries is a party to any agreement or instrument, or subject to any
charter or other corporate restriction or any judgment, order, regulation,
ruling or other requirement of a court or other Governmental Authority or
regulatory body, which has a Material Adverse Effect, or, to the best knowledge
of the Borrower, is reasonably likely to have a Material Adverse Effect, except
in connection with defaults under the Existing Credit Facilities.
6.14 Holding Company and Investment Company Acts. Neither the
Borrower nor any of its Subsidiaries is (i) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) an "investment company" or an "affiliated person" or "promoter"
of or "principal underwriter" of or for an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
6.15 Permits, Etc. The Borrower and its Subsidiaries have all
material permits, licenses, authorizations and approvals required for them
lawfully to own and operate their business.
6.16 Priority, Title. Except for Permitted Liens, the Liens
granted under the Security Documents constitute and shall at all times
constitute perfected, first priority Liens on the Collateral which are subject
to no other Liens other than Permitted Liens, and the Borrower is the sole and
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create Liens therein. No Person has any right of first refusal,
option or other preferential right to purchase any Collateral. The Borrower will
at its expense forever warrant and, at the Administrative Agent's request,
defend the same from any and all claims and demands of any other Person other
than the Permitted Liens; and the Borrower will not grant, create or permit to
exist, any Lien upon the Collateral, or any proceeds thereof, in favor or any
other Person other than Permitted Liens. The Borrower and its respective
Subsidiaries have good and marketable title to all of their properties and
assets, free and clear of all Liens except Permitted Liens.
6.17 Full Disclosure. The representations or warranties made
by the Borrower under this Agreement and the other Loan Documents, taken as a
whole, are not false or misleading in any material respect and the Loan
Documents, the schedules and exhibits thereto and the certificates, reports,
statements and other documents or information furnished to the Administrative
Agent or the Lenders in connection herewith or therewith or with the
consummation of the transactions contemplated hereby and thereby, taken as a
whole, do not contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained herein or
therein not misleading. To the extent the Borrower furnishes any projections of
the financial position and results of operations of the Borrower for, or as at
the end of, certain future periods, such projections were believed at the time
furnished to
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be reasonable, have been or will have been prepared on a reasonable basis and in
good faith by the Borrower, and have been or will be based on assumptions
believed by the Borrower to be reasonable at the time made and upon the best
information then available to the Borrower.
6.18 Operating Lease Obligations. On the Closing Date, (i) the
Borrower does not have any obligations as lessee for the payment of rent for any
real property other than the Operating Lease Obligations set forth in Schedule
6.18 hereto and the Capital Lease Obligations set forth in Schedule 6.29 hereto
and (ii) the Borrower does not have any personal property leases providing for
total rent payments in excess of $2,500,000 in the aggregate.
6.19 Environmental Matters. Except as disclosed in Schedule
6.19 hereto (i) none of the operations of the Borrower is the subject of any
federal, state or local investigation to determine whether any Remedial Action
is needed to address the presence, disposal, Release or threatened Release; (ii)
the operations of the Borrower and its Subsidiaries are in compliance with all
Environmental Laws; (iii) there has been no Release at any of the properties
owned or operated by the Borrower, its Subsidiaries or any predecessor in
interest or title, or at any disposal or treatment facility which received
Hazardous Materials generated by the Borrower, its Subsidiaries or any
predecessor in interest or title which is reasonably likely to result in
Environmental Liabilities and Costs of $250,000 or more; (iv) no Environmental
Actions have been asserted against the Borrower, its Subsidiaries or any
predecessor in interest or title nor does the Borrower or its Subsidiaries have
knowledge or notice of any threatened or pending Environmental Action against
the Borrower, its Subsidiaries or any predecessor in interest or title which, if
adversely determined, is reasonably likely to result in Environmental
Liabilities and Costs of $250,000 or more; (v) the Borrower and its Subsidiaries
have obtained all permits, approvals, authorizations and licenses required by
Environmental Laws necessary for their operations, and all such permits,
approvals, authorizations and licenses are in effect and the Borrower and its
Subsidiaries are in compliance with all terms and conditions of such permits,
approvals, authorizations and licenses; (vi) no Environmental Actions have been
asserted against any facilities that may have received Hazardous Materials
generated by the Borrower, its Subsidiaries or any predecessor in interest or
title which, if adversely determined, is reasonably likely to result in
Environmental Liabilities and Costs of $250,000 or more.
6.20 Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate and does not omit to state any information material
thereto.
6.21 Insurance. The Borrower and its Subsidiaries keep their
properties adequately insured and maintain (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workers compensation insurance in the amount
required by applicable law, (iii) public liability insurance in the amount
customary with companies in the same or similar business against claims for
personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or by the Loan Documents.
Schedule 6.21 hereto sets forth a list of all insurance maintained by the
Borrower and its Subsidiaries on the Closing Date.
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6.22 Use of Proceeds. The proceeds of the Loans shall be used
(i) to repay indebtedness under the Existing Credit Facilities and (ii) for
other working capital and general corporate purposes. The Letters of Credit will
be used (A) to import Inventory in the ordinary course of the Borrower's
business, and (B) for general corporate purposes, including but not limited to
workers compensation insurance and general liability insurance programs.
6.23 Security Documents. The Security Documents create and
grant to the Administrative Agent, for the benefit of the Lenders, a legal,
valid and perfected first priority Lien on the Collateral subject to no other
Liens except for Permitted Liens.
6.24 Financial Accounting Practices, Etc.
(a) The Borrower and its Subsidiaries make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect their respective transactions and dispositions of their respective
assets and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP except as previously disclosed to the Administrative Agent
and (B) to maintain accountability for assets, and (iii) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(b) The Borrower and its Subsidiaries maintain a system
of internal procedures and controls sufficient to provide reasonable assurance
that the information required to be set forth in each Borrowing Base Certificate
(including, without limitation, information relating to the identification of
assets which are Inventory and the valuation thereof) is accurate.
6.25 No Material Adverse Effect. Since November 2, 1996 (or
since August 31, 1996 if the Borrower's SEC Form 10Q for its third quarter 1996
contains material information not contained in its statement delivered to the
Administrative Agent dated as of November 2, 1996), there has not occurred any
Material Adverse Effect or any event which could have a Material Adverse Effect,
other than the existence of certain defaults under the Existing Credit
Facilities.
6.26 Real Property; Leases.
(a) Schedule 6.26 hereto sets forth a complete and
accurate description and list as of the Closing Date of the location, by state
and street address, of all real property owned and leased by the Borrower,
together with, in the case of real property that is owned, a statement as to
whether such real property is the subject of a contract of sale (and, if so, a
statement as to the status of such sale).
(b) As of the Closing Date, the Borrower has valid
leasehold interests in the Leases described in Schedule 6.26 hereto. Schedule
6.26 hereto sets forth with respect to
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each Lease, the commencement date, termination date, renewal options (if any)
and annual base rents. Each such Lease is valid and enforceable in accordance
with its terms in all material respects and is in full force and effect. No
consent or approval of any landlord or other third party in connection with the
Leases is necessary for the Borrower to enter into and execute the Loan
Documents, except as set forth on Schedule 6.26 hereto. Neither the Borrower
nor, to the knowledge of the Borrower, any other party to any Lease is in
default of its obligations thereunder and the Borrower has not at any time
delivered or received any notice of default which remains uncured under any such
Lease and, as of the Closing Date, no event has occurred which, with the giving
of notice or the passage of time, or both, would constitute a default under any
such Lease, except for defaults the consequence of which in the aggregate would
have no Material Adverse Effect.
(c) All permits required to have been issued to the
Borrower with respect to the real property owned or leased by the Borrower to
enable such property to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used (separate and apart from any other
properties), have been lawfully issued and are in full force and effect, other
than such permits which if not obtained, would not have a Material Adverse
Effect, and all such real property complies in all material respects with all
applicable legal and insurance requirements.
(d) The Borrower has not received any notice, nor does
the Borrower have any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any real property owned or leased by the
Borrower or any Subsidiary.
(e) No portion of any real property owned or leased by
the Borrower or any of its Subsidiaries has suffered any damage by fire or other
casualty loss which has not heretofore been completely repaired and restored to
its condition existing prior to such casualty or which if not repaired or
restored is not reasonably likely to result in a Material Adverse Effect.
6.27 Location of Bank Accounts. Schedule 6.27 hereto sets
forth a complete and accurate list as of the Closing Date of all deposit and
other accounts, including the Cash Concentration Accounts and all Depository
Accounts, maintained by the Borrower and its Subsidiaries together with a
description thereof (i.e. the bank at which such deposit or other account is
maintained and the account number and the purpose thereof).
6.28 No Event of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Potential Default.
6.29 Capitalized Leases. As of the Closing Date, Capitalized
Lease Obligations of the Borrower and its respective Subsidiaries which are set
forth on Schedule 6.29 hereto do not exceed $14,809,419 in the aggregate.
6.30 Tradenames. Schedule 6.30 hereto sets forth a complete
and accurate list as of the Closing Date of all tradenames used by the Borrower
and its Subsidiaries.
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6.31 Solvency. After giving effect to the transactions
contemplated by this Agreement and the Related Documents and each Credit
Extension, the Borrower is Solvent.
6.32 Inventory. There is no location at which the Borrower has
any Inventory (except for Inventory in transit) other than (i) those locations
listed on Schedule 1.01(A) hereto and (ii) any other locations approved in
writing by the Administrative Agent pursuant to the definition of "Eligible
Inventory". Schedule 1.01(A) hereto contains a true, correct and complete list,
as of the Closing Date, of the legal names and addresses of each store and
warehouse at which Inventory of the Borrower is stored. None of the receipts
received by the Borrower from any warehouse states that the goods covered
thereby are to be delivered to bearer or to the order of a named Person or to a
named Person and such named Person's assigns.
6.33 Intellectual Property. The Borrower and its Subsidiaries
own or license or otherwise have the right to use all material licenses,
permits, patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights that are necessary for the
operations of their businesses and, to the knowledge of the Borrower or such
Subsidiary, without infringement upon or conflict with the rights of any other
Person with respect thereto. To the best knowledge of the Borrower and its
Subsidiaries, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Borrower or its Subsidiaries infringes upon or conflicts with
any rights owned by any other Person, and no claim or litigation regarding any
of the foregoing is pending or threatened, except for such infringements and
conflicts which could not have, individually or in the aggregate, a Material
Adverse Effect. To the knowledge of the Borrower and its Subsidiaries, no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, individually or in
the aggregate, could have a Material Adverse Effect.
6.34 Material Contracts. Set forth in Schedule 6.34 hereto is
a complete and accurate list as of the Closing Date of all Material Contracts of
the Borrower and its Subsidiaries, showing the parties and subject matter
thereof and amendments and modifications thereto. Each such Material Contract
(i) is in full force and effect and is binding upon and enforceable against the
Borrower or its Subsidiaries, as the case may be, and, to the Borrower's
knowledge, all other parties thereto in accordance with its terms, (ii) has not
been otherwise amended or modified in any material respect, and (iii) there
exists no default under any Material Contract by the Borrower or any of its
Subsidiaries or, to the Borrower's knowledge, any other party thereto which has
not been cured or waived.
