UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
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 0-19149
FILENE'S BASEMENT CORP.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3016733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Walnut Street, Wellesley, MA 02481
(Address of principal executive offices)
(Zip Code)
(617) 348-7000
(Registrant's telephone number, including area code)
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 by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes____ No____ Not yet applicable__X_
(The Company and its subsidiary filed voluntary petitions pursuant to
provisions of Chapter 11 of the United States Bankruptcy Code on August 23,
1999. No plan has been confirmed by a court.)
The number of shares of common stock outstanding as of August 31, 1999 was
21,000,256 shares.
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FILENE'S BASEMENT CORP.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets as of 3
July 31, 1999, January 30, 1999
and August 1, 1998
Consolidated Statements of Operations 4
for the thirteen weeks ended
July 31, 1999 and August 1, 1998
Consolidated Statements of Operations 5
for the twenty-six weeks ended
July 31, 1999 and August 1, 1998
Consolidated Statements of Cash Flows 6
for the twenty-six weeks ended
July 31, 1999 and August 1, 1998
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 16
Item 4 - Submission of Matters to a Vote of 16
Security Holders
Item 5 - Other Information 16
Item 6 - Exhibits and Reports on Form 8-K 17
2
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FILENE'S BASEMENT CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
July 31, January 30, August 1,
1999 1999 1998
---------- ---------- ----------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 871 $ 830 $ 740
Inventories 95,593 105,773 117,318
Other current assets 13,756 11,529 12,827
------- ------- -------
Total current assets 110,220 118,132 130,885
Property, plant and equipment, net 64,160 61,279 51,938
Beneficial operating lease rights, net 11,526 12,183 12,840
Intangible assets, net and other 14,279 11,107 9,717
------- ------- -------
$200,185 $202,701 $205,380
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,381 $ 56,090 $ 49,293
Accrued expenses 28,379 27,539 27,267
Short-term debt 66,282 38,561 25,800
Current portion of long-term debt - - 2,000
Obligations under capital leases 587 553 434
------- ------- -------
Total current liabilities 141,629 122,743 104,794
Reserve for store closings 2,733 2,857 2,933
Deferred revenue 2,048 1,665 1,748
Long-term debt - - 10,500
Obligations under capital leases 2,374 2,648 2,554
Stockholders' equity:
Common stock, $.01 par value,
70,000,000 shares authorized,
21,075,256, 21,047,244 and
21,011,880 shares issued 211 211 210
Additional paid-in capital 87,147 87,141 87,063
Accumulated deficit (35,552) (14,159) (4,406)
Accumulated other comprehensive income (389) (389) -
Treasury stock, 75,000 shares (16) (16) (16)
------- ------- -------
Total stockholders' equity 51,401 72,788 82,851
------- ------- -------
$200,185 $202,701 $205,380
======= ======= =======
See Notes to Consolidated Financial Statements.
3
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
(Unaudited)
(in thousands, except per share amounts)
July 31, August 1,
1999 1998
---------- ----------
Net sales $143,977 $131,396
Cost of sales, including buying,
receiving and occupancy costs 115,429 99,204
------- -------
Gross profit 28,548 32,192
Selling, general and administrative
expenses 40,117 29,683
Amortization of intangible assets and
beneficial operating lease rights 366 366
------- -------
Operating income (loss) (11,935) 2,143
Interest expense, net 3,015 869
------- -------
Income (loss) before income taxes (14,950) 1,274
Income tax provision (Note 2) - 278
------- -------
Net income (loss) $(14,950) $ 996
======= =======
Basic and diluted earnings (loss) $ (0.71) $ 0.05
per share (Note 3) ======= =======
See Notes to Consolidated Financial Statements.
4
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Twenty-Six Weeks Ended
(Unaudited)
(in thousands, except per share amounts)
July 31, August 1,
1999 1998
---------- ----------
Net sales $280,800 $259,043
Cost of sales, including buying,
receiving and occupancy costs 221,317 196,376
------- -------
Gross profit 59,483 62,667
Selling, general and administrative
expenses 75,903 60,097
Amortization of intangible assets and
beneficial operating lease rights 733 733
------- -------
Operating income (loss) (17,153) 1,837
Interest expense, net 4,240 1,513
------- -------
Income (loss) before income taxes (21,393) 324
Income tax provision (Note 2) - 69
------- -------
Net income (loss) $(21,393) $ 255
======= =======
Basic and diluted earnings (loss) $ (1.02) $ 0.01
per share (Note 3) ======= =======
See Notes to Consolidated Financial Statements.
5
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-Six Weeks Ended
(Unaudited)
(in thousands)
July 31, August 1,
1999 1998
---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $(21,393) $ 255
Adjustments to reconcile net income (loss)
to net cash used in operations:
Depreciation and amortization 7,134 6,716
Decrease (increase) in inventories 10,180 (24,297)
Increase in other current assets (2,227) (1,665)
(Decrease) increase in accounts payable (9,709) 6,595
Increase in accrued expenses
and other liabilities 716 649
Other 383 (84)
-------- --------
Net cash used in operating activities (14,916) (11,831)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,281) (9,579)
Other (3,249) (952)
------- -------
Net cash used in investing activities (12,530) (10,531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 27,721 22,700
Payments of capital lease obligation (240) (203)
Proceeds from common stock issuance 6 130
------- -------
Net cash provided by
financing activities 27,487 22,627
------- -------
Net increase in cash
and cash equivalents 41 265
Cash and cash equivalents:
Beginning of period 830 475
------- -------
End of period $ 871 $ 740
======= =======
See Notes to Consolidated Financial Statements.
6
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do not include
all the disclosures normally required by generally accepted accounting
principles or those normally made in the Company's Form 10-K filing.
Reference should be made to the Company's Annual Report on Form 10-K for
additional disclosures, including a summary of the Company's accounting
policies. The results of the periods ended July 31, 1999 and August 1, 1998
are not necessarily indicative of the results for a full fiscal year because
the Company's business, in common with the businesses of retailers generally,
is subject to seasonal influences, with higher levels of sales and income
generally realized in the fall season. The information furnished, in the
opinion of management, includes all normal recurring adjustments necessary
for a fair presentation of the results of operations for the periods
reported.
On August 23, 1999, the Company and its subsidiary filed voluntary petitions
seeking relief under Chapter 11 of the federal bankruptcy laws in the United
States Bankruptcy Court for the District of Massachusetts (the "Bankruptcy
Court"). Under Chapter 11, certain claims against the debtor in existence
prior to the filing of the petition for relief under the federal bankruptcy
laws are stayed while the debtor continues business operations as a debtor in
possession. In addition, under the federal bankruptcy code, the Company may
reject leases and executory contracts. Claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting from the
rejection of executory contracts, including leases, and from the
determination of the court (or agreed to by parties in interest) of allowed
claims for contingencies and other disputed amounts.
The Company intends to operate its business during the reorganization process
and entered into a $135 million debtor in possession financing facility on
August 23, 1999. The Bankruptcy Court has approved the financing facility on
an interim basis and has scheduled a final hearing on September 15, 1999. The
Company believes this new facility will allow it to meet its merchandise
inventory and normal operating expense needs, as well as presently anticipated
capital expenditure requirements, for the remainder of the fiscal year.
Accordingly, the accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. However,
the Company's operating results and adequacy of its working capital could be
adversely affected if, for any reason, the Company's borrowing base was to
become impaired, or portions thereof were otherwise deemed ineligible, thereby
diminishing the level of available funds. The Company is subject to various
covenants under the new financing facility including minimum eligible
inventory levels and maximum loans outstanding to eligible inventory ratios.
7
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION (Continued)
In response to the Company's press release regarding its filing for
protection under Chapter 11, NASDAQ halted trading of its common stock on
August 23, 1999. Trading will remain halted pending receipt and review of
additional information by NASDAQ as set forth in its letter to the Company
dated August 23, 1999. The Company will cooperate in providing the requested
information to NASDAQ.
2. RESTRUCTURING CHARGES
Included in accrued expenses at July 31, 1999 are restructuring costs
incurred related to the closing of three stores that will be completed in the
third and fourth quarters of this year. These costs consisted of the
following:
Markdown reserve $1,138
Write-off of leasehold improvements
and fixtures 861
Severance and other closing expenses 604
-----
$2,603
=====
As of July 31, 1999, no amounts had been expended relating to the above
charges.
3. INCOME TAXES
The Fiscal 1999 income tax benefit was reduced to zero by an increase in the
income tax valuation allowance necessary to bring the deferred tax asset to a
level, that would more likely than not, be realized.
4. EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Share", basic earnings per share is computed using the
weighted average number of shares outstanding during each period.
Diluted earnings per share is computed using the weighted number of
outstanding shares plus the weighted average number of dilutive common
equivalent shares outstanding during each period.