6.35 Labor Relations; Collective Bargaining Agreements.
(a) Set forth on Schedule 6.35 hereto is a list
(including dates of termination) of all Collective Bargaining Agreements between
or applicable to the Borrower or any of its Subsidiaries and any union, labor
organization or over bargaining agent in respect of the employees of the
Borrower or any of its Subsidiaries.
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(b) Neither the Borrower nor any Subsidiary is engaged in
any unfair labor practice that is reasonably likely to have a Material Adverse
Effect. There is (i) no significant unfair labor practice complaint pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower or any of its Subsidiaries, threatened against any of them, before the
National Labor Relations Board, and no significant grievance or significant
arbitration proceeding arising out of or under any Collective Bargaining
Agreement is now pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower or any of its Subsidiaries, threatened
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage is pending against the Borrower or any of its Subsidiaries or, to the
best knowledge of the Borrower or any of its Subsidiaries, threatened against
the Borrower or any of its Subsidiaries, and (iii) to the best knowledge of the
Borrower or any of its Subsidiaries, no union representation question existing
with respect to the employees of the Borrower or any of its Subsidiaries, except
(with respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.36 Accounts. The chief executive office of the Borrower and
the location of its books and records are set forth on Schedule 6.36 hereto. All
agreements related to credit card receivables, including private label credit
cards, are listed on such Schedule 6.36.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any other Obligations (whether or not due) shall
remain unpaid or the Lenders shall have any Revolving Credit Commitment
hereunder, the Borrower will, unless the Majority Lenders shall otherwise
consent in writing:
7.01 Reporting Requirements. Furnish to the Lenders:
(a) As soon as practicable and in any event within ninety
(90) days after the close of each fiscal year of the Borrower, a consolidated
statement of operations and cash flows of the Borrower for such fiscal year and
a balance sheet of the Borrower as of the close of such fiscal year, and notes
to each, all in reasonable detail, setting forth in comparative form the
corresponding figures for the preceding fiscal year, which consolidated
statements and balance sheet shall be audited and accompanied by an opinion of
Coopers & Lybrand or other independent certified public accountants of
recognized national standing selected by the Borrower and reasonably
satisfactory to the Administrative Agent. The opinion of such accountants (the
"Accountant's Opinion") shall be without a "going concern" qualification or like
qualification or exception or qualification arising out of the scope of the
audit with respect to such statements and balance sheet being prepared in
compliance with GAAP and shall in any event contain a written statement of such
accountants substantially to the effect that (i) such accountants examined such
statements and balance sheet in accordance with generally accepted
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auditing standards and accordingly made such tests of accounting records and
such other auditing procedures as such accountants considered necessary in the
circumstances and (ii) in the opinion of such accountants such statements and
balance sheet present fairly, in all material respects, the financial position
of the Borrower as of the end of such fiscal year and the results of its
operations and the changes in its financial position for such fiscal year, in
conformity with GAAP (except for changes in application in which such
accountants concur). A copy of the Accountant's Opinion shall be delivered to
the Administrative Agent and each Lender and signed by such independent public
accountants. Each set of statements and balance sheets delivered pursuant to
this Section 7.01 (a) shall be accompanied by (1) a certificate or report dated
the date of such statements and balance sheet by the accountants who certified
or reported on such statements and balance sheet stating in substance that they
have reviewed this Agreement and that in making the examination necessary for
their certification of such statements and balance sheet they did not become
aware of any Event of Default or Potential Default, or if they did become so
aware, such certificate or report shall state the nature and period of existence
thereof, if determinable and (2) a certificate dated the date of the delivery of
such statements and balance sheet by the Designated Financial Officer of the
Borrower stating in substance that he has reviewed this Agreement and that in
making the examination necessary for this certification, he did not become aware
of any Event of Default or Potential Default, or if he did become so aware, such
certificate shall state the nature and period of existence thereof if
determinable in form and substance satisfactory to the Administrative Agent.
(b) As soon as practicable and in any event within forty-five (45) days
after the close of each of the first three fiscal quarters of each of the
Borrower's fiscal years, unaudited consolidated statements of operations and
cash flows of the Borrower as of the close of such fiscal quarter and a balance
sheet of the Borrower as of the close of such fiscal quarter, and notes to each,
all in reasonable detail setting forth in comparative form the corresponding
figures for the corresponding fiscal quarter for the preceding fiscal year,
which statements and balance sheet shall be certified by a Designated Financial
Officer of the Borrower as presenting fairly, in all material respects, the
financial position of the Borrower as of the end of such quarter and the results
of its operations and the changes in its financial position for such quarter, in
conformity with GAAP applied in a manner consistent except as otherwise
disclosed therein with that of the most recent audited financial statements
furnished to the Lenders, subject to year-end adjustments. Each set of
statements and balance sheets delivered pursuant to this Section 7.01 (b) shall
be accompanied by a certificate of a Designated Financial Officer of the
Borrower dated the date of delivery of such statements and balance sheet stating
that he has reviewed this Agreement and that to the best of his knowledge he did
not become aware of any Event of Default or Potential Default, or if he did
become so aware, such certificate shall state the nature and period of existence
thereof, if determinable, in form and substance satisfactory to the
Administrative Agent.
(c) As soon as practicable and in any event within thirty (30) days
after the end of each fiscal month of the Borrower (other than the last month of
each of the first three fiscal quarters of the Borrower) unaudited statements of
operations and cash flows for the Borrower for such fiscal month and for the
period from the beginning of such fiscal year to the
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end of such fiscal month, and an unaudited balance sheet of the Borrower as of
the end of such fiscal month, all in reasonable detail, setting forth in
comparative form the corresponding figures for the same periods during the
preceding fiscal year, and accompanied by (1) a certificate of a Designated
Financial Officer of the Borrower (A) stating that such statements present
fairly, in all material respects, the financial position of the Borrower as of
the end of such fiscal month and the results of its operations and cash flows
for such fiscal month, applied in a manner consistent with prior practice, and,
subject to year-end adjustments, and (2) a Certificate of the Designated
Financial Officer of the Borrower stating that he has reviewed this Agreement
and that to the best of his knowledge he did not become aware of any Event of
Default or Potential Default, or if he did become so aware, such certificate
shall state the nature and period of existence thereof, if determinable.
(d) As soon as practicable and in any event within five (5) Business
Days after the end of each fiscal month (including the fiscal month in which
this Agreement is executed), the Borrower shall furnish to the Lenders a monthly
inventory report in form and substance reasonably satisfactory to the
Administrative Agent and certified by a Designated Financial Officer of the
Borrower, which shall be accompanied by a reconciliation from the monthly
inventory report as of the Borrower's close of business on the last day of the
preceding month.
(e) As soon as practicable and in any event within five (5) Business
Days after the end of each week (including the week in which this Agreement is
executed), the Borrower shall furnish to the Lenders weekly sales reports,
weekly inventory reports and a Borrowing Base Certificate, each as of the
Borrower's close of business on the Saturday of the preceding week and in form
and substance reasonably satisfactory to the Administrative Agent and certified
by a Designated Financial Officer of the Borrower.
(f) As soon as possible, and in any event within three (3) days after
the occurrence of a Potential Default or an Event of Default or a Material
Adverse Effect, the written statement of the Designated Financial Officer of the
Borrower, setting forth the details of the Potential Default or Event of
Default, Material Adverse Effect and the action which the Borrower proposes to
take with respect thereto.
(g) Promptly upon their becoming available, a copy of (1) all reports
financial statements or other information delivered by the Borrower to its
shareholders or the Securities Exchange Commission, (2) all reports, proxy
statements, financial statements and other information generally distributed by
the Borrower to its creditors or the financial community in general, and (3) any
accountant's management letters and any audit or other reports submitted to the
Borrower by independent accountants in connection with any annual, interim or
special audit of the Borrower.
(h) (1) As soon as possible and in any event (A) within thirty (30)
days after the Borrower or any of its ERISA Affiliates knows or has reason to
know that any Termination Event described in clause (i) of the definition of
Termination Event with respect to
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any Benefit Plan has occurred, and (B) within 20 days after the Borrower or any
of its ERISA Affiliates knows or has reason to know that any other Termination
Event with respect to any Benefit Plan has occurred, or that the Borrower or any
of its ERISA Affiliates has failed to make a required installment to a Benefit
Plan within the meaning of Section 412(m) of the Code, a statement of the
Designated Financial Officer of the Borrower describing such Termination Event
and the action, if any, which the Borrower or such ERISA Affiliate proposes to
take with respect thereto, (2) promptly and in any event within three (3)
Business Days after receipt thereof by the Borrower or any of its ERISA
Affiliates from the PBGC, copies of each notice received by the Borrower or any
of its ERISA Affiliates of the PBGC's intention to terminate any Plan or to have
a trustee appointed to administer any Plan, (3) promptly and in any event within
30 days after the filing thereof with the Internal Revenue Service, copies of
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Benefit Plan and Multiemployer Plan, (4) promptly and in
any event within five Business Days after receipt thereof by the Borrower or any
of its ERISA Affiliates from a sponsor of a Multiemployer Plan or from the PBGC,
a copy of each notice received by the Borrower or any of its ERISA Affiliates
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA, (5) promptly, and in any event within ten
(10) days after the Borrower or any of their respective ERISA affiliates is
required to send a notice of a plant closing or mass layoff (as defined in the
Worker Adjustment and Retraining Notification Act), and (6) promptly and in any
event within 30 days after the Borrower or any ERISA Affiliate takes action to
establish Benefit Plan or contribute to a Multiemployer Plan, a statement of the
Designated Financial Officer of the Borrower describing such Benefit Plan or
Multiemployer Plan.
(i) Promptly after, and in any event within five (5) days after, an
officer of the Borrower learns of any of the following, notice thereof:
(i) the receipt by the Borrower or any of its Subsidiaries of
notification that any real or personal property of the Borrower or such
Subsidiary is subject to any Environmental Lien;
(ii) notice of violation of any Environmental Law which could
reasonably be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs of $250,000 or more; or
(iii) notice of the commencement of any Environmental Action
by the Borrower or any of its Subsidiaries of any Environmental Law, which if
adversely determined, could reasonably be expected to subject the Borrower or
any of its Subsidiaries to Environmental Liabilities and Costs of $250,000 or
more.
(j) Promptly after the commencement thereof but in any event not later
than five (5) days after service of process with respect thereto on, or the
obtaining of knowledge thereof by the Borrower or any of its Subsidiaries,
notice of each action, suit or proceeding involving the Borrower or any of its
Subsidiaries before any court or other
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Governmental Authority or other regulatory body or any arbitrator which could
have a Material Adverse Effect.
(k) Promptly after submission to any Governmental Authority
all documents and information furnished to such Governmental Authority in
connection with any investigation of the Borrower or any of its Subsidiaries
other than routine inquiries by such Governmental Authority.
(l) As soon as available, and in any event within five (5)
Business Days after (1) receipt or delivery thereof, copies of any material
notices that the Borrower receives or delivers in connection with any Material
Contract and, (2) the Borrower enters into a Material Contract (including,
without limitation any agreements related to credit card receivables), a copy of
such Material Contract.
(m) Within five (5) Business Days after the end of each month,
a receivables aging report.
(n) Promptly upon request, such other information concerning
the condition or operations, financial or otherwise, of the Borrower or any of
its respective Subsidiaries as the Administrative Agent or any Lender from time
to time may reasonably request.
(o) Within sixty (60) days following the Closing Date, monthly
financial projections for the year ending February 28, 1998.