The following is a reconciliation of the outstanding shares used in
calculating earnings per share for the thirteen week and twenty-six week
periods ended July 31, 1999 and August 1, 1998 (in thousands):
8
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. EARNINGS PER SHARE (Continued)
Thirteen Weeks Ended
July 31, August 1,
1999 1998
--------- --------
Basic shares outstanding 20,999 20,917
Options - 658
------- -------
Dilutive shares outstanding 20,999 21,575
======= =======
Twenty-Six Weeks Ended
July 31, August 1,
1999 1998
--------- --------
Basic shares outstanding 20,989 20,906
Options - 669
------- -------
Dilutive shares outstanding 20,989 21,575
======= =======
Options for the thirteen and twenty-six weeks ended July 31, 1999 to purchase
shares of 3,084,872 and 3,027,453, respectively, and options for the thirteen
and twenty-six weeks ended August 1, 1998 to purchase shares of 828,220 and
814,564, respectively, are not included in the computation of diluted
earnings per share because to do so would have been antidilutive for those
periods.
5. SEGMENT INFORMATION
In Fiscal 1998, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", which establishes standards for
reporting information about operating segments in annual financial statements
and requires selected information about segments in interim financial reports
issued to stockholders. It also establishes standards for related
disclosures about products and services, and geographic areas. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker or decision making group, in deciding how to
allocate its resources and in assessing performance. Based on the standards
applied in SFAS No. 131, the Company has only one reportable segment.
9
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended July 31, 1999 net sales were $144.0 million, up 9.6%
from last year's second quarter sales of $131.4 million. Comparable store
sales for the second quarter were down 3.4% versus last year. Net sales for
the twenty-six week period ended July 31, 1999 were up 8.4% versus last year
while comparable store sales were down 3.7%. The comparable store decreases
were primarily attributable to disappointing sales, which were in part due to
insufficient quantities of inventory due to vendor concerns regarding the
financial position of the Company. The increase in net sales for the
thirteen and twenty-six week periods ended July 31, 1999 was due to the
opening of four new "Aisle 3" stores in the first quarter of fiscal 1999 and
four new Basement stores in the last half of 1998. At the end of fiscal
July, the Company operated 51 traditional Filene's Basement stores and four
Aisle 3 weekend warehouse stores, primarily in the Northeast and Midwest,
versus 47 traditional Filene's Basement stores last year.
Cost of sales as a percentage of sales was 80.2% and 78.8% for the thirteen
and twenty-six week periods ended July 31, 1999 compared to 75.5% and 75.8%
for the corresponding periods in the prior year. These increases were
primarily attributable to an increase in markdowns combined with an increase
in buying, selling and occupancy costs, as a percentage of sales, due to the
decline in same store sales. In addition, a $1.9 million markdown reserve
was established in the second quarter for the closing of three traditional
Filene's Basement stores and to clear out additional inventory. (See Outlook)
Selling, general and administrative expenses for the second quarter of 1999
were $40.1 million, or 27.9% of sales, compared to $29.7 million, or 22.6% of
sales, for the same period last year. The increase in selling, general and
administrative expenses, in absolute terms, was primarily the result of
opening six new Basement stores in 1998 and the opening of four new "Aisle 3"
stores in the first quarter of 1999. As a percentage of sales, expenses
increased primarily due to a $1.4 million charge for costs relating to the
closing of certain stores that will be completed in the third quarter of 1999
(See Outlook), as well as the decrease in comparable sales noted above.
Selling, general and administrative expenses for the twenty-six weeks ended
July 31, 1999 were $75.9 million, or 27.0% of sales, compared to $60.1
million or 23.2% of sales in the prior year period. In addition to the
reasons stated above, the increase in expenses was attributable to an
increase of approximately $1.4 million in pre-opening costs relating to the
new "Aisle 3" stores in the first quarter of 1999. The Company adopted
Statement of Position 98-5, "Accounting for Start-Up Activities", in fiscal
1998 which requires the Company to expense the costs of all start-up
activities as incurred. The Company had historically amortized these costs
over the remainder of the fiscal year.
10
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Net interest expense for the quarter ended July 31, 1999 was $3.0 million
compared to $0.9 million last year. Net interest expense for the twenty-six
weeks ended July 31, 1999 was $4.2 million, compared to $1.5 million last
year. The increase in net interest expense was primarily due to a $1.7
million write-off of deferred financing costs relating to the Company's old
financing agreement. The remaining increase was due to both higher average
outstanding borrowings and higher interest rates in the second quarter of
1999. (See Financial Condition, Liquidity and Capital Resources.) These
increases were partially offset by discounts of approximately $0.3 million on
advance payments to vendors in the second quarter of 1999.
Net loss for the quarter ended July 31, 1999 was $15.0 million, or $0.71 per
share, on 21.0 million weighted average shares outstanding, compared to net
income of $1.0 million, or $0.05 per share, on 21.6 million weighted average
shares outstanding for the quarter ended August 1, 1998. Net loss for the
twenty-six weeks ended July 31, 1999 was $21.4 million, or $1.02 per share,
on 21.0 million weighted average shares outstanding, compared to net income
of $0.3 million, or $0.01 per share, on 21.6 million weighted average shares
outstanding for the twenty-six weeks ended August 1, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
On July 27, 1999, the Company entered into a $125 million revolving credit
facility (the "Agreement"), which replaced the Company's Second Amended and
Restated Revolving Credit Agreement dated January 22, 1999, as amended June
15, 1999 (the "Old Agreement"). The Agreement consisted of two Tranches,
Tranche A of $85 million and Tranche B of $40 million. The interest rates on
the Agreement for Tranche A borrowings was based, at the Company's option, on
prime rate plus 0.75% or LIBOR plus 2.25%, while Tranche B borrowings were
based on prime rate plus 4.25%. These rates were to be adjusted up or down
quarterly as determined by the Company's financial performance during the
four preceding quarters.
During the six months ended July 31, 1999, average borrowings under the
Agreement and the Old Agreement were approximately $58.4 million at an
average interest rate of 7.99%. During the same period last year, average
borrowings were $27.5 million at an average interest rate of 7.94%. Excess
credit availability at July 31, 1999 was approximately $10.9 million compared
to approximately $25.5 million at August 1, 1998.
11
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
The Agreement contained financial covenants, which required cumulative
minimum earnings before interest, taxes, depreciation and amortization
(EBITDA) and a minimum ratio of eligible inventory to accounts payable, as
well as a limit on capital expenditures for specified periods during the term
of the Agreement.
Net cash used in operating activities was $14.9 million for the twenty-six
weeks ended July 31, 1999 versus cash used of $11.8 million during the same
period last year. The $3.1 million increase in cash used by operations was
primarily due to a decrease in EBITDA from income of $8.6 million in 1998 to
a loss of $(10.0) million in 1999. This decrease was offset by reduced
purchases of inventory as the result of vendor concerns regarding the
Company.
Net cash used in investing activities during 1999 increased $2.0 million over
the comparable period in 1998 primarily as a result of the deferred financing
costs incurred in connection with the Agreement entered into in July 1999.
During fiscal 1999, capital expenditures are expected to approximate $20
million.
Net cash provided by financing activities during the six months ended July
31, 1999 was $27.5 million as compared to $22.6 million in the same period of
the prior year. The $4.9 million increase was primarily due to increased
short-term borrowings in 1999 as the result of the opening of the four "Aisle
3" stores and the decrease in EBITDA.
On August 23, 1999, the Company filed a voluntary petition seeking relief
under Chapter 11 of the United States bankruptcy code as the result of
reduced trade support and interruption in inventory deliveries. On August
23, 1999, the Company also entered into the Debtor In Possession Credit
Agreement (the "New Agreement") with GE Capital as agent and Paragon Capital
LLC as oversight agent. The New Agreement replaces the Agreement. As the case
with the Agreement, the New Agreement consists of two Tranches, Tranche A of
$85 million which bears interest at a rate, at the Company's option, of prime
plus 1.25% or LIBOR plus 2.75%, and Tranche B of $50 million, which bears
interest at a rate of 14.25%, and to the extent advances are made against
real estate collateral, 18%. The New Agreement expires on the earlier of
February 23, 2001 or the first effective date of any plan of reorganization.
In addition to the covenants contained in the Agreement, the New Agreement
also contains covenants which require minimum eligible inventory levels and
maximum loans outstanding to eligible inventory ratios.
12
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
The Company believes the New Agreement will allow the Company
to meet its merchandise inventory and normal operating expense needs, as well
as presently anticipated capital expenditure requirements, for the remainder
of the fiscal year. However, the Company's operating results and the adequacy
of its working capital could be adversely affected if, for any reason, the
Company's borrowing base was to become impaired, or otherwise be deemed
ineligible, thereby diminishing the level of available funds. In addition,
because of uncertainty regarding the outcome of the bankruptcy case and the
effect of any bankruptcy reorganization plan on the interest of the Company's
creditors and stockholders, the ultimate impact on the Company's results of
operations and financial position cannot be determined.
The Company's business is seasonal, reflecting increased consumer demand in
the fall season. The second half of each fiscal year provides a greater
portion of the Company's annual sales and operating profit.
YEAR 2000
The Company utilizes software and related technologies throughout its
business that will be affected by the "Year 2000" problem, which is common to
most corporations, and concerns the inability of information systems,
primarily computer software programs, to properly recognize and process date
sensitive information as the year 2000 approaches.
While it is not possible at this time to predict the total cost of this
effort, the investment, whether leased, purchased or expensed, in new
software and equipment needed to achieve "Year 2000" compliance and enhance
existing systems, is currently estimated at approximately $31.0 million, of
which $19.9 million had been incurred through July 31, 1999. The expense
portion of the total project is estimated at $11.9 million of which $2.2
million and $3.0 million is expected to be incurred in fiscal 1998 and fiscal
1999, respectively. Through July 31, 1999, $3.8 million has been expensed.
Funding requirements have been incorporated into the Company's capital and
operating plans and are not expected to have a material adverse impact on the
Company's financial condition or liquidity.
The Company believes its Year 2000 program will be completed on a timely
basis and should effectively minimize disruption to the Company's operations,
however, there can be no assurance that the Company will be successful in
this respect.
13
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
OUTLOOK
As noted above, on August 23, 1999, the Company filed a voluntary petition
with the United States Bankruptcy Court for the District of Massachusetts in
Boston, MA seeking relief under Chapter 11 of the United States Bankruptcy
Code. The filing was principally the result of a lack of trade support and
interruption in inventories. The Company intends to operate its business
during the reorganization process and has entered into a $135 million debtor
in possession financing facility, which has been approved on an interim basis
pending a final hearing. The Company believes this facility will provide
sufficient funding for a timely flow of merchandise during the reorganization
process.
Prior to the filing, the Company began implementing strategies to improve
merchandising, operations and enhance financial performance, including a
reduction of headquarters staff by 15%. As part of this strategy, the Company
will close three of its traditional stores. The Franklin Mills, PA and
Sunrise, FL locations will close in the third quarter of 1999 and the
Plymouth, MA location will close in the fourth quarter of 1999.
The Company plans to open four new Aisle 3 stores in the third quarter of
1999. The new format leverages the current Filene's Basement infrastructure
and vendor relationships. The capital required to open an "Aisle 3" store is
significantly less than that required to open a traditional Filene's Basement
specialty store.
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. Factors which may cause actual results to differ materially from
those indicated by such forward-looking statements include, among others: (i)
Bankruptcy Court actions or proceedings related to the bankruptcy, (ii)
economic and weather conditions which affect the buying patterns of the
Company's customers, (iii) actions of the Company's competitors and the
Company's ability to respond to such actions, (iv) the continued support of
the Company's numerous vendors and third party factors in the form of short-
term trade credit through extended payment terms and letters of credit, (v) a
decrease in the Company's available funds due to the impairment or
ineligibility of a significant portion of its borrowing base,
14
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
(vi) the continued success of the Company's efforts to implement planned
strategic initiatives, (vii) unexpected store closings and the related higher
markdowns associated with inventory liquidations, (viii) any unanticipated
impact of the "Year 2000" problem and (ix) the extent to which the Aisle 3
concept is successful.
15
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PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
As reported in its report on Form 8-K dated August 26, 1999, Filene's
Basement Corp. and its subsidiary filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code on August 23, 1999.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Filene's Basement Corp. was held on
June 22, 1999, for the purpose of electing a Class II Director of the Company
to serve until the year 2002 Annual Meeting of Stockholders or until their
successors are duly elected and qualified. The following sets forth the
results of shareholder voting:
Election of Class II Director:
Votes in Votes
Favor Withheld
-------- --------
Election of Harold Leppo
as Class II Director 14,358,478 4,199,821
ITEM 5 OTHER INFORMATION
Stockholder Proposals for 2000 Annual Meeting
Stockholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and intended to be
presented at the Company's 2000 Annual Meeting of Stockholders must be
received by the Company not later than January 18, 2000 in order to be
considered for inclusion in the Company's proxy materials for that meeting.
In addition, in accordance with recent amendments to Rules 14a-4, 14a-5 and
14a-8 under the Exchange Act, written notice of stockholder proposals
submitted outside the processes of Rule 14a-8 for consideration at the 2000
Annual Meeting of Stockholders must be received by the Company on or before
March 29, 2000 in order to be considered timely for purposes of Rule 14a-4.
16
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PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION (CONTINUED)
In addition, the Company's Restated By-Laws also establish an advance notice
procedure with respect to stockholder nomination of candidates for election
as directors. A notice regarding stockholder nominations for director must
be accompanied by a petition signed by at least 100 record holders
representing in the aggregate at least 1% of the outstanding shares entitled
to vote for directors. Such notice must be received by the clerk of the
Company not less than 60 days or more than 90 days prior to the applicable
stockholder meeting, provided, however, that, in the event the date of the
meeting is not publicly announced by the Company more than 70 days prior to
the meeting, the notice must be received by the Company not later than the
close of business on the tenth day following the day on which such
announcement of the date of the meeting is made. Any such notice must be
written and contain certain specified information concerning the persons to
be nominated and the stockholder submitting the nomination, all as set forth
in the Company's Restated By-Laws. The presiding officer of the meeting may
refuse to acknowledge any director nomination not made in compliance with
such advance notice requirements. The Company has not yet publicly announced
the date of the 2000 Annual Meeting. The advance notice provisions of the
Company's Restated By-Laws supersede the notice requirements contained in
recent amendments to Rule 14a-14 under the Exchange Act.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Debtor in Possession Credit Agreement, dated as of August 23, 1999
among Filene's Basement Inc., debtor and debtor in possession, as
borrower, the other parties signatory hereto, as credit parties, the
lenders signatory hereto from time to time, as lenders, Paragon
Capital LLC, as oversight agent, and General Electric Capital
Corporation, as agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
On August 10, 1999, the Company filed an 8-K announcing the closing of a
$125 million credit facility.
On August 26, 1999, the Company filed an 8-K announcing the voluntary
filing of a petition for reorganization under Chapter 11 of the United States
Bankruptcy Code.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, being also its principal financial
officer.
FILENE'S BASEMENT CORP.
/s/ Steven Siegel
---------------------
Steven Siegel
Executive Vice President
& Chief Financial Officer
DATE: September 14, 1999
18
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit Title
4.1 Debtor in Possession Credit Agreement, dated as of August 23, 1999 among
Filene's Basement Inc., debtor and debtor in possession, as borrower,
the other parties signatory hereto, as credit parties, the lenders
signator hereto from time to time, as lenders, Paragon Capital LLC, as
oversight agent, and General Electric Capital Corporation, as agent.
27 Financial Data Schedule
DEBTOR IN POSSESSION CREDIT AGREEMENT, dated as of August 23,
1999 among FILENE'S BASEMENT, INC., a Massachusetts corporation, as
debtor and debtor in possession ("Borrower"); the other Credit Parties
signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (in its individual capacity, "GE Capital"), for itself, as
Lender, and as Agent for Lenders, PARAGON CAPITAL LLC, a Delaware
limited liability company, as Oversight Agent and as Lender, and the
other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, on August 23, 1999 (the "Petition Date"), Borrower
and Filene's Basement Corp., a Massachusetts corporation ("Holdings")
commenced Chapter 11 Cases No. ___ - ___ (collectively, the "Chapter 11
Case") by filing voluntary petitions for reorganization under Chapter
11 of Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the
"Bankruptcy Code"), with the United States Bankruptcy Court for the
District of Massachusetts (the "Bankruptcy Court"). Borrower and
Holdings continue to operate their business and manage their properties
as debtors and debtors in possession pursuant to Sections 1107(a) and
1108 of the Bankruptcy Code;
WHEREAS, prior to the Petition Date, Lenders provided
financing to Borrower pursuant to that certain Credit Agreement, dated
as of July 26, 1999, among Borrower, the other credit parties signatory
thereto, GE Capital, as Agent, Paragon Capital LLC, as Oversight Agent,
and the Lenders from time to time signatory thereto (as amended,
modified or supplemented, the "Pre-Petition Loan Agreement");
WHEREAS, Borrower has requested that Lenders provide a senior
secured superpriority revolving credit facility of up to $135,000,000
to fund its working capital requirements during the pendency of the
Chapter 11 Case and to replace the Pre-Petition Loan Agreement;
WHEREAS, Lenders are willing to provide to Borrower such
postpetition loans and other extensions of credit pursuant to a credit
facility having the terms and conditions set forth herein;
WHEREAS, Holdings is willing to guaranty all of the
obligations of Borrower to Lenders under the Loan Documents and to
pledge to Agent, for the benefit of Agent and Lenders, all of the
capital stock of Borrower to secure such guaranty; and
WHEREAS, capitalized terms used in this Agreement shall have
the meanings ascribed to them in Annex A. All Annexes, Disclosure
Schedules, Exhibits and other attachments (collectively, "Appendices")
hereto, or expressly identified to this Agreement, are incorporated
herein by reference, and taken together, shall constitute but a single
agreement. These Recitals shall be construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities.