7.02 Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply with all applicable laws, rules, regulations and orders
(including, without limitation, Environmental Laws and compliance in respect of
their businesses, or use, maintenance or operation of real and personal
properties owned or leased by them), such compliance to include, without
limitation, (i) paying before the same become delinquent all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or upon any of its properties, and (ii) paying all lawful claims which if unpaid
might become a Lien or charge upon any of its properties, except to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof, except, in the case of all such non-compliance (other than
non-compliance in the payment of federal, state and local taxes which, if
unpaid, could result in a Lien on any Collateral or any other non-compliance
that may result in a Lien on Collateral), where all such instances of
non-compliance taken together will not have Material Adverse Effect.
7.03 Preservation of Existence, Etc. Maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by them or in which the transaction of their business makes
such qualification necessary, except where all instances of such failure to
qualify
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or remain in good standing or such failure to maintain rights and privileges
taken together will not have a Material Adverse Effect.
7.04 Keeping of Records and Books of Account. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with generally accepted accounting principles
consistently applied.
7.05 Inspection Rights. Permit, and cause each of its Subsidiaries to
permit, the Administrative Agent or any Lender, or any agents or representatives
thereof or such professionals or other Persons as the Administrative Agent may
designate (i) to examine and inspect the books and records of the Borrower and
take copies and extracts therefrom at reasonable times and during normal
business hours, (ii) to verify materials, leases, notes, receivables, deposit
accounts and other assets of the Borrower from time to time, and (iii) to
conduct Inventory appraisals and/or valuations at the distribution center(s) and
retail stores of the Borrower provided that, in the absence of a continuing
Event of Default, all such action described in clauses (i) through (iii) above
shall be conducted at reasonable times, during normal business hours and upon
prior notice.
7.06 Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of their properties
(including all real properties leased or owned by them) which are necessary or
useful in the proper conduct of their business in good working order and
condition, ordinary wear and tear excepted, and comply, and cause each of its
Subsidiaries to comply, at all times with the provisions of all Leases to which
each of them is a party as lessee or under which each of them occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
7.07 Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, with responsible and reputable insurance companies or
associations, insurance (including, without limitation, comprehensive general
liability, hazard and business interruption insurance) with respect to their
properties (including all real properties leased or owned by them) and business,
in such amounts and covering such risks, as is required by any Governmental
Authority or other regulatory body having jurisdiction with respect thereto or
as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated and in any event in amount, adequacy
and scope reasonably satisfactory to the Administrative Agent. All policies
covering the Collateral are to be made payable to the Administrative Agent, in
case of loss, under a standard non-contributory "lender" or "secured party"
clause and are to contain such other provisions as the Administrative Agent may
require to fully protect the Administrative Agent's interest in the Collateral
and to any payments to be made under such policies. All original policies or
true copies thereof are to be delivered to the Administrative Agent, premium
prepaid, with the loss payable and additional insured endorsement in the
Administrative Agent's favor, and shall provide for not less than thirty (30)
days prior written notice to the Administrative Agent of the exercise of any
right of cancellation; provided, however, that original policies may be
delivered not later than thirty (30) days from the Closing Date. At the
Borrower's request, or if the Borrower fails to maintain such insurance, the
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Administrative Agent may arrange for such insurance, but at the Borrower's
expense and without any responsibility on the Administrative Agent's part for:
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Upon the occurrence of an Event of
Default, the Administrative Agent shall have the sole right, in the name of the
Administrative Agent and the Borrower, to file claims under any insurance
policies, to receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.
7.08 Environmental. Comply, and cause each of its Subsidiaries to
comply in all material respects, with the requirements of all Environmental Laws
and provide to the Administrative Agent all documentation in connection with
such compliance that the Administrative Agent may reasonably request; not cause
or permit the Collateral or any property or facility owned, operated or occupied
by the Borrower or its Subsidiaries to be used for any activities involving,
directly or indirectly, the use, generation, treatment, storage, release or
disposal of any Hazardous Materials except in compliance with applicable laws;
and immediately notify the Administrative Agent of any Release of Hazardous
Materials in excess of any reportable quantity and take any Remedial Actions
required to abate such Release. On behalf of the Borrower and its Subsidiaries,
the Borrower hereby agrees to defend, indemnify, and hold harmless the
Administrative Agent, the Lenders and the Letter of Credit Issuer, their
employees, agents, officers, and directors, from and against any claims,
demands, penalties, fines, liabilities (including strict liability),
settlements, damages, costs, or expenses (including, without limitation,
attorney and consultant fees, investigation and laboratory fees, court costs,
and litigation expenses) and Environmental Liabilities and Costs arising out of
(i) any Release, or threatened Release on any property presently or formerly
owned or occupied by the Borrower or its Subsidiaries (or their predecessors in
interest or title) or at any disposal facility which received Hazardous
Materials generated by the Borrower or its Subsidiaries; (ii) any violation of
Environmental Laws; (iii) any Environmental Actions; (iv) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to exposure to Hazardous Materials used, handled, generated
transported or deposited by the Borrower or its Subsidiaries (or any predecessor
in interest or title); and/or (v) the breach of any representation or warranty
made by the Borrower in Section 6.19 hereof or the breach of any covenant made
by any of the Borrower in this Section 7.08. This environmental indemnity shall
survive the repayment of the Obligations and discharge or release of any
security interest granted under the Loan Documents.
7.09 Further Assurances. Do, execute, acknowledge and deliver, and
cause its Subsidiaries to do, execute, acknowledge and deliver, at the sole cost
and expense of the Borrower all such further acts, deeds, conveyances,
mortgages, assignments estoppel certificates, financing statements, notices of
assignment, transfers and assurances as the Administrative Agent may require
from time to time in order (a) to carry out more effectively the purposes of
this Agreement or any other Related Document, (b) to subject to valid and
perfected first priority Liens all of the Collateral, (c) to perfect and
maintain the validity, effectiveness and priority of
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any of the Related Documents and the Lien intended to be created thereby, and
(d) to better assure, convey, grant, assign, transfer and confirm unto the
Administrative Agent, the Co-Agent, the Lenders and the Letter of Credit Issuer
the rights now or hereafter intended to be granted to the Administrative Agent,
the Lenders and the Letter of Credit Issuer under this Agreement any Loan
Document or any other instrument under which the Borrower or any Subsidiary may
be or may hereafter become bound to convey, mortgage or assign to the
Administrative Agent, the Lenders and the Letter of Credit Issuer.
7.10 Borrowing Base. Maintain all Loans and Letters of Credit in
compliance with the then current Borrowing Base.
7.11 Change in Collateral; Collateral Records. Give the Administrative
Agent not less than thirty (30) days' prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to the Administrative Agent and at which the Administrative Agent has
filed financing statements and otherwise fully perfected its Liens thereon. The
Borrower shall also advise the Administrative Agent promptly of any other change
in the location of any Collateral. The Borrower shall also advise the
Administrative Agent promptly, in sufficient detail, of any material adverse
change relating to the type quantity or quality of the Collateral or the
security interests granted therein. The Borrower agrees to execute and deliver
to the Administrative Agent for the benefit of the Administrative Agent from
time to time, solely for the Administrative Agent's convenience in maintaining a
record of the Collateral, such written statements and schedules as the
Administrative Agent may reasonably require, designating, identifying or
describing the Collateral. The Borrower's failure, however, to promptly give the
Administrative Agent such statements or schedules shall not affect, diminish,
modify or otherwise limit the Administrative Agent's security interest in the
Collateral.
7.12 Financial Accounting Practices, Etc.
(a) Make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with GAAP and
(B) to maintain accountability for assets, and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Maintain a system of internal procedures and controls
sufficient to provide reasonable assurance that the information required to be
set forth in each Borrowing Base Certificate (including, without limitation,
information relating to the identification of assets which are Eligible
Inventory as provided herein and the valuation thereof) is accurate in all
material respects.
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7.13 Cash Management System.
(a) The Borrower agrees and covenants to (i) cause all cash
and all proceeds from Accounts and from the sale of Inventory and any insurance
proceeds paid with respect to Inventory to be deposited on a daily basis (other
than Sunday) into the Depository Accounts in the ordinary course of business of
the Borrower (ii) cause all remittances on credit card sales to be transferred
on a daily basis into the a Cash Concentration Account consistent with the terms
of the relevant credit card servicer agreement, (iii) cause all good funds in
the Depository Accounts to be transferred on a daily basis into a Cash
Concentration Account in the ordinary course of business of the Borrower,
provided that the Borrower shall in good faith estimate the good funds that are
available in each Depository Account after taking into consideration bank fees,
deposited checks returned because of insufficient funds, change orders and the
payment of deposited checks, (iv) cause all cash deposited in the Cash
Concentration Account to be sent by wire transfer or such other method of
transfer that is acceptable to the Administrative Agent to the Agent Account on
a daily basis, (v) instruct the Administrative Agent to cause all funds
transferred to the Agent Account to be credited to the Loan Account and applied
to reduce the Obligations outstanding from time to time and (vi) take all such
actions as the Administrative Agent deems necessary or advisable to send all
cash, all proceeds from the sale of or insurance proceeds with respect to
Inventory, all remittances or other proceeds of Collateral to a Cash
Concentration Account to be applied according to this Section 7.13. Upon and
during the continuance of an Event of Default, the Administrative Agent may
instruct the Cash Concentration Account Bank to remit all amounts deposited in
the Cash Concentration Account to the Agent Account or as the Administrative
Agent may otherwise direct. Not later than December 30, 1996, the Borrower shall
instruct Huntington National Bank to close the Borrower's concentration account
established prior to the Closing Date in the Borrower's name and transfer all
funds in such account to the Cash Concentration Account.
(b) The Borrower shall promptly and in any event not later
than three (3) days after the opening of any such new account, notify the
Administrative Agent in writing of the creation of any new Depository Account
and shall at the time of such notice execute and deliver to the Administrative
Agent a notice letter, substantially in the form of Exhibit G hereto. Upon and
during the continuance of an Event of Default, at the request of the
Administrative Agent, the Borrower shall use its reasonable best efforts to
cause each Depository Bank maintaining a Depository Account to promptly, and in
any event within twenty (20) days after the date of such request, enter into a
Depository Account Agreement. If, after any such request by the Administrative
Agent, the Borrower is unable to obtain a Depository Account Agreement from any
financial institution that receives remittances or other proceeds of sales of
Inventory within such twenty (20) day period, the Borrower shall promptly
thereafter terminate such accounts and establish new accounts at a financial
institution that will enter into a Depository Account Agreement.
(c) The Borrower shall promptly, and in any event not later
than five (5) days after the establishment of any new credit card relationship,
notify the Administrative Agent in writing of the creation of such new
relationship and deliver to the Administrative Agent
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a credit card bank depository account agreement, in form and substance
satisfactory to the Administrative Agent, duly executed by the Borrower and such
new credit card servicer.
7.14 Landlord and Warehouse Waivers. The Borrower shall to deliver to
the Administrative Agent (i) a landlord waiver, in form and substance
satisfactory to the Administrative Agent, to each of the Borrower' landlords
identified in Schedule 6.26 hereto and (ii) a warehouse waiver, in form and
substance satisfactory to the Administrative Agent, to each of the Borrower's
warehouses listed on Schedule 1.01(A) hereto.