(a) Tranche A and Tranche B Revolving Credit Facilities.
(i) Subject to the terms and conditions hereof, each
Tranche A Revolving Lender agrees to make available from time to
time until the Commitment Termination Date its Pro Rata Share of
advances (each, a "Tranche A Revolving Credit Advance"). The Pro
Rata Share of the Tranche A Revolving Loan of any Tranche A
Revolving Lender shall not at any time exceed its separate Tranche
A Revolving Loan Commitment. The obligations of each Tranche A
Revolving Lender hereunder shall be several and not joint. The
aggregate amount of Tranche A Revolving Credit Advances
outstanding shall not exceed at any time the lesser of (A) the
Maximum Tranche A Amount and (B) the Tranche A Borrowing Base, in
each case less the sum of the Letter of Credit Obligations and the
Swing Line Loan outstanding at such time ("Tranche A Borrowing
Availability").
(ii) Subject to the terms and conditions of this
Agreement, at any time that no Tranche A Borrowing Availability
exists (except for Tranche B Real Estate Advances made pursuant to
Section 1.1(e) hereof), each Tranche B Revolving Lender agrees to
make available from time to time until the Commitment Termination
Date its Pro Rata Share of advances (each, a "Tranche B Revolving
Credit Advance"). The Pro Rata Share of the Tranche B Revolving
Loan of any Tranche B Revolving Lender shall not at any time
exceed its separate Tranche B Revolving Loan Commitment. The
obligations of each Tranche B Revolving Lender hereunder shall be
several and not joint. The aggregate amount of Tranche B
Revolving Credit Advances outstanding shall not exceed at any time
the lesser of (A) the Maximum Tranche B Amount and (B) the Tranche
B Borrowing Base ("Tranche B Borrowing Availability").
Notwithstanding the foregoing, at no time shall the aggregate of
those portions of the Tranche A Revolving Advances and Tranche B
Revolving Advances which are based upon Eligible Inventory exceed
one hundred percent (100%) of the Net Retail Liquidation Value of
Eligible Inventory. Additionally, Tranche A Revolving Lenders
shall not make Inventory Overadvances, but in the event that
Tranche A Revolving Lenders make any Inventory Overadvances, such
Inventory Overadvances shall be subordinate to the same extent
that Tranche B Revolving Credit Advances are subordinate to the
Senior Obligations under Section 1.11(b) hereof. At no time shall
the Tranche A Revolving Lenders be required to make Tranche A
Revolving Loans or Swing Line Loans if the making of such Tranche
A Revolving Loans or Swing Line Loans would (i) constitute
Inventory Overadvances, or (ii) result in Inventory Loans
exceeding the Tranche B Inventory Loan Limit.
(iii) Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under
this Section 1.1(a). Each Revolving Credit Advance shall be made
on notice by Borrower to the representatives of Agents identified
on Schedule 1.1 at the address specified thereon. Those notices
must be given no later than (1) 11:00 a.m. (New York time) on the
Business Day of the proposed Tranche A Revolving Credit Advance,
in the case of an Index Rate Tranche A Revolving Loan, (2) 11:00
a.m. (New York time) on the date which is three (3) Business Days
prior to the proposed Tranche A Revolving Credit Advance, in the
case of a LIBOR Tranche A Revolving Loan, (3) 11:00 a.m. (New York
time) on the date which is five (5) Business Days, in the case of
a proposed Tranche B Real Estate Advance (other than in the case
of Tranche B Real Estate Advances made on the Closing Date) when
after giving effect to such Tranche B Real Estate Advance, the
aggregate outstanding principal amount of all Tranche B Real
Estate Advances would exceed $5,000,000, or (4) 11:00 a.m. (New
York time) on the Business Day immediately preceding the proposed
Tranche B Revolving Credit Advance, in the case of any other
Tranche B Revolving Loan. Each such notice (a "Notice of
Revolving Credit Advance/Borrowing Base Certificate") must be
given in writing (by telecopy or overnight courier) substantially
in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as
may be required by Agents. If Borrower desires to have the
Revolving Credit Advances bear interest by reference to a LIBOR
Rate, it must comply with Section 1.5(e). Subject to Agent's
receipt of wire transfers from the Tranche A Revolving Lenders and
the Tranche B Revolving Lenders in accordance with Section 9.9
hereof, and provided timely notices are given by Borrower in
accordance with this Section 1.1(a) (iii), Agent shall: (1) in the
case of Tranche A Revolving Index Rate Loans, make requested
Tranche A Revolving Credit Advances on the same Business Day of
the requested funding; (2) in the case of Tranche B Revolving
Index Rate Loans, make requested Tranche B Revolving Credit
Advances the first Business Day after the requested funding; and
(3) in the case of Tranche A Revolving LIBOR Loans, make requested
Tranche A Revolving Credit Advances within three (3) Business Days
after the requested funding.
(iv) Borrower shall execute and deliver to each Tranche
A Revolving Lender a note to evidence the Tranche A Revolving Loan
Commitment of that Tranche A Revolving Lender. Each note shall be
in the principal amount of the Tranche A Revolving Loan Commitment
of the applicable Tranche A Revolving Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(a)(iv) (each a
"Tranche A Revolving Note" and, collectively, the "Tranche A
Revolving Notes"). Each Tranche A Revolving Note shall represent
the obligation of Borrower to pay the amount of each Tranche A
Revolving Lender's Revolving Loan Commitment or, if less, the
applicable Tranche A Revolving Lender's Pro Rata Share of the
aggregate unpaid principal amount of all Tranche A Revolving
Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the
Tranche A Revolving Loan and all other non-contingent Obligations
shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.
(v) Borrower shall execute and deliver to each Tranche
B Revolving Lender a note to evidence the Tranche B Revolving Loan
Commitment of that Tranche B Revolving Lender. Each note shall be
in the principal amount of the Tranche B Revolving Loan Commitment
of the applicable Tranche B Revolving Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(a)(v) (each a
"Tranche B Revolving Note" and, collectively, the "Tranche B
Revolving Notes"). Each Tranche B Revolving Note shall represent
the obligation of Borrower to pay the amount of each Tranche B
Revolving Lender's Revolving Loan Commitment or, if less, the
applicable Tranche B Revolving Lender's Pro Rata Share of the
aggregate unpaid principal amount of all Tranche B Revolving
Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the
Tranche B Revolving Loan and all other non-contingent Obligations
shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.
(b) Swing Line Facility.
(i) Agent shall notify the Swing Line Lender upon
Agent's receipt of any Notice of Revolving Credit
Advance/Borrowing Base Certificate. Subject to the terms and
conditions hereof, the Swing Line Lender shall make available from
time to time until the Commitment Termination Date advances
consisting only of Tranche A Revolving Loans (each, a "Swing Line
Advance") in accordance with any such notice. The aggregate
amount of Swing Line Advances outstanding shall not exceed the
lesser of (A) the Swing Line Commitment and (B) the lesser of the
Tranche A Maximum Amount and the Tranche A Borrowing Base, in each
case, less the outstanding balance of the Tranche A Revolving Loan
at such time ("Swing Line Availability"). Until the Commitment
Termination Date, Borrower may from time to time borrow, repay and
reborrow under this Section 1.1(b). Each Swing Line Advance shall
be made pursuant to a Notice of Revolving Credit Advance/Borrowing
Base Certificate delivered by Borrower to Agents in accordance
with Section 1.1(a). Those notices must be given no later than
11:00 a.m. (New York time) on the Business Day of the proposed
Swing Line Advance. Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall
constitute a Tranche A Index Rate Loan and shall be funded as a
Tranche A Index Rate Loan in accordance with the last sentence of
Section 1.1(a)(iii).
(ii) Borrower shall execute and deliver to the Swing
Line Lender a promissory note to evidence the Swing Line
Commitment. Such note shall be in the principal amount of the
Swing Line Commitment of the Swing Line Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(b)(ii) (the
"Swing Line Note"). The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line
Commitment or, if less, the aggregate unpaid principal amount of
all Swing Line Advances made to Borrower together with interest
thereon as prescribed in Section 1.5. The entire unpaid balance
of the Swing Line Loan and all other non-contingent Obligations
shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner
paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line
Lender, at any time and from time to time in its sole and absolute
discretion, but no less frequently than weekly, shall on behalf of
Borrower (and Borrower hereby irrevocably authorizes the Swing
Line Lender to so act on its behalf) request each Tranche A
Revolving Lender (including the Swing Line Lender) to make a
Tranche A Revolving Credit Advance to Borrower (which shall be a
Tranche A Index Rate Loan) in an amount equal to such Tranche A
Revolving Lender's Pro Rata Share of the principal amount of the
Swing Line Loan (the "Refunded Swing Line Loan") outstanding on
the date such notice is given. Regardless of whether the
conditions precedent set forth in this Agreement to the making of
a Tranche A Revolving Credit Advance are then satisfied, each
Tranche A Revolving Lender shall disburse directly to Agent, its
Pro Rata Share of a Tranche A Revolving Credit Advance on behalf
of the Swing Line Lender, prior to 3:00 p.m. (New York time), in
immediately available funds on the Business Day next succeeding
the date such notice is given. The proceeds of such Tranche A
Revolving Credit Advances shall be immediately paid to the Swing
Line Lender and applied to repay the Refunded Swing Line Loan.
(iv) Tranche A Revolving Lenders' Obligations
Unconditional. Each Tranche A Revolving Lender's obligation to
make Tranche A Revolving Credit Advances in accordance with
Section 1.1(b)(iii) shall be absolute and unconditional and shall
not be affected by any circumstance, including (A) any setoff,
counterclaim, recoupment, defense or other right which such
Tranche A Revolving Lender may have against the Swing Line Lender,
Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Default or Event of Default; (C)
any inability of Borrower to satisfy the conditions precedent to
borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. If any Tranche A Revolving
Lender does not make available to Agent or the Swing Line Lender,
as applicable, the amount required pursuant to Section
1.1(b)(iii) the Swing Line Lender shall be entitled to recover
such amount on demand from such Tranche A Revolving Lender,
together with interest thereon for each day from the date of
non-payment until such amount is paid in full at the Federal Funds
Rate for the first two Business Days and at the Index Rate
thereafter.
(c) Reliance on Notices. Agent shall be entitled to rely
upon, and shall be fully protected in relying upon, any Notice of
Revolving Credit Advance/Borrowing Base Certificate, Notice of
Conversion/Continuation or similar notice as being duly authorized
provided that such notice is signed by a Person identified on
Disclosure Schedule (1.1(c)). Agent may assume that the signature of
each Person identified on Disclosure Schedule (1.1(c)) executing and
delivering such a notice is genuine. Borrower may amend, modify or
supplement Disclosure Schedule (1.1(c)) upon ten (10) Business Days'
written notice to Agent.
(d) Agent Advances.
(i) Agent hereby is authorized by Borrower and Lenders,
from time to time in Agents' discretion, (1) after the occurrence of a
Default or an Event of Default (but without constituting a waiver of
such Default or Event of Default), or (2) at any time that any of the
other applicable conditions precedent set forth in Section 2.1 or 2.2
have not been satisfied, to make Advances to Borrower on behalf of
Lenders which Agents, in their reasonable business judgment, deem
necessary or desirable, whether under clause (1) or (2) above, (A) to
preserve or protect the Collateral, or any portion thereof, (B) to
enhance the likelihood of, or maximize the amount of, repayment of the
Obligations, or (C) to pay any other amount chargeable to Borrower
pursuant to the terms of this Agreement, including costs, fees, and
expenses described in Section 11.3 (any of the Advances described in
this Section 1.1(d) being hereinafter referred to as "Agent Advances");
provided, that Agent shall not make any Agent Advances to Borrower
without the consent of the Requisite Tranche A Revolving Lenders and
the Requisite Tranche B Revolving Lenders if the amount thereof would
exceed $4,000,000 in the aggregate at any one time. Any Advances made
pursuant to this Section 1.1(d) shall be allocated on a pro rata basis
to the Tranche A Revolving Lenders and the Tranche B Revolving Lenders.
(ii) Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Tranche A Revolving Credit
Advances and Tranche B Revolving Credit Advances, and shall bear
interest at the rate applicable to Tranche A Revolving Index Rate Loans
and Tranche B Revolving Loans, as the case may be, plus the Default
Rate pursuant to Section 1.5. Under no circumstances shall any Agent
Advances be deemed to constitute Inventory Overadvances.
(e) Tranche B Real Estate Advances. Subject to the
provisions of this Agreement (including, without limitation, Section
1.1(a)(ii)), each Tranche B Revolving Lender agrees to make available
from time to time until the Commitment Termination Date its Pro Rata
Share of Advances based on the NLV of Eligible Leasehold Real Estate
("Tranche B Real Estate Advances"). All Tranche B Real Estate Advances
shall bear interest at the rate of 18% per annum which interest shall
be payable in arrears on each applicable Interest Payment Date.
Borrower may use Tranche A Borrowing Availability to repay Tranche B
Real Estate Advances, if after giving effect to such repayment (i) no
Default or Event of Default would result, (ii) Net Borrowing
Availability, as determined by Agents, exceeds $10,000,000 or such
lower amount as required by Agent in its reasonable discretion, and
(iii) the Tranche A Inventory Loan Limit would not be exceeded.
(f) Notwithstanding anything set forth above, all credit
advances and Agent Advances hereunder shall be subject to the terms and
conditions of the Interim Order and the Final Order.
1.2. Letters of Credit. Subject to and in accordance with
the terms and conditions contained herein and in Annex B, Borrower
shall have the right to request, and Tranche A Revolving Lenders agree
to incur, or purchase participations in, Letter of Credit Obligations
in respect of Borrower.
1.3. Prepayments.
(a) Voluntary Prepayments. Borrower may at any time on at
least ten (10) days' prior written notice to Agent (i) voluntarily
prepay all or part of the Revolving Loan and/or permanently reduce but
not terminate the Revolving Loan Commitment; provided that (A) any such
prepayments or reductions shall be in a minimum amount of $10,000,000
and integral multiples of $1,000,000 in excess of such amount, (B) the
Tranche A Revolving Loan Commitment shall not be reduced to an amount
less than $100,000,000, and (C) the Tranche B Revolving Loan shall not
be reduced to an amount less than $20,000,000. Borrower may at any
time and from time to time on at least (10) days' prior written notice
to Agent terminate the Revolving Loan Commitment; provided that upon
such termination, all Loans and other Obligations shall be immediately
due and payable in full. Any such voluntary prepayment and any such
reduction or termination of the Revolving Loan Commitment must be
accompanied by the payment of the compensation required by Section
1.9(c), if any, plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.13(b). In the event GE Capital acts as the
lead agent in providing a refinancing of the Loans under this
Agreement, GE Capital shall waive the payment of any compensation
otherwise required to be paid to GE Capital under Section 1.9(c). Upon
any such prepayment and reduction or termination of the Revolving Loan
Commitment, Borrower's right to request Revolving Credit Advances, or
request that Letter of Credit Obligations be incurred on its behalf, or
request Swing Line Advances, shall simultaneously be permanently
reduced or terminated, as the case may be; provided that a permanent
reduction of the Tranche A Revolving Loan Commitment shall not require
corresponding pro rata reduction in the Swing Line Commitment and/or
the L/C Sublimit (as defined in Annex B). Each notice of partial
prepayment shall designate the Loan or other Obligations to which such
prepayment is to be applied, provided that notwithstanding the
foregoing in the case of a Default or an Event of Default, all
prepayments shall be applied to the Tranche A Revolving Loan.
(b) Mandatory Prepayments.
(i) If at any time the outstanding balance of the
Tranche A Revolving Loan exceeds the lesser of (A) the Tranche A
Maximum Amount and (B) the Tranche A Borrowing Base, less, in each
case, the outstanding Swing Line Loan at such time less the Letter
of Credit Obligations outstanding, Borrower shall immediately
repay the aggregate outstanding Tranche A Revolving Credit
Advances to the extent required to eliminate such excess. If any
such excess remains after repayment in full of the aggregate
outstanding Tranche A Revolving Credit Advances, Borrower shall
provide cash collateral for the Letter of Credit Obligations in
the manner set forth in Annex B to the extent required to
eliminate such excess.
(ii) If at any time the outstanding balance of the
Tranche B Revolving Loan exceeds the lesser of (A) the Tranche B
Maximum Amount and (B) the Tranche B Borrowing Base, Borrower
shall immediately repay the aggregate outstanding Tranche B
Revolving Credit Advances to the extent required to eliminate such
excess. Notwithstanding the foregoing, any prepayment pursuant to
this Section 1.3(b)(ii) shall be paid only after any and all
mandatory prepayments required by Section 1.3(b)(i) have been
paid.
(iii) Immediately upon receipt by any Credit Party
of proceeds of any asset disposition (including condemnation
proceeds, but excluding proceeds of asset dispositions permitted
by Section 6.8(a)) or any sale of Stock of any Subsidiary of any
Credit Party, Borrower shall prepay the Loans in an amount equal
to all such proceeds, net of (A) commissions and other reasonable
and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrower in
connection therewith (in each case, paid to non-Affiliates), (B)
transfer taxes, (C) amounts payable to holders of senior Liens (to
the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income
taxes in accordance with GAAP in connection therewith. Any such
prepayment shall be applied in accordance with clause (c) below.