7.15 Additional Subsidiaries. If a Person shall be come a Subsidiary of
the Borrower after the Closing Date, the Borrower shall notify the
Administrative Agent promptly after such Person becomes a Subsidiary of the
Borrower and promptly, and in any event within ten (10) Business Days of such
Person becoming a Subsidiary, cause such Subsidiary to execute and deliver a
guaranty in form and substance satisfactory to the Administrative Agent, in
respect of the Obligations and to deliver proof of corporate action, incumbency
of officers, opinions of counsel and other documents as the Administrative Agent
may reasonably request.
7.16 ERISA. Upon the Administrative Agent's request, the Borrower shall
deliver to the Administrative Agent a copy of each Plan and for each such Plan
(a) that is a "single employer plan" (as defined in Section 4001(a)(15) of
ERISA), the most recently completed actuarial valuation prepared therefore by
such Plan's regular enrolled actuary and the Schedule B, "Actuarial Information"
to the IRS Form 5500 (Annual Report) most recently filed with the Internal
Revenue Service and (b) that is a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA), each of the documents referred to in clause (a) either in
the possession of the Borrower or reasonably available thereto from the sponsor
or trustees of such Plan.
7.17 Beneficial Retail Installment Contract. Within thirty (30) days of
the Closing Date, the Borrower shall cease using any retail installment or
related agreement with its customers which refer in any way to "Sun TV, Inc."
and shall delive a certificate certifying that the use of said name has been
discontinued and attaching the revised retail installment agreement specifying
the name of the Borrower.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any Obligations (whether or not due) shall remain
unpaid or any Lender shall have any Revolving Credit Commitment hereunder, the
Borrower will not, without the prior written consent of the Majority Lenders:
8.01 Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of their properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of
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its Subsidiaries to assign or otherwise transfer, any right to receive income,
other than the following ("Permitted Liens"):
(a) Liens created pursuant to the Loan Documents;
(b) Liens existing on the date hereof, as set forth in
Schedule 8.01 hereto;
(c) Liens for taxes, assessments or governmental charges or
levies to the extent that the payment thereof shall not be required by Section
7.02 hereof;
(d) Liens created by operation of law other than Environmental
Liens, such as materialmen's liens, mechanics' liens and other similar liens,
arising in the ordinary course of business which secure amounts not overdue for
a period of more than thirty (30) days or which are being contested in good
faith by appropriate proceedings;
(e) deposits, pledges or Liens (other than Liens arising under
ERISA) securing (1) obligations incurred in respect of workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits, (2)
the performance of bids, tenders, leases, contracts (other than for the payment
of money) and statutory obligations, or (3) obligations on surety or appeal
bonds, but only to the extent such deposits, pledges or Liens are incurred or
otherwise arise in the ordinary course of business and secure obligations which
are not past due;
(f) restrictions on the use of real property and minor
irregularities in the title thereto which do not (1) secure obligations for the
payment of money or (2) materially impair the value of such property or its use
by the Borrower or any of its Subsidiaries in the normal conduct of such
Person's business;
(g) purchase money Liens on or purchase money security
interests in equipment or real property acquired or held in the ordinary course
of its business securing Indebtedness, provided that the Indebtedness secured by
such Liens or security interests shall not exceed the aggregate principal amount
of $5,000,000 per annum;
(h) Liens securing Capitalized Leases;
(i) to the extent the same constitutes Liens, the interest of
the consignor in Inventory held by the Borrower on consignment;
(j) Liens on real property of the Borrower which secure
Indebtedness incurred by the Borrower;
(k) [Intentionally left blank];
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(l) Liens upon any property or assets of any Subsidiary of the
Borrower existing at the time such Subsidiary is acquired by, merged into or
consolidated with the Borrower in accordance with the terms of this Agreement,
provided that such Liens were not created in contemplation of any such
acquisition, merger or consolidation;
(m) pre-existing Liens upon any property or assets existing at
the time such property or assets are acquired by the Borrower, provided that
such Liens were not created in contemplation of such acquisition; and
(n) Renewals and replacements of the Liens described in
clauses (b), (g), (l) and (m) of this Section 8.01, provided that any such
renewal or replacement Lien shall be limited to the property or assets covered
by the Lien renewed or replaced and the Indebtedness secured by any such renewal
or replacement Lien shall be in an amount not greater than the amount of
Indebtedness secured by the Lien renewed or replaced.
8.02 Indebtedness. Create, incur or suffer to exist, or permit any of
its Subsidiaries to create, incur or suffer to exist, any Indebtedness, other
than:
(a) Indebtedness created hereunder or under the Note or any
Letter of Credit;
(b) Indebtedness existing on the date hereof, as set forth in
Schedule 8.02 hereto (such schedule shall not include indebtedness
under the Existing Credit Facilities), and any extension of maturity,
refinancing or other modification of the terms thereof, provided,
however, that such extension, refinancing or modification (A) is
pursuant to terms that are not less favorable to the Borrower and its
Subsidiaries than the terms of the Indebtedness being extended,
refinanced or modified, and (B) after giving effect to the extension,
refinancing or modification of such Indebtedness, the amount of such
Indebtedness outstanding is not greater than the amount of such
Indebtedness outstanding immediately prior to such extension,
refinancing or modification;
(c) Indebtedness in connection with Capitalized Leases;
(d) To the extent the same constitutes Indebtedness,
Indebtedness secured by Liens or security interests permitted by
Section 8.01 hereof; and
(e) Subordinated Indebtedness provided, however, that the
amount, rate, terms and the provisions subordinating such indebtedness
to the Loans are in form and substance acceptable to the Administrative
Agent in its sole discretion.
8.03 Guarantees, Etc. Become liable, or permit any of its Subsidiaries
to become liable, under any Guarantee in connection with any Indebtedness of any
other Person, other than:
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(a) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; and
(b) guaranties existing on the date hereof, as set forth in
Schedule 8.03 hereto, but not any renewal or other modification
thereof.
8.04 Merger, Consolidation, Sale of Assets, Etc.
(a) Merge or consolidate with any Person, or permit any of its
Subsidiaries to merge or consolidate with any Person; provided, however, that
any Subsidiary of the Borrower may be merged into the Borrower or another such
Subsidiary, or may consolidate with another such Subsidiary, so long as (i) no
other provision of this Agreement would be violated thereby, and (ii) the
Borrower gives the Administrative Agent at least 30 days' prior written notice
of such merger or consolidation.
(b) Sell, assign, lease or otherwise transfer or dispose of,
or permit any of its Subsidiaries to sell, assign, lease or otherwise transfer
or dispose of, whether in one transaction or in a series of related
transactions, any of their properties rights or other assets whether now owned
or hereafter acquired to any Person, provided that:
(i) the Borrower may sell Inventory in the ordinary
course of business, provided that the Net Proceeds of such
sales of Inventory shall be deposited in a Depository Account
or a Cash Concentration Account pursuant to the terms of
Section 7.13 hereof;
(ii) the Borrower and its Subsidiaries may dispose
of, to the extent the same is not collateral, obsolete or
worn-out property and property not used or deemed useful by
the Borrower in the ordinary course of business;
(iii) the Borrower and its Subsidiaries may enter
into a sale/leaseback transaction related to the Groveport
facility;
(iv) the Borrower may sell (including sale/lease back
transactions), assign or transfer assets not consisting of
Collateral and 100% of the proceeds thereof shall be deemed to
be a mandatory prepayment under this Agreement in the event
the Borrower's availability is $20,000,000 or less; and
(v) in the event any Collateral is sold, assigned or
transferred either as currently permitted hereunder, or if
consented to by the Administrative Agent at any other time,
100% of the proceeds thereof shall be deemed to be a mandatory
prepayment hereunder.
8.05 Change in Nature of Business. Make, or permit its Subsidiaries to
make, any change in the nature of its business as carried on at the date hereof
except for changes that
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will not fundamentally and substantively alter the character of it business from
that conducted by the Borrower on the Closing Date.
8.06 Loans, Advances and Investments, Etc. Make, or permit any of its
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any
capital stock, properties, assets or obligations of, or any interest in, any
Person, other than:
(a) Permitted Investments;
(b) receivables owing to the Borrower or any of its
Subsidiaries if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with the customary trade
terms of the Borrower or its applicable Subsidiary as the case may be;
and
(c) investments existing on the date hereof as set forth in
Schedule 8.06 hereto.
8.07 Dividends, Prepayments, Etc. Declare or pay any dividends,
purchase or otherwise acquire for value any of their capital stock now or
hereafter outstanding, return any capital to their stockholders as such, or make
any other payment or distribution of assets to its stockholders as such, or
permit any of their Subsidiaries to do any of the foregoing or to purchase or
otherwise acquire for value any stock of the Borrower or make any payment or
prepayment of principal of, premium, if any, or interest on, or redeem, defease
or otherwise retire, any other Indebtedness of the Borrower before its scheduled
due date, other than the payment of dividends in an amount not to exceed
$750,000 per annum, unless the Borrower has net income, and if it has net
income, dividends in an amount not to exceed fifty (50%) percent of such net
income (as determined in accordance with GAAP) per annum (but in no event less
than $750,000).
8.08 Federal Reserve Regulations. Permit any Loan or the proceeds of
any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
8.09 Transactions with Affiliates. Enter into or be a party to, or
permit any of their Subsidiaries to enter into or be a party to, any transaction
with any Affiliate of the Borrower except as otherwise provided herein or in the
ordinary course of business in a manner and to an extent consistent with past
practice and necessary or desirable for the prudent operation of its business
for fair consideration and on terms no less favorable to the Borrower or the
Subsidiary as are available from unaffiliated third parties.
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8.10 Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of any Hazardous Material at property owned or
leased by the Borrower or its Subsidiaries except in compliance with
Environmental Laws.
8.11 ERISA.
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Section 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a
private exemption has not previously been obtained from the Department
of Labor and that would have a Material Adverse Effect;
(b) permit, or permit any ERISA Affiliate to permit, any
enforceable Lien from arising under Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to amend any Benefit
Plan in a manner that would require security under Section 307 of
ERISA; or
(d) request or permit any ERISA Affiliate to request a waiver
of the minimum funding requirements under Section 412 of the Code in
respect of any Benefit Plan.