(iv) If Holdings or Borrower issues Stock or incurs any
Indebtedness (other than Indebtedness permitted by Section 6.3) no
later than the Business Day following the date of receipt of the
proceeds thereof, Borrower shall prepay the Loans in an amount
equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable transaction costs, fees and
expenses paid to non-Affiliates in connection therewith. Any such
prepayment shall be applied in accordance with clause (c) below.
(c) Application of Certain Mandatory Prepayments. So long
as no Default or Event of Default shall have occurred and be
continuing, any prepayments made by Borrower pursuant to clauses
(b)(iii) or (b)(iv) above shall be applied as follows: first, to Fees
and reimbursable expenses of Agents then due and payable pursuant to
any of the Loan Documents; second, to interest then due and payable on
the Swing Line Loan; third, to the principal balance of the Swing Line
Loan until the same shall have been repaid in full; fourth, ratably to
interest then due and payable on the Tranche A Revolving Loan and the
Tranche B Revolving Loan; and fifth, ratably to the outstanding
principal balance of the Tranche A Revolving Loan and the Tranche B
Revolving Loan until the same shall have been paid in full. So long as
a Default or Event of Default shall have occurred and be continuing,
any prepayment made by Borrower pursuant to clauses (b)(iii) or (b)(iv)
above shall be applied as follows: first, to fees and reimbursable
expenses of Agents then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on the Swing Line
Loan; third, to the principal balance of the Swing Line Loan until the
same shall have been repaid in full; fourth, to interest then due and
payable on the Tranche A Revolving Loan; fifth, to the outstanding
principal balance of Tranche A Revolving Loan until the same shall have
been paid in full; sixth, to interest then due and payable on the
Tranche B Revolving Loan; and last to the principal balance of the
Tranche B Revolving Loan. Neither the Revolving Loan Commitment nor
the Swing Line Loan Commitment shall be permanently reduced by the
amount of any prepayments made pursuant to this Section 1.3(c).
(d) Application of Prepayments from Insurance Proceeds.
Prepayments from insurance proceeds in accordance with Section 5.4(c)
shall be applied as follows: insurance proceeds from casualties or
losses shall be applied first, to the Swing Line Loans, second, to the
Tranche A Revolving Credit Advances; and last to the Tranche B
Revolving Credit Advances. Neither the Revolving Loan Commitment nor
the Swing Line Loan Commitment shall be permanently reduced by the
amount of any such prepayments.
(e) Nothing in this Section 1.3 shall be construed to
constitute Agent's or any Lender's consent to any transaction referred
to in clauses (b)(iii) and (b)(iv) above which is not permitted by
other provisions of this Agreement or the other Loan Documents.
1.4. Use of Proceeds. Borrower shall utilize the proceeds of
the Revolving Loan and the Swing Line Loan (a) which are incurred on
the Closing Date (net of any amounts used on the Closing Date to pay
Fees) to repay in full the outstanding principal, accrued interest, and
accrued fees and expenses owing to Prior Lenders under the Pre-Petition
Loan Agreement, (b) thereafter, (x) for working capital and general
corporate purposes as in accordance with the Budget, as the case may be
(but excluding in any event the making of any Restricted Payment not
specifically permitted by Section 6.14), and (y) certain other pre-
petition expenses that are approved by the Bankruptcy Court and
consented to by Lenders. Disclosure Schedule (1.4) contains a
description of Borrower's sources and uses of funds as of the Closing
Date, including Loans and Letter of Credit Obligations to be made or
incurred on that date, and a funds flow memorandum detailing how funds
from each source are to be transferred to particular uses.
1.5. Interest and Applicable Margins.
(a) Borrower shall pay interest to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being made by
each Lender, in arrears on each applicable Interest Payment Date, at
the following rates: (i) with respect to the Tranche A Revolving
Credit Advances, the Index Rate plus the Applicable Tranche A Revolver
Index Margin per annum or, at the election of Borrower, the applicable
LIBOR Rate plus the Applicable Tranche A Revolver LIBOR Margin per
annum, based on the aggregate Tranche A Revolving Credit Advances
outstanding from time to time; (ii) with respect to the Tranche B
Revolving Credit Advances, 14.25% (except that Tranche B Real Estate
Advances shall bear interest as set forth in Section 1.1(e)); and (iii)
with respect to the Swing Line Loan, the Index Rate plus the Applicable
Tranche A Revolver Index Margin per annum.
The Applicable Margins will be, as set forth below, on a per
annum basis as of the Closing Date and until adjusted as described
below.
Applicable Tranche A Revolver LIBOR Margin 2.75%
Applicable Tranche A Revolver Index Margin 1.25%
Applicable L/C Margin 1.75%
Applicable Unused Facility Margin 0.50%
(b) If any payment on any Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to
the next succeeding Business Day (except as set forth in the definition
of LIBOR Period) and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such
extension.
(c) All computations of Fees calculated on a per annum basis
and interest shall be made by Agent on the basis of a three hundred and
sixty (360) day year, in each case for the actual number of days
occurring in the period for which such interest and Fees are payable.
The Index Rate shall be determined each day based upon the Index Rate
as in effect each day. Each determination by Agent of an interest rate
and Fees hereunder shall be conclusive, absent manifest error.
(d) So long as an Event of Default shall have occurred and
be continuing, the interest rates applicable to the Loans and the
Letter of Credit Fees shall be increased automatically by two percent
(2%) per annum above the rates of interest or the rate of such Fees
otherwise applicable hereunder ("Default Rate"), and all outstanding
Obligations shall bear interest at the Default Rate applicable to such
Obligations. Interest and Letter of Credit Fees at the Default Rate
shall accrue from the initial date of such Event of Default until that
Event of Default is cured or waived and shall be payable upon demand.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, and subject to the additional conditions
precedent set forth in Section 2.2, Borrower shall have the option to
(i) request that any Tranche A Revolving Credit Advances be made as a
LIBOR Loan, (ii) convert at any time all or any part of outstanding
Tranche A Revolving Loans (other than the Swing Line Loan) from Index
Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index
Rate Loan, subject to payment of LIBOR breakage costs in accordance
with Section 1.13(b) if such conversion is made prior to the expiration
of the LIBOR Period applicable thereto, or (iv) continue all or any
portion of any Tranche A Revolving Loan (other than the Swing Line
Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR
Period and the succeeding LIBOR Period of that continued Loan shall
commence on the day after the last day of the LIBOR Period of the Loan
to be continued. Under no circumstances shall the Tranche B Revolving
Loan or Swing Line Loan be a LIBOR Loan. Any Loan to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum
amount of $3,000,000 and integral multiples of $500,000 in excess of
such amount. Any such election must be made by 11:00 a.m. (New York
time) on the third (3rd) Business Day prior to (1) the date of any
proposed Advance which is to bear interest at the LIBOR Rate, (2) the
end of each LIBOR Period with respect to any LIBOR Loans to be
continued as such, or (3) the date on which Borrower wishes to convert
any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by
Borrower in such election. If no election is received with respect to
a LIBOR Loan by 11:00 a.m. (New York time) on the third (3rd) Business
Day prior to the end of the LIBOR Period with respect thereto (or if a
Default or an Event of Default shall have occurred and be continuing or
the additional conditions precedent set forth in Section 2.2 shall not
have been satisfied), that LIBOR Loan shall be converted to an Index
Rate Loan at the end of its LIBOR Period. Borrower must make such
election by notice to Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election
must be made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of Exhibit 1.5(e). No Loan may be
made as or converted into a LIBOR Loan which has a LIBOR Period greater
than one month until the earlier of (i) ninety (90) days after the
Closing Date, and (ii) Agents' completion of a syndication of the
Loans, satisfactory to Agents in their reasonable discretion.
(f) Notwithstanding anything to the contrary set forth in
this Section 1.5, if a court of competent jurisdiction determines in a
final order that the rate of interest payable hereunder exceeds the
highest rate of interest permissible under law (the "Maximum Lawful
Rate"), then so long as the Maximum Lawful Rate would be so exceeded,
the rate of interest payable hereunder shall be equal to the Maximum
Lawful Rate; provided, however, that if at any time thereafter the rate
of interest payable hereunder is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum Lawful
Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest which would have been
received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the
Closing Date as otherwise provided in this Agreement. Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the
manner provided in Sections 1.5(a) through (e) above, unless and until
the rate of interest again exceeds the Maximum Lawful Rate, and at that
time this paragraph shall again apply. In no event shall the total
interest received by any Lender pursuant to the terms hereof exceed the
amount which such Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to
the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made. If, notwithstanding the provisions of
this Section 1.5(f), a court of competent jurisdiction shall finally
determine that a Lender has received interest hereunder in excess of
the Maximum Lawful Rate, Agent shall, to the extent permitted by
applicable law, promptly apply such excess in the order specified in
Section 1.11 and thereafter shall refund any excess to Borrower or as
a court of competent jurisdiction may otherwise order.