ARTICLE IX
DEFAULTS
9.01 Events of Default. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):
(a) The Borrower shall fail to make any payment of principal
under this Agreement on any Loan or any Reimbursement Obligation when due or the
Borrower shall fail to pay when due any other amount payable under this
Agreement or any other Related Document (including but not limited to the making
of deposits in the Depositor Accounts, the Cash Concentration Accounts or the
Letter of Credit Cash Collateral Account) including any interest or fee due
hereunder or under the Fee Letter or any other Related Document; or
(b) Any representation or warranty, made by the Borrower under
this Agreement or any other Related Document or any statement made by the
Borrower in any financial statement certificate report or document furnished to
the Administrative Agent or the Lenders pursuant to or in connection with this
Agreement or any other Related Document, shall prove to have been false or
misleading in any material respect as of the time when made (including by
omission of material information necessary to make such representation, warranty
or statement, in light of the circumstances under which it was made, not
misleading); or
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(c) The Borrower shall default in the performance or
observance of the covenants contained in (i) Sections 7.01, 7.02, 7.03, 7.05,
7.09, 7.10 and 7.11 or Article VIII hereof or Section 5 of the Security
Agreement or (ii) 7.07 if such default shall have continued unremedied for a
period of five (5) days; or
(d) The Borrower shall default in the performance or
observance of any other covenant, agreement or duty under this Agreement or any
other Related Document (to the extent not otherwise set forth in this Section
9.01) and such default shall have continued unremedied for a period of ten (10)
days; or
(e) The Borrower or any Subsidiary shall have entered into any
consent or settlement decree or agreement or similar arrangement with a
Governmental Authority or any judgment, order, decree or similar action shall
have been entered against any such Person based on or arising from the violation
of or pursuant to any Environmental Law, or the generation, storage,
transportation, treatment, disposal or Release of any Hazardous Material and, in
connection with any of the foregoing, any such Person shall incur Environmental
Liabilities and Costs which are unstayed, due and owing in an amount in excess
of $250,000; or
(f) The Borrower or any Subsidiary shall fail to pay any
principal or interest on any of its Indebtedness (excluding Indebtedness
evidenced by the Note) in excess of $100,000, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other event, shall occur
and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration to the maturity of such Indebtedness;
or any such Indebtedness in excess of such amount shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; or
(g) The Borrower or any Subsidiary (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for the Borrower or any Subsidiary
or for any substantial part of its property, (ii) shall be generally not paying
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, (iii) shall make a general assignment for the benefit
of creditors, or (iv) shall take any action to authorize or effect any of the
actions set forth above in this subsection (g); or
(h) Any proceeding shall be instituted against the Borrower or
any Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation,
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winding up, reorganization, arrangement, adjustment, protection, relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for the Borrower or any
Subsidiary or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of thirty (30) days
or any of the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against it or the appointment of a receiver
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur; or
(i) Any material provision of any Loan Document shall at any
time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Borrower, or a proceeding shall
be commenced by the Borrower, or by any Governmental Authority or other
regulatory body having jurisdiction over the Borrower, seeking to establish the
invalidity or unenforceability thereof, or the Borrower shall deny in writing
that the Borrower has any liability or obligation purported to be created under
any Loan Document; or
(j) The Security Agreement or any other Security Document,
after delivery thereof pursuant hereto, shall for any reason fail or cease to
create a valid and perfected and, except to the extent permitted by the terms
hereof or thereof first priority Lien on or security interest in any Collateral
purported to be covered thereby; or
(k) One or more judgments or orders (other than a judgment
described in subsections (g) or (h) of this Section 9.01) for the payment of
money exceeding any applicable insurance or bond coverage by more than
$1,000,000 in the aggregate shall be rendered against the Borrower or any
Subsidiary and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgment or order or (ii) there shall be any period
of twenty (20) consecutive days during which a stay of enforcement of any such
judgment or order by reason of a pending appeal or otherwise shall not be in
effect; or
(l) The Borrower or any of its ERISA Affiliates shall have
made a complete or partial withdrawal from a Multiemployer Plan and as a result
of such complete or partial withdrawal the Borrower or such ERISA Affiliate
incurs a withdrawal liability in an annual amount exceeding $500,000 or a
Multiemployer Plan enters reorganization status under Section 4241 of ERISA,
and, as a result thereof, the Borrower's or such ERISA Affiliate's annual
contribution requirement with respect to such Multiemployer Plan increases in an
annual amount exceeding $500,000; or
(m) Any Termination Event with respect to any Benefit Plan
shall have occurred, and, thirty (30) days after notice thereof shall have been
given to the Borrower by Administrative Agent, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Benefit Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Benefit Plan by more than $500,000 (or in the
case of a Termination Event involving liability under Section 515, 4062, 4063,
4064, 4069, 4201 or 4204 of ERISA, the liability is in excess of such amount).
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9.02 Consequences of an Event of Default. If an Event of Default shall
occur and be continuing or shall exist the Administrative Agent may, and upon
the direction of the Majority Lenders, shall by notice to the Borrower,
(a) declare the Revolving Credit Commitment of each Lender and
the Current Commitment terminated, whereupon the Revolving Credit
Commitment of each Lender and the Current Commitment will terminate
immediately without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue; or
(b) declare the unpaid principal amount of the Note, interest
accrued thereon, the total amount of the Letter of Credit Exposure that
is not cash collateralized in accordance with this Agreement, any fees
due hereunder and all other amounts owing by the Borrower hereunder or
under the Note to be immediately due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived, and an action therefor shall immediately accrue; or
(c) give notice to the Borrower of the occurrence and
continuance of an Event of Default; or
(d) any time when there are no Loans outstanding, maintain
cash collateral (to the extent the Borrower has or receives cash) equal
to 105% of all outstanding Letters of Credit; or
(e) apply all funds deposited in each Cash Concentration
Account, and in the Letter of Credit Cash Collateral Account to the
payment in whole or in part, of the Obligations; or
(f) set-off amounts in the Cash Concentration Account, the
Letter of Credit Cash Collateral Account, or any other account under
the dominion and control of the Administrative Agent and apply such
amounts to the Obligations of the Borrower hereunder and under the
Related Documents;
provided, however, that upon the occurrence of any Event of Default described in
subsections (g) or (h) of Section 9.01, the Loans and all Reimbursement
Obligations, all interest thereon, all fees hereunder and all other amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by the
Borrower.
9.03 Deposit for Letters of Credit. Upon demand by the Letter of Credit
Issuer after the occurrence of any Event of Default, the Borrower shall deposit
with the Administrative Agent for the benefit of the Letter of Credit Issuer
with respect to each Letter of Credit then outstanding cash in an amount equal
to the greatest amount for which such Letter of Credit may be drawn. Such
deposits shall be held by the Administrative Agent for the benefit of the Letter
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of Credit Issuer in the Letter of Credit Cash Collateral Account as security
for, and to provide for the payment of, the Letter of Credit Exposure.
9.04 Certain Remedies. If an Event of Default occurs, each of the
Administrative Agent and the Lenders may exercise all rights and remedies which
it may have hereunder or under any other Related Document or at law or in equity
or otherwise. All such remedies shall be cumulative and not exclusive.
ARTICLE X
MISCELLANEOUS
10.01 Holidays. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
10.02 Records. The unpaid principal amount of the Note, the unpaid
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability, the Current Commitment,
the Stated Amount of each Letter of Credit, the principal amount of all
Reimbursement Obligations, the Letter of Credit Exposure, fees required by the
Fee Letter, Unused Line Fee and Letter of Credit Fees shall at all times be
ascertained from the records of Administrative Agent, which shall be conclusive
and binding absent manifest error.
10.03 Amendments and Waivers. (a) No amendment or modification of any
provision of this Agreement or of the Note or of any other Related Document
shall be effective without the written agreement of the Majority Lenders and the
Borrower and no termination or waiver of any provision of this Agreement or of
any of the Note, or consent to any departure by the Borrower therefrom, shall in
any event be effective without the written concurrence of the Majority Lenders,
which the Majority Lenders shall have the right to grant or withhold at their
sole discretion; except that any amendment, modification, or waiver (i) of any
provision of Article II or III which amendment, modification or waiver increases
the Revolving Credit Commitment of any Lender, reduces the principal of, or
interest on, the Loans or the Reimbursement Obligations payable to any Lender,
reduces the amount of any fee payable for the account of any Lender, or
postpones or extends any date fixed for any payment of principal of, or interest
or fees on, the Loans or Letter of Credit Exposure payable to any Lender, (ii)
that increases the aggregate amount of the Revolving Credit Commitments, of the
Lenders, (iii) of the definitions of "Termination Date", "Majority Lenders" or
"Pro Rata Shares", (iv) of the definitions of "Eligible Receivable", "Eligible
Inventory" or "Borrowing Base" if the effect of such amendment, modification or
waiver is to increase the Availability of the Borrower, (v) of any provision of
this Agreement or any Related Document that would permit Liens on the Collateral
or release all or a substantial portion of Collateral (except as set forth in
Section 11.08
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hereof or except as otherwise permitted herein), (v) of the mandatory
termination of the Revolving Credit Commitments contained in Section 2.04(a)(ii)
hereof, or (vii) of the provisions contained in this Section 10.03, shall be
effective only if evidenced by a writing signed by or on behalf of (A) any
Lender affected thereby in the case of the amendments, modifications or waivers
described in clause (i) above or (B) all Lenders in the case of the amendments,
no definitions or waivers described in clauses (ii) through (vii) above. No
amendment, modification, termination, or waiver of any provision of Article XI
or any other provision referring to the Administrative Agent shall be effective
without the written concurrence of Administrative Agent. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, waiver or consent effected in
accordance with this Section 10.03 shall be binding on each Lender, each future
Lender, and, if signed by the Borrower, on the Borrower.
(b) Notwithstanding anything to the contrary contained in
subsection 10.03(a), in the event that the Borrower requests that this Agreement
or any other Related Document be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders and such amendment or
other modification is agreed to by the Majority Lenders, then with the consent
of the Borrower and the Majority Lenders, the Borrower and the Majority Lenders
may amend this Agreement without the consent of the Lender or Lenders which did
not agree to such amendment or other modification (collectively the "Minority
Lenders") to provide for (w) the termination of the Revolving Credit Commitment
of each of the Minority Lenders, (x) the addition to this Agreement of one or
more other Lenders, or an increase in the Revolving Credit Commitment of one or
more of the Majority Lenders, so that the Revolving Credit Commitments after
giving effect to such amendment shall be in the same aggregate amount as the
Revolving Credit Commitments immediately before giving effect to such amendment,
(y) if any Loans are outstanding at the time of such amendment, the making of
such additional Loans by such new Lenders or Majority Lenders, as the case may
be, as may be necessary to repay in full the outstanding Loans of the Minority
Lenders immediately before giving effect to such amendment and (z) the payment
of all interest, fees and other Obligations payable or accrued in favor of the
Minority Lenders and such other modifications to this Agreement as the Borrower
and the Majority Lenders may determine to be appropriate.
10.04 No Implied Waiver; Cumulative Remedies. No course of dealing and
no delay or failure of the Lenders or the Administrative Agent in exercising any
right power or privilege under this Agreement, the Note or any other Related
Document shall affect any other or future exercise thereof or exercise of any
other right, power or privilege; nor shall any single or partial exercise of any
such right, power or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further exercise thereof
or of any other right, power or privilege. The rights and remedies of the
Lenders or the Administrative Agent under this Agreement, the Note and the other
Related Documents are cumulative and not exclusive of any rights or remedies
which the Lenders or the Administrative Agent have thereunder or at law or in
equity or otherwise. The Lenders or the Administrative Agent may
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exercise their rights and remedies against the Borrower and the Collateral as
the Lenders and the Administrative Agent may elect, and regardless of the
existence or adequacy of any other right or remedy.
10.05 Notices.
(a) All notices, requests, demands, directions and other
communications (collectively "Notices") under the provisions of this Agreement
or the Note shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, or delivered by recognized
overnight courier and shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent, confirmation received and
(iii) if delivered, upon delivery with a receipt therefor. All notices shall be
sent to the applicable party at the address stated on the signature page hereof
together with, in the case of a letter of credit request and Letter of Credit
Application sent pursuant to Section 3.01(a), a copy to the Administrative Agent
at the address for the Administrative Agent provided on the signature page
hereof, or in accordance with the last unrevoked written direction from such
party to the other parties hereto.
(b) The Lenders, the Co-Agent and the Administrative Agent may
rely, and shall be fully protected in relying, on any notice purportedly made by
or on behalf of the Borrower and the Lenders and the Administrative Agent shall
have no duty to verify the identity or authority of any Person giving such
notice. The preceding sentence shall apply to all notices whether or not made in
a manner authorized or required by this Agreement or any other Related Document.
10.06 Expenses; Taxes; Attorneys' Fees; Indemnification. The Borrower
agrees to pay or cause to be paid, on demand, and to save the Administrative
Agent (and, in the case of clauses (c) through (m) below, the Co-Agent and the
Lenders) harmless against liability for the payment of all reasonable
out-of-pocket expenses, regardless of whether the transactions contemplated
hereby are consummated, including but not limited to reasonable fees and
expenses of counsel for the Administrative Agent and, in the case of clauses (c)
through (m) below, the Lenders), accounting, due diligence, periodic field
audits, appraisals, investigations, monitoring of assets, syndication,
miscellaneous disbursements, examination, travel, lodging and meals, incurred by
the Administrative Agent (and, in the case of clauses (c) through (m) below, the
Lenders) from time to time arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Related Documents, (b) any requested amendments waivers
or consents to this Agreement or the other Related Documents whether or not such
documents become effective or are given, (c) the preservation and protection of
any of the Administrative Agent's and the Lenders' rights under this Agreement
or the other Related Documents, (d) the defense of any claim or action asserted
or brought against the Administrative Agent or the Lenders by any Person that
arises from or relates to this Agreement, any other Related Document
Administrative Agent's or the Lenders' claims against the Borrower, or any and
all matters in connection therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to
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this Agreement or any other Related Document, (f) the filing of any petition,
complaint, answer, motion or other pleading by the Administrative Agent or the
Lenders, or the taking of any action in respect of the Collateral or other
security, in connection with this Agreement or any other Related Document, (g)
the protection, collection, lease, sale, taking possession of or liquidation of,
any Collateral or other security in connection with this Agreement or any other
Related Document, (h) any attempt to enforce any Lien on any Collateral or other
security in connection with this Agreement or any other Related Document, (i)
any attempt to collect from the Borrower, (j) the receipt of any advice with
respect to any of the foregoing, (k) all Environmental Liabilities and Costs
arising from or in connection with the past, present or future operations of the
Borrower or its Subsidiaries involving any damage to real or personal property
or natural resources or harm or injury alleged to have resulted from any Release
of Hazardous Materials on, upon or into such property, (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Hazardous Materials present or arising out of the
operations of any facility of the Borrower or any of its Subsidiaries, or (m)
any costs or liabilities incurred in connection with any Environmental Lien.
Without limitation of the foregoing or any other provision of any Related
Document: (x) the Borrower agrees to pay all stamp, document, transfer,
recording or filing taxes or fees (including, without limitation, mortgage
recording taxes) and similar impositions now or hereafter determined by the
Administrative Agent or any of the Lenders to be payable in connection with this
Agreement or any other Related Document, and the Borrower agrees to save the
Administrative Agent and the Lenders harmless from and against any and all
present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such taxes, fees or impositions,
and (y) if the Borrower either fails to perform any covenant or agreement
contained herein of in any other Related Document, the Administrative Agent may
itself perform or cause performance of such covenant or agreement, and the
expenses of the Administrative Agent incurred in connection therewith shall be
reimbursed on demand by the Borrower. The Borrower agrees to indemnify and
defend the Administrative Agent, Co-Agent and the Lenders and their directors,
officers, agents, employees and affiliates (collectively, the "Indemnified
Parties") from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, costs or expenses of any nature whatsoever
(including reasonable attorneys' fees and amounts paid in settlement) incurred
by, imposed upon or asserted against any of them arising out of or by reason of
any investigation, litigation or other proceeding or claim brought or threatened
relating to, or otherwise arising out of or relating to, the execution of this
Agreement or any other Related Document, the transactions contemplated hereby or
thereby or any Loan or proposed Loan or Letter of Credit or proposed Letter of
Credit hereunder (including, but without limitation, any use made or proposed to
be made by the Borrower or any of its Affiliates of the proceeds of any thereof,
or the delivery or use or transfer of or the payment or failure to pay under any
Loan or Letter of Credit) but excluding any such losses, liabilities, claims,
damages, costs or expenses to the extent finally judicially determined to have
resulted from the gross negligence or willful misconduct of the Indemnified
Party.
10.07 Application. Except to the extent, if any, expressly set forth in
this Agreement or in the Related Documents, the Administrative Agent and the
Lenders shall have
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the right to apply any payment received or applied by it in connection with the
Obligations to such of the Obligations then due and payable as it may elect.
10.08 Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.09 Governing Law. This Agreement and the Notes shall be deemed to be
contracts under the laws of the State of New York, without regard to choice of
law principles, and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
10.10 Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties hereto
relating to the transactions provided for herein other than the Fee Letter.
10.11 Duration; Survival. All representations and warranties of the
Borrower contained herein or made in connection herewith shall survive the
making of the Loans and the issuance of any Letter of Credit and shall not be
waived by the execution and delivery of this Agreement, the Notes or any
other Related Document, any investigation by or knowledge of the Administrative
Agent or the Lenders, the making of any Loan or the issuance of any Letter of
Credit hereunder, or any other event whatsoever. All covenants and agreements of
the Borrower contained herein shall continue in full force and effect from and
after the date hereof so long as the Borrower may borrow hereunder and until the
Obligations have been paid in full and no Letters of Credit remain outstanding.
Without limitation, it is understood that all obligations of the Borrower to
make payments to or indemnify the Administrative Agent and the Lenders
(including, without limitation, obligations arising under Section 10.06 hereof)
shall survive the payment in full of the Notes and all Reimbursement Obligations
and of all other obligations of the Borrower thereunder and hereunder.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
10.13 Assignments; Participations.
(a) Each Lender may with the written consent of the
Administrative Agent, which consent shall not be unreasonably withheld, assign
to one or more commercial banks or other financial institutions a portion of its
rights and obligations under this Agreement (including, without limitation, a
portion of its Revolving Credit Commitment, the Loans owing
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to it and its rights and obligations as a Lender with respect to Letters of
Credit) and the other Related Documents; provided, however, that (i) each such
assignment shall be in a principal amount of not less than $10,000,000 and in
multiples of $10,000,000 in excess thereof (or the remainder of such Lender's
Revolving Credit Commitment), (ii) no such assignment shall be made, other than
by CIT, prior to the Syndication Date, and (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register (as hereinafter defined), an Assignment
and Acceptance. Upon such execution, delivery acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (A) the
assignee thereunder shall be a party hereto and to the other Related Documents
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letters of
Credit) of a Lender hereunder and thereunder and (B) the assigning Lender shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement.
(b) By executing and delivering an Assignment and Acceptance,
the assignor and the assignee thereunder confirm to and agree with each other
and the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Related Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Related
Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other Related Document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Related Documents, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the assigning Lender, the Administrative Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Related Documents; (v) such assignee
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other
Related Documents as are delegated to the Administrative Agent by the terms
thereof together with such powers as are reasonably incidental thereto; and (vi)
such assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement and the other Related
Documents are required to be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to on the signature page hereto, a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Revolving Credit Commitment of,
and principal amount of the Loans owing to and the
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participation interest in the Letters of Credit of, each Lender from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender, an assignee Lender together with the Note subject to
such assignment, the Administrative Agent shall if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit E
hereto, (i) accept such Assignment and Acceptance, (ii) give prompt notice
thereof to the Borrower and (iii) record the information contained therein in
the Register. Within five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for the surrendered Note a new Note to the order of such
assignee Lender in an aggregate principal amount equal to the Revolving Credit
Commitment assumed by it pursuant to such Assignment and Acceptance, and a new
Note to the order of the assigning Lender in an aggregate principal amount equal
to the Revolving Credit Commitment retained by it hereunder, in each case
prepared by the Administrative Agent. Such new Note shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note shall be dated the date of the Administrative Agent's acceptance of such
assignment and acceptance and shall otherwise be in substantially the form of
Exhibit A hereto.
(e) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Related Documents (including, without limitation,
all or a portion of its Revolving Credit Commitment and the Loans owing to it
and its participation in Letters of Credit); provided that (i) such Lender's
obligations under this Agreement (including, without limitation, its Revolving
Credit Commitment hereunder) and the other Related Documents shall remain
unchanged; (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Related Documents; and (iii) a
participant shall not be entitled to require such Lender to take or omit to take
any action hereunder except (A) action directly effecting an extension of the
maturity dates or decrease in the principal amount of the Loans or Reimbursement
Obligations, or (B) action directly effecting an extension of the due dates of
or a decrease in the rate of interest payable on the Loans or the fees payable
under this Agreement, or (C) actions directly effecting a release of all or a
substantial portion of the Collateral (except as set forth in Section 11.08 of
this Agreement or any Related Document).
(f) Notwithstanding the foregoing provisions of this Section
10.13, each Lender may at any time sell, assign, transfer, or negotiate all or
any part of its rights and obligations under this Agreement and the Related
Documents to any Affiliate of such Lender.
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10.14 Successors and Assigns. This Agreement and the other Related
Documents shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns except that the Borrower may not
assign or transfer any of its rights hereunder or thereunder without the prior
written consent of all of the Lenders.
10.15 Confidentiality. Upon delivering to any Lender or the
Administrative Agent, or permitting any Lender or the Administrative Agent to
inspect, any written information pursuant to this Agreement or the other Related
Documents, each Lender and the Administrative Agent shall treat such information
as confidential to the extent such information is conspicuously marked
confidential. Each Lender and the Administrative Agent agrees to hold such
information in confidence from the date of disclosure thereof. Subject to the
other provisions of this Section 10.15, each Lender and the Administrative Agent
may disclose confidential information to its officers, directors, employees,
attorneys, accountants or other professionals engaged by any Lender or the
Administrative Agent only after determining that such third party has been
instructed to hold such information in confidence to the same extent as if it
were a Lender. Notwithstanding the foregoing, the provisions of this Section
10.15 shall not apply to information within any one of the following categories
or any combination thereof: (i) information the substance of which, at the time
of disclosure by any Lender or the Administrative Agent, has been disclosed to
or is known to any creditor (other than information as to which such creditor is
then under an obligation of nondisclosure), or any Person other than (A) a
director, officer, employee or agent of any of the Borrower or a professional
engaged by the Borrower or (B) a Person who is then under an obligation of
nondisclosure (otherwise than as a consequence of a wrongful act of any Lender
or the Administrative Agent), (ii) information which any Lender or the
Administrative Agent had in its possession prior to receipt thereof from the
disclosing party, or (iii) information received by any Lender or the
Administrative Agent from a third party having no obligations of nondisclosure
with respect thereto. Nothing contained in this Section 10.15 shall prevent any
disclosure: (x) believed in good faith by any Lender or the Administrative Agent
to be required by any law or guideline or interpretation or application thereof
by any Governmental Authority, arbitrator or grand jury charged with the
interpretation or administration thereof or compliance with any request or
directive of any Governmental Authority, arbitrator or grand jury (whether or
not having the force of law), (y) determined by counsel for any Lender or the
Administrative Agent to be necessary or advisable in connection with enforcement
or preservation of rights under or in connection with this Agreement or any
other Related Document or (z) of any information which has been made public by a
Person other than any Lender or the Administrative Agent. The Lenders and the
Administrative Agent shall have the right to disclose any confidential
information described in this Section 10.15 to the Letter of Credit Issuer and
to an assignee or prospective assignee or to a participant or prospective
participant in Loans hereunder, provided that the assigning or selling Lender
shall have obtained from such assignee or prospective assignee or participant or
prospective participant an agreement to hold such information in confidence to
the same extent as if it were a Lender.