1.6. Eligible Accounts. "Eligible Accounts" shall be the
aggregate of the unpaid portions of Accounts (net of any credits,
rebates, offsets, holdbacks or other adjustments or commissions payable
to third parties that are adjustments to such Accounts) (a) that
Borrower reasonably and in good faith determines to be collectible; (b)
that are with account debtors that (i) are not Affiliates of Borrower;
(ii) are Credit Card Providers who have agreed in writing to direct
all payments be made to the Collection Account, (iii) are not insolvent
or involved in any case or proceeding, whether voluntary or
involuntary, under any bankruptcy, reorganization, arrangement,
insolvency, adjustment of debt, dissolution, liquidation or similar law
of any jurisdiction and (iv) are, in the Agents' reasonable judgment,
creditworthy; (c) that are in payment of obligations that have been
fully performed and are not subject to dispute or any other similar
claims that would reduce the cash amount payable therefor; (d) that are
not subject to any pledge, restriction, security interest or other lien
or encumbrance other than those created by the Loan Documents and
Permitted Liens which are subordinate to the liens of the Agent; (e) in
which the Agent has a valid and perfected first priority security
interest; (f) that are not outstanding for more than five (5) Business
Days past the date the applicable Credit Card Provider is required to
make payment and that are not outstanding for more than ten (10)
Business Days past the date of sale of the underlying goods to a retail
customer in the ordinary course of business; (g) that are not due from
an account debtor located in Indiana, Minnesota or New Jersey unless
Borrower (A) has received a certificate of authority to do business and
is in good standing in such state or (B) has filed a notice of business
activities report with the appropriate office or agency of such state
for the current year; (h) that are not due from any single account
debtor if more than fifteen percent (15%) of the aggregate amount of
all Accounts owing from such account debtor would otherwise not be
Eligible Accounts; (i) that are payable in Dollars; (j) that are not
secured by a letter of credit unless the Agent has a prior perfected
security interest in such letters of credit; and (k) that are not
payable from an office outside of the United States. General criteria
for Eligible Accounts may be established and revised by the Agents from
time to time with respect to Accounts owing under arrangements which
were not in effect on or have been materially altered since the Closing
Date. Agents may, in their Permitted Discretion, from time to time,
upon three (3) days' prior notice to Borrower, establish Reserves with
respect to Eligible Accounts to the extent that the arrangements under
which such Eligible Accounts arise were not in effect on the Closing
Date and Agents reasonably determine that: (i) the dilution with
respect of the Accounts (excluding Accounts owing from Credit Card
Providers existing as of the Closing Date) for any period has increased
in any material respect or may be reasonably anticipated to increase in
any material respect above historical levels, or (ii) the general
creditworthiness of account debtors or other obligors of Borrower has
declined. In determining whether to establish Reserves with respect to
Eligible Accounts, Agents may consider events, conditions,
contingencies or risks which are also considered in determining
Eligible Accounts.
1.7. Eligible Inventory. "Eligible Inventory" shall be
Inventory owned by Borrower; provided that Eligible Inventory shall not
include any inventory (a) held on consignment, or not otherwise owned
by Borrower, (b) which is damaged or is subject to any legal
encumbrance other than Permitted Encumbrances, (c) which is not in the
possession of Borrower unless (i) Agents have received a waiver from
the party in possession (including, without limitation, with respect to
all consolidator locations) of such inventory in form and substance
reasonably satisfactory to Agents or (ii) such inventory is in transit
from one Permitted Inventory Location to another Permitted Inventory
Location, and the total duration of such transit time is not more than
three (3) Business Days, (d) which is subject to any lien, encumbrance
or security interest which is prior to the liens granted to Agent
(other than landlord's or lessor's liens under leases to which Borrower
is a party provided no amount secured by such lien has become due and
payable and not been paid), (e) as to which appropriate Uniform
Commercial Code financing statements showing Borrower as debtor and
Agent as secured party have not been filed in the proper filing office
or offices in order to perfect Agent's security interest therein, (f)
which has been shipped to a customer of Borrower regardless of whether
such shipment is on a consignment basis, (g) which is not located at a
Permitted Inventory Location unless such Inventory is in transit from
one Permitted Inventory Location to another Permitted Inventory
Location, and the total duration of such transit time is not more than
three (3) Business Days, (h) which consists of display items or packing
or shipping materials, manufacturing supplies, work-in process
Inventory or replacement parts, (i) which is not of a type for sale in
the ordinary course of Borrower's business, (j) which consists of
Hazardous Materials or goods that can only be transported or sold with
licenses that are not readily available, or (k) which is not covered by
casualty insurance acceptable to Agents. General criteria for Eligible
Inventory may be established and revised by Agents from time to time if
Agents reasonably determine that there has been a substantive change in
the shrinkage, character, composition or mix, markdowns or retail
markons and markups inconsistent with prior period practice, industry
standards or current business plans. Agents may in their Permitted
Discretion from time to time, upon three (3) days' prior notice to
Borrower establish Reserves with respect to Eligible Inventory to the
extent that Agents reasonably determine that (A) the liquidation value
of the Eligible Inventory, or any category thereof, has decreased , or
(B) the nature of the inventory has changed. In determining whether to
establish Reserves with respect to Eligible Inventory, Agents may
consider events, conditions, contingencies or risks which are also
considered in determining Eligible Inventory.
1.8. Cash Management Systems. On or prior to the Closing
Date, Borrower will establish and will maintain until the Termination
Date, the cash management systems described on Annex C (the "Cash
Management Systems").
1.9. Fees and Other Compensation. (a) Borrower shall pay
(i) to GE Capital, individually, the Fees specified in the GE Capital
Fee Letter, at the times specified for payment therein, and (ii) to
Paragon, individually, the Fees specified in the Paragon Fee Letter, at
the times specified for payment therein.
(b) As additional compensation for the Revolving Lenders,
Borrower agrees to pay to Agent, for the ratable benefit of such
Lenders based on the amount of such Lender's unused Commitment, in
arrears, on the first Business Day of each month prior to the
Commitment Termination Date and on the Commitment Termination Date,
compensation for Borrower's non-use of available funds in an amount
equal to the Applicable Unused Line Margin per annum (calculated on the
basis of a 360 day year for actual days elapsed) of the difference
between (x) the Maximum Amount (as it may be reduced from time to time)
and (y) the average for the period of the daily closing balances of the
Revolving Loan and the Swing Line Loan outstanding during the period
for which the such compensation is due.
(c) If Borrower prepays the Revolving Loan and reduces or
terminates the Revolving Loan Commitment, whether voluntarily or
involuntarily and whether before or after acceleration of the
Obligations, Borrower shall pay to Agent, for the benefit of Lenders as
liquidated damages and compensation for the costs of being prepared to
make funds available hereunder an amount determined by multiplying the
Applicable Percentage (as defined below) by the amount of the reduction
of the Revolving Loan Commitment. As used herein, the term "Applicable
Percentage" shall mean (x) one and one-half percent (1 1/2%), in the
case of a prepayment on or prior to the date occurring six months after
the Closing Date, (y) one percent (1%), in the case of a prepayment
after the date occurring six months after the Closing Date but on or
prior to the first anniversary of the Closing Date, and (z) one-half
percent (1/2%), in the case of a prepayment after the first anniversary
of the Closing Date but prior to the Commitment Termination Date.
Notwithstanding the foregoing, no prepayment fee shall be payable by
Borrower upon a mandatory prepayment made pursuant to Sections 1.3(b)
or 1.16(c); provided that in the case of prepayments made pursuant to
Section 1.3(b)(iii) or (b)(iv), the transaction giving rise to the
applicable prepayment is expressly permitted under Section 6.
1.10. Receipt of Payments. Borrower shall make each
payment under this Agreement not later than 2:00 p.m. (New York time)
on the day when due in immediately available funds in Dollars to the
Collection Account. For purposes of computing interest and Fees and
determining Borrowing Availability or Net Borrowing Availability as of
any date, all payments shall be deemed received on the day of receipt
of immediately available funds therefor in the Collection Account prior
to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York
time on any Business Day shall be deemed to have been received on the
following Business Day.
1.11. Application and Allocation of Payments;
Subordination.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, (i) payments consisting of proceeds of
Accounts received in the ordinary course of business shall be applied
to first, the Swing Line Loan, second, ratably to interest on the
Tranche A Revolving Loan and the Tranche B Revolving Loan and last,
ratably to principal on the Tranche A Revolving Loan and the Tranche B
Revolving Loan; (ii) voluntary prepayments shall be applied as
determined by Borrower, subject to the provisions of Section 1.3(a);
and (iii) mandatory prepayments shall be applied as set forth in
Sections 1.3(c) and 1.3(d). All payments and prepayments applied to a
particular Loan shall be applied ratably to the portion thereof held by
each Lender as determined by its Pro Rata Share. As to each other
payment, and as to all payments made when a Default or Event or Default
shall have occurred and be continuing or following the Commitment
Termination Date, Borrower hereby irrevocably waives the right to
direct the application of any and all payments received from or on
behalf of Borrower, and Borrower hereby irrevocably agrees that Agent
shall have the continuing exclusive right to apply any and all such
payments against the Obligations as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any
other books and records. In the absence of a specific determination by
Agent with respect thereto, payments shall be applied to amounts then
due and payable in the following order: (1) to Fees and Agents'
expenses reimbursable hereunder; (2) to interest on the Swing Line
Loan; (3) to principal payments on the Swing Line Loan; (4) ratably to
interest on the Tranche A Revolving Loan and the Tranche B Revolving
Loan; (5) ratably to principal payments on the Tranche A Revolving Loan
and the Tranche B Revolving Loan and to provide cash collateral for
Letter of Credit Obligations in the manner described in Annex B,
ratably to the aggregate, combined principal balance of such Loans and
outstanding Letter of Credit Obligations; and (6) to all other
Obligations including expenses of Lenders to the extent reimbursable
under Section 11.3.