10.16 Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE ADMINISTRATIVE AGENT, EACH LENDER AND THE
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BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY
OTHER RELATED DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, OR THE BORROWER IN
CONNECTION HEREWITH OR THEREWITH, THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE ADMINISTRATIVE AGENT AND THE LENDERS TO ENTER INTO THIS AGREEMENT.
10.17 Right of Setoff. Upon the occurrence and during the continuance
of any Event of Default any Lender, the Administrative Agent and the Letter of
Credit Issuer may, and is hereby authorized to, at any time from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower) and to the fullest extent permitted by law, set off and apply any and
all deposits (general or special, time or demand, provision or final) at any
time held and other Indebtedness at any time owing by such Lender, the
Administrative Agent or the Letter of Credit Issuer to or for the credit or the
account of the Borrower against any an all Obligations of the Borrower now or
hereafter existing under the Loan Documents, irrespective of whether or not any
Lender, the Administrative Agent and the Letter of Credit Issuer shall have made
any demand hereunder or thereunder and although such Obligations may be
contingent or unmatured. Each Lender, the Administrative Agent and the Letter of
Credit Issuer agrees promptly to notify the Borrower after any such setoff and
application made by such Lender, the Administrative Agent or the Letter of
Credit Issuer; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender,
the Administrative Agent and the Letter of Credit Issuer under this Section
10.17 are in addition to the other rights and remedies (including, without
limitation, other rights of setoff under applicable law or otherwise) which such
Lender, the Administrative Agent or the Letter of Credit Issuer may have.
10.18 Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
10.19 Forum Selection and Consent to Jurisdiction. Any litigation based
hereon, or arising out of, under or in connection with, this Agreement or any
other Loan Document, or any course of conduct, course of dealing, statement
(whether verbal or written) or action of the Administrative Agent, any Lender,
the Administrative Agent, the Letter of Credit Issuer or the Borrower may be
brought and maintained exclusively in the courts of the State of New York or the
United States District Court for the Southern District of New York; provided,
however, that any suit seeking enforcement against any Collateral or other
property may be brought, at the Administrative Agent's option, in the courts of
any jurisdiction where such Collateral or other property may be found. The
Borrower hereby expressly and irrevocably submits to the jurisdiction of the
courts of the State of New York and of the United States District Court for the
Southern District of New York for the purpose of any such litigation and
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irrevocably agree to be bound by any judgment rendered thereby in connection
with such litigation. The Borrower further irrevocably consents to the service
of process (i) by registered or certified mail, postage prepaid, to the Borrower
at its address for notices contained in Section 10.05 hereof, such service to
become effective five days after such mailing, or (ii) by personal service
within or without the State of New York. Nothing herein shall affect the right
of the Administrative Agent, any Lender or the Letter of Credit Issuer to
service of process in any other manner permitted by law. The Borrower hereby
expressly and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in an inconvenient forum. To the extent that
the Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Agreement and the other Loan Documents.
10.20 Termination.
10.20A. Termination of this Agreement
(a) Subject to Section 10.20B below, the Borrower or the Majority
Lenders may terminate this Agreement only as of the Initial
Termination Date and then only by giving the other at least
sixty (60) Business Days' prior written notice of termination;
if this Agreement is not terminated as aforesaid, there will
be an automatic annual renewal on the Initial Termination
Date.
(b) Notwithstanding the foregoing, the Borrower may terminate this
Agreement prior to the Initial Termination Date upon thirty
(30) Business Days' prior written notice by the Borrower to
the Administrative Agent, provided that the Borrower pays to
the Administrative Agent for the account of the Lenders, on or
prior to such termination, an early termination fee, if
applicable, in accordance with Section 2.04(e) hereof.
10.20B. Termination Upon an Event of Default. Notwithstanding the
foregoing, the Administrative Agent may, and if required by the Majority Lenders
to do so shall, terminate this Agreement immediately upon the occurrence of an
Event of Default.
10.20C. Maturity of Obligations Upon Termination. All Obligations shall
become due and payable as of any termination under this Agreement and, pending a
final accounting, if the Administrative Agent determines in its good faith
judgment that there is a reasonable basis for doing so, the Administrative Agent
may withhold any balances in the Borrower's account (unless supplied with an
indemnity satisfactory to the Administrative Agent) to cover all of the
Obligations then due and payable hereunder. All of the Lenders' and the
Administrative Agent's rights, liens and security interests shall continue after
any termination
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until payment in full of all Loans and other amounts then due and payable
hereunder at the date of such termination.
10.20D. Termination by Lenders. All or any Lender's obligations under
this Agreement shall terminate with respect to such Lender on the Initial
Termination Date by such Lender giving the Administrative Agent, the Borrower
and the other Lenders at least ninety (90) days' prior written notice of
termination. Within sixty (60) days of receipt of such notice from any Lender,
the Administrative Agent shall either: (i) give notice to the Borrower of
termination of this Agreement in accordance with the terms hereof and thereof,
in which event the obligations of the Lenders hereunder and thereunder shall
terminate as of the Initial Termination Date, or (ii) if the other Lenders so
elect, they shall have the right to purchase the terminating Lender's or
Lenders' pro rata share of its or their interest hereunder for the full amount
thereof on a pro rata basis among such electing Lenders, together with any
accrued interest. Termination of this Agreement by any Lender as herein provided
shall not affect the Lenders' respective rights and obligations under this
Agreement incurred prior to the effective date of termination as set forth in
the preceding sentence.
ARTICLE XI.
The Administrative Agent
11.01 Appointment. Each Lender (and each subsequent holder of any Note
by its acceptance thereof) hereby irrevocably appoints and authorizes CIT, in
its capacity as Administrative Agent (i) to receive on behalf of each Lender any
payment of principal of or interest on the Note outstanding hereunder and all
other amounts accrued hereunder for the account of the Lenders and paid to the
Administrative Agent, and, subject to Section 2.03 of this Agreement, to
distribute promptly to each Lender its Pro Rata Share of all payments so
received, (ii) to distribute to each Lender copies of all material notices and
agreements received by the Administrative Agent and not required to be delivered
to each Lender pursuant to the terms of this Agreement, provided that the
Administrative Agent shall not have any liability to the Lenders for the
Administrative Agent's inadvertent failure to distribute any such notice or
agreements to the Lenders, and (iii) subject to Section 10.03 of this Agreement,
to take such action as the Administrative Agent deems appropriate on its behalf
to administer the Loans, Letters of Credit and the Loan Documents and to
exercise such other powers delegated to the Administrative Agent by the terms
hereof or the Loan Documents (including, without limitation, the power to give
or to refuse to give notices, waivers, consents, approvals and instructions and
the power to make or to refuse to make determinations and calculations) together
with such powers as are reasonably incidental thereto to carry out the purposes
hereof and thereof. As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Note), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions of the Majority Lenders shall be
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binding upon all Lenders and all holders of Note; provided, however, that the
Letter of Credit Issuer shall not be required to refuse to honor a drawing under
any Letter of Credit and the Administrative Agent shall not be required to take
any action which, in the reasonable opinion of the Administrative Agent, exposes
the Administrative Agent to liability or which is contrary to this Agreement or
any Loan Document or applicable law. Each Lender acknowledges that National City
has been denominated, the Co-Agent.
11.02 Nature of Duties. The Administrative Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement or in the
Related Documents. The Co-Agent shall have no duties or responsibilities except
to the extent, if any, expressly set forth in this Agreement or in the Related
Documents. The duties of the Administrative Agent shall be mechanical and
administrative in nature. The Administrative Agent shall not have by reason of
this Agreement or any Related Document a fiduciary relationship in respect of
any Lender. Nothing in this Agreement or any of the Related Documents, express
or implied, is intended to or shall be construed to impose upon the
Administrative Agent any obligations in respect of this Agreement or any of the
Related Documents except as expressly set forth herein or therein. Each Lender
shall make its own independent investigation of the financial condition and
affairs of the Borrower in connection with the making and the continuance of the
Loans hereunder and with the issuance of the Letters of Credit and shall make
its own appraisal of the creditworthiness of the Borrower and the value of the
Collateral, and the Administrative Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the initial Credit Extension hereunder or at any time or times
thereafter, provided that, upon the reasonable request of a Lender, the
Administrative Agent shall provide to such Lender any documents or reports
delivered to the Administrative Agent by the Borrower pursuant to the terms of
this Agreement or any Related Document. If the Administrative Agent seeks the
consent or approval of the Majority Lenders to the taking or refraining from
taking any action hereunder, the Administrative Agent shall send notice thereof
to each Lender. The Administrative Agent shall promptly notify each Lender any
time that the Majority Lenders have instructed the Administrative Agent to act
or retrain from acting pursuant hereto.
11.03 Rights, Exculpation, Etc. The Administrative Agent and its
directors, officers, agents or employees shall not be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement or the other Loan Documents, except for their own gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the
Administrative Agent (i) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives written notice of the assignment or
transfer thereof, pursuant to Section 10.13 hereof, signed by such payee and in
form satisfactory to the Administrative Agent: (ii) may consult with legal
counsel (including, without limitation, counsel to the Administrative Agent or
counsel to the Borrower), independent public accountants, and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or
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representations made in or in connection with this Agreement or the other Loan
Documents; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Person, the existence or possible existence of any Potential Default or Event of
Default, or to inspect the Collateral or other property (including, without
limitation, the books and records) of any Person; (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; and
(vi) shall not be deemed to have made any representation or warranty regarding
the existence, value or collectibility of the Collateral, the existence,
priority or perfection of the Administrative Agent's Lien thereon, or the
Borrowing Base or any certificate prepared by the Borrower in connection
therewith, nor shall the Administrative Agent be responsible or liable to the
Lenders for any failure to monitor or maintain the Borrowing Base or any portion
of the Collateral. The Administrative Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith pursuant to
Section 2.08(c), and if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any Lender to whom
payment was due but not made, shall be to recover from other Lenders any payment
in excess of the amount which they are determined to be entitled. The
Administrative Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Related Documents the Administrative Agent is permitted or required
to take or to grant, and if such instructions are promptly requested, the
Administrative Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Related Documents until it
shall have received such instructions from the Majority Lenders. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against the Administrative Agent as a result of the Administrative Agent acting
or refraining from acting under this Agreement, the Note, or any of the other
Related Documents in accordance with the instructions of the Majority Lenders.
For purposes of this Section 11.03, the Co-Agent shall be entitled to the
benefits of this Section to the same extent as the Administrative Agent.
11.04 Reliance. The Administrative Agent shall be entitled to rely upon
any written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Related Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
11.05 Indemnification. To the extent that the Administrative Agent is
not reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify the Administrative Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or any of the Related Documents
or
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any action taken or omitted by the Administrative Agent under this Agreement
or any of the Related Documents, in proportion to each Lender's Pro Rata Share,
including, without limitation, advances and disbursements made pursuant to
Section 11.08; provided, however, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements for which there has
been a final judicial determination that such resulted from the Administrative
Agent's gross negligence or willful misconduct. The obligations of the Lenders
under this Section 11.05 shall survive the payment in full of the Loans and
Reimbursement Obligations and the termination of this Agreement. For purposes of
this Section 11.05, the Co-Agent shall be entitled to the benefits of this
Section to the same extent as the Administrative Agent.
11.06A CIT Individually. With respect to its Pro Rata Share of the
Revolving Credit Commitments hereunder, the Loans made by it and the Note issued
to or held by it, CIT shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and to the
extent set forth herein for any other Lender or holder of a Note. The terms
"Lenders" or "Majority Lenders" or any similar term shall, unless the context
clearly otherwise indicates, include CIT in its individual capacity as a Lender
or one of the Majority Lenders. CIT and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking, trust or other
business with the Borrower or any of its Subsidiaries as if it were not acting
as Administrative Agent pursuant hereto without any duty to account to the
Lenders. The Lenders acknowledge and agree that Chase and Dai-Ichi Kangyo Bank,
Limited, New York branch, as the Letter of Credit Issuer, is an Affiliate of the
Administrative Agent, and may take actions which are not in the interests of, or
may have an adverse effect on, the Lenders, or may omit to take actions which
would be in the interests of, or would have a favorable effect on, the Lenders,
and the Lenders will not assert any claim against the Administrative Agent based
on actions or omissions by the Letter of Credit Issuer and will not assert any
such actions or omissions as a defense or offset to the Lenders' obligations
hereunder.
11.06B National City Individually. With respect to its Pro Rata Share
of the Revolving Credit Commitments hereunder, the Loans made by it and the Note
issued to or held by it, National City shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender or holder
of a Note. The terms "Lenders" or "Majority Lenders" or any similar term shall,
unless the context clearly otherwise indicates, include National City in its
individual capacity as a Lender or one of the Majority Lenders. National City
and its Affiliates may accept deposits from, lend money to, and generally engage
in any kind of banking, trust or other business with the Borrower or any of its
Subsidiaries as if it were not acting as Administrative Agent pursuant hereto
without any duty to account to the Lenders.
11.07 Successor Agent.
(a) The Administrative Agent may resign from the performance
of all its functions and duties hereunder and under the other Related Documents
at any time by giving
85
<PAGE> 92
at least thirty (30) Business Days' prior written notice to the Borrower and
each Lender. Such resignation shall take effect upon the acceptance by a
successor Administrative Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below. The Co-Agent may resign at any time.
(b) Upon any such notice of resignation, the Majority Lenders
shall appoint a successor Administrative Agent who shall be reasonably
satisfactory to the Borrower. Upon the acceptance of any appointment as
Administrative Agent hereunder by successor Agent, such successor Agent, such
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement
and the other Related Documents. After any Agent's resignation hereunder as the
Administrative Agent, the provisions of this Article XI shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Related Documents.
(c) If a successor Administrative Agent shall not have been so
appointed within said thirty (30) Business Day period, the retiring Agent, with
the consent of the Borrower, shall then appoint a successor Administrative Agent
who shall serve as Administrative Agent until such time, if any, as the Majority
Lenders, with the consent of the Borrower, appoint a successor Administrative
Agent as provided above.
11.08 Collateral Matters.
(a) The Administrative Agent may from time to time, during the
occurrence and continuance of an Event of Default, make such disbursements and
advances ("Agent Advances") which the Administrative Agent, in its sole
discretion, deems necessary or desirable to preserve or protect the Collateral
or any portion thereof, to enhance the likelihood or maximize the amount of
repayment by the Borrower of the Loans and other Obligations or to pay any other
amount chargeable to the Borrower pursuant to the terms of this Agreement,
including, without limitation, costs, fees and expenses as described in Section
10.06. The Administrative Agent Advances shall be repayable on demand and be
secured by the Collateral. The Administrative Agent Advances shall not
constitute Loans but shall otherwise constitute Obligations hereunder. The
Administrative Agent shall notify each Lender and the Borrower in writing of
each such Administrative Agent Advance, which notice shall include a description
of the purpose of such Administrative Agent Advance. Without limitation to its
obligations pursuant to Section 11.05, each Lender agrees that it shall make
available to the Administrative Agent, upon the Administrative Agent's demand,
in Dollars in immediately available funds, the amount equal to such Lender's Pro
Rata Share of each such Administrative Agent Advance. If such funds are not made
available to the Administrative Agent by such Lender the Administrative Agent
shall be entitled to recover such funds, on demand from such Lender together
with interest thereon, for each day from the date such payment was due until the
date such amount is paid to the Administrative Agent, at the customary rate set
by the Administrative Agent for the correction of errors among banks for three
(3) Business Days and thereafter at the Regular Rate.
86
<PAGE> 93
(b) The Lenders hereby irrevocably authorize the
Administrative Agent, at its option and in its discretion, to release any Lien
granted to or held by the Administrative Agent upon any Collateral upon
termination of the Revolving Credit Commitments and payment and satisfaction of
all Loans, Reimbursement Obligations, other Letter of Credit Exposure (whether
or not due) and all other Obligations which have matured and which the
Administrative Agent has been notified in writing are then due and payable; or
constituting property being sold or disposed of if the Borrower certifies to the
Administrative Agent that the sale or disposition is made in compliance with
Section 8.04(b) hereof (and the Administrative Agent may rely conclusively on
any such certificate, without further inquiry); or constituting property in
which the Borrower owned no interest at the time the Lien was granted or at any
time thereafter; or if approved, authorized or ratified in writing by the
Majority Lenders. Upon request by the Administrative Agent at any time, the
Lenders will confirm in writing the Administrative Agent's authority to release
particular types or items of Collateral pursuant to this Section 11.08(b).
(c) Without in any manner limiting the Administrative Agent's
authority to act without any specific or further authorization or consent by the
Majority Lenders (as set forth in Section 11.08(b)), each Lender agrees to
confirm in writing upon request by the Administrative Agent, the authority to
release Collateral conferred upon the Administrative Agent under Section
11.08(b). So long as no Event of Default is then continuing, upon receipt by
the Administrative Agent of Confirmation from the Majority Lenders of its
authority to release any particular item or types of Collateral, and upon at
least five (5) Business Days' prior written request by the Borrower the
Administrative Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
Liens granted to the Administrative Agent for the benefit of the Lenders upon
such Collateral; provided, however, that (i) the Administrative Agent shall not
be required to execute any such document on terms which, in the Administrative
Agent's opinion, would expose the Administrative Agent to liability or create
an obligations or entail any consequence other than the release of such Liens
without recourse or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Lien upon (or obligations of
the Borrower in respect of) all interests in the Collateral retained by the
Borrower.
(d) The Administrative Agent shall have no obligation
whatsoever to any Lenders to assure that the Collateral exists or is owned by
the Borrower or is cared for, protected or insured or has been encumbered or
that the Lien granted to the Administrative Agent pursuant to the Security
Documents has been properly or sufficiently or lawfully created, perfected,
protected or enforced or is entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Administrative Agent in this Section 11.08 or in any
of the Related Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Administrative
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Administrative Agent's own interest in the Collateral as one of the
Lenders and that the Administrative Agent shall have no duty or liability
whatsoever to any other Lender.
87
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Agreement as of the date first
above written.
BORROWER
SUN TELEVISION AND APPLIANCES, INC.
By: /s/ Steven A. Martin
--------------------------------
Name: Steven A. Martin
Title: EVP/CFO
Address for Notices:
6600 Port Road
Groveport, Ohio 43125
Attention: Steven A. Martin
Telephone: (614) 492-5602
Telecopier:(614) 492-5688
AGENT AND LENDER
THE CIT GROUP BUSINESS CREDIT, INC.
By: /s/ Jonathan Lucas
--------------------------------
Name: Jonathan Lucas
Title: VP
Address for Notices:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Jonathan Lucas
Telephone: (212) 536-1283
Telecopier: (212) 536-1293
88
<PAGE> 95
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Nancy R. Finkelstein, Esq.
Telephone: (212) 836-8007
Telecopier: (212) 836-7151
CO-AGENT AND LENDER
NATIONAL CITY COMMERCIAL FINANCE, INC.,
the Co-Agent
By: /s/ Joseph L. White
--------------------------------
Name: Joseph L. White
Title: Vice President
89
<PAGE> 1
EXHIBIT 11
SUN TELEVISION AND APPLIANCES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the quarters ended November 30, 1996 and November 25, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the
Quarters Ended
--------------
Nov. 30, Nov. 25,
1996 1995
---- ----
<S> <C> <C>
Net (loss) income $ (4,068) $ 1,367
======== ========
Common shares outstanding:
Weighted average 17,419 17,282
Dilutive effect of stock options 46 111
-------- --------
Weighted average shares used to calculate
primary earnings per share 17,465 17,393
Add net additional dilutive effect of stock
options using period-end market price -- --
-------- --------
Weighted average shares used to calculate
fully diluted earnings per share 17,465 17,393
======== ========
Net (loss) income per share
Assuming primary dilution $ (.23) $ .08
======== ========
Assuming full dilution $ (.23) $ .08
======== ========
</TABLE>
<PAGE> 2
EXHIBIT 11
SUN TELEVISION AND APPLIANCES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the nine months ended November 30, 1996 and
November 25, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the
Nine Months Ended
-----------------
Nov. 30, Nov. 25,
1996 1995
---- ----
<S> <C> <C>
Net (loss) income $(11,218) $ 3,833
======== ========
Common shares outstanding:
Weighted average 17,396 17,279
Dilutive effect of stock options 55 160
-------- --------
Weighted average shares used to calculate
primary earnings per share 17,451 17,439
Add net additional dilutive effect of stock
options using period-end market price -- --
-------- --------
Weighted average shares used to calculate
fully diluted earnings per share 17,451 17,439
======== ========
Net (loss) income per share
Assuming primary dilution $ (.64) $ .22
======== ========
Assuming full dilution $ (.64) $ .22
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Sun
Television and Appliances, Inc.'s quarterly report on Form 10-Q for the quarter
ended November 30, 1996.
</LEGEND>
<CIK> 0000874690
<NAME> SUN TELEVISION AND APPLIANCES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> MAR-03-1996
<PERIOD-END> NOV-30-1996
<CASH> 22,887
<SECURITIES> 0
<RECEIVABLES> 32,206<F1>
<ALLOWANCES> 0
<INVENTORY> 193,730
<CURRENT-ASSETS> 270,426
<PP&E> 109,883
<DEPRECIATION> 0
<TOTAL-ASSETS> 402,092
<CURRENT-LIABILITIES> 196,735
<BONDS> 0
0
0
<COMMON> 174
<OTHER-SE> 141,970
<TOTAL-LIABILITY-AND-EQUITY> 142,145
<SALES> 485,988
<TOTAL-REVENUES> 485,998
<CGS> 367,781
<TOTAL-COSTS> 367,781
<OTHER-EXPENSES> 131,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,716)
<INCOME-PRETAX> (17,564)
<INCOME-TAX> (7,542)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,196)<F2>
<CHANGES> 0
<NET-INCOME> (11,218)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
<FN>
<F1>Trade accounts receivable net allowance for doubtful accounts of $400,000.
<F2>Represents the after tax effect of a $2,000 one-time restructure charge.
</FN>
</TABLE>