(b) Each holder of the Tranche B Revolving Loan by
acceptance thereof acknowledges and agrees that the Tranche B Revolving
Loan is and shall be expressly subordinate and junior in right of
payment to all of the Senior Obligations in the manner and to the
extent provided herein. In the event of any Default or Event of
Default (other than under Section 8.1(o), (q) or (x)) and for so long
(and only so long) as such Default or Event of Default has not been
cured or waived, so long as any Senior Obligations are outstanding, the
holders of Senior Obligations shall be entitled to receive payment in
full in cash of all Senior Obligations before the holders of the
Tranche B Revolving Loan are entitled to receive any direct or indirect
payment or distribution of any kind or character, whether in cash,
other property or by set-off or otherwise, on or in respect of
principal of, interest on, or other amounts owing in respect of, the
Tranche B Revolving Loan ("payment or distribution"), and to that end,
so long as any Senior Obligations remain outstanding, any payment or
distribution to which the holders of the Tranche B Revolving Loan would
be entitled but for the provisions hereof (except distributions of
securities which are subordinate and junior in right of payment to the
Senior Obligations at least to the same extent as provided herein)
shall be delivered to the holders of Senior Obligations to the extent
necessary to make payment in full of all Senior Obligations, after
giving effect to any concurrent payment or distribution to or for the
holders of Senior Obligations in respect thereof. Any subordination
resulting from Section 8.1(t) shall be limited to the amount of the
Lien enforced against the Collateral unless and until such Event of
Default results in an acceleration of the Loans. Upon the exercise of
any rights and remedies by the Agent under the Loan Documents with
respect to the Collateral, all Proceeds of the Collateral shall first
be applied by Agent to the Senior Obligations until such Obligations
have been paid in full in cash and all Letter of Credit Obligations
have been cash collateralized, canceled or backed by stand-by letters
of credit in accordance with Annex B and then to the Obligations in
respect of the Tranche B Revolving Loan. In the event that any holder
of the Tranche B Revolving Loan shall receive any payment or
distribution in respect of the Tranche B Revolving Loan which the
holders thereof are not permitted to receive and retain pursuant to
this Agreement, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over promptly on demand to, the Agent
for the benefit of the holders of the Senior Obligations, for
application to the payment of the Senior Obligations until the same
shall have been paid in full in cash, after giving effect to any
concurrent payment or distribution to the holders of the Senior
Obligations.
(c) Notwithstanding the provisions of Section 1.11(b) and
Section 1.3(c):
(i) at any time when there is no Default or Event of Default,
Tranche B Revolving Lenders shall be entitled to recover first from any
proceeds as a result of the sale of any Real Estate an amount equal to
the aggregate amount of principal, interest and fees owing in respect
of all Tranche B Real Estate Advances then outstanding ("Tranche B Real
Estate Advance Obligations") and the excess, if any, of such proceeds
shall be applied in accordance with Section 1.3(c);
(ii) during the time any Liquidation Default shall have
occurred and be continuing Tranche B Revolving Lenders shall be
entitled to recover first from any such proceeds an amount equal to the
Tranche B Real Estate Advance Obligations plus (aa) $3,000,000, in the
event that the aggregate principal amount then outstanding of all
Tranche B Real Estate Advances is less than or equal to $10,000,000 and
(bb) $6,000,000, in the event that the aggregate principal amount then
outstanding of all Tranche B Real Estate Advances is greater than
$10,000,000; provided that in no event shall the Tranche B Revolving
Lenders receive in the aggregate more than $6,000,000 in excess of the
amounts used to repay Tranche B Real Estate Advance Obligations
pursuant to this clause (ii), and the excess, if any, of such proceeds
shall be applied in accordance with Section 1.11(b); and
(iii) during the time any Default or Event of Default (other
than a Liquidation Default) shall have occurred or be continuing
Tranche B Revolving Lenders shall be entitled to recover first from any
such proceeds an amount equal to the Tranche B Real Estate Advance
Obligations and the excess, if any, of such proceeds, shall be applied
in accordance with Section 1.11(b).
(d) Agent is authorized to, and at its sole election may,
charge to the Revolving Loan balance on behalf of Borrower and cause to
be paid all Fees, expenses, Charges, costs (including insurance
premiums in accordance with Section 5.4(a)) and interest and principal,
other than principal of the Revolving Loan, owing by Borrower under
this Agreement or any of the other Loan Documents if and to the extent
Borrower fails to promptly pay any such amounts as and when due, even
if such charges would cause the aggregate balance of the Revolving Loan
and the Swing Line Loan to exceed Borrowing Availability. At Agent's
option and to the extent permitted by law, any charges so made shall
constitute part of the Revolving Loan hereunder. Agent shall provide
Borrower with same day written notice of any charges made to the
Revolving Loan balance pursuant to this Section 1.11(c), provided,
however, the failure to deliver such notice shall not in any manner
affect Agent's right to charge the Revolving Loan.
1.12. Loan Account and Accounting. Agent shall maintain
a loan account (the "Loan Account") on its books to record: all
Advances, all payments made by Borrower, and all other debits and
credits as provided in this Agreement with respect to the Loans or any
other Obligations. All entries in the Loan Account shall be made in
accordance with Agent's customary accounting practices as in effect
from time to time. The balance in the Loan Account, as recorded on
Agent's most recent printout or other written statement, shall, absent
manifest error, be presumptive evidence of the amounts due and owing to
Agent and Lenders by Borrower; provided that any failure to so record
or any error in so recording shall not limit or otherwise affect
Borrower's duty to pay the Obligations. Agent shall render to Borrower
a monthly accounting of transactions with respect to the Loans setting
forth the balance of the Loan Account. Unless Borrower notifies Agent
in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after
the date thereof, each and every such accounting shall, absent manifest
error, be deemed final, binding and conclusive upon Borrower in all
respects as to all matters reflected therein. Only those items
expressly objected to in such notice shall be deemed to be disputed by
Borrower. Notwithstanding any provision herein contained to the
contrary, any Lender may elect (which election may be revoked) to
dispense with the issuance of Notes to that Lender and may rely on the
Loan Account as evidence of the amount of Obligations from time to time
owing to it.
1.13. Indemnity.
(a) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Agents,
Lenders and their respective Affiliates, and each such Person's
respective officers, directors, partners, members, employees,
attorneys, advisors, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and reasonable expenses (including
reasonable attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal)
which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended,
suspended or terminated under this Agreement and the other Loan
Documents and the administration of such credit, and in connection with
or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith,
including any and all Environmental Liabilities and legal costs and
expenses arising out of or incurred in connection with disputes between
or among any parties to any of the Loan Documents unless such dispute
is among any of the parties hereto other than the Credit Parties
(collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified
Person to the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense that is determined by a court of
competent jurisdiction by final and nonappealable judgment to have
resulted directly from that Indemnified Person's gross negligence,
willful misconduct or breach of the terms of this Agreement. Agents
and Lenders agree not to settle or compromise any Indemnified
Liabilities other than in a commercially reasonable manner. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO
ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A
RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on
the terms provided herein, if (i) any LIBOR Loans are repaid in whole
or in part prior to the last day of any applicable LIBOR Period
(whether that repayment is made pursuant to any provision of this
Agreement or any other Loan Document or is the result of acceleration,
by operation of law or otherwise); (ii) Borrower shall default in
payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) Borrower shall default in making any borrowing of,
conversion into or continuation of LIBOR Loans after Borrower has given
notice requesting the same in accordance herewith; or (iv) Borrower
shall fail to make any prepayment of a LIBOR Loan after Borrower has
given a notice thereof in accordance herewith, Borrower shall indemnify
and hold harmless each Lender from and against all losses, costs and
expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or
expense arising from the reemployment of funds obtained by it or from
fees payable to terminate deposits from which such funds were obtained.
For the purpose of calculating amounts payable to a Lender under this
subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest
at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan
and having a maturity comparable to the relevant LIBOR Period;
provided, however, that each Lender may fund each of its LIBOR Loans in
any manner it sees fit, and the foregoing assumption shall be utilized
only for the calculation of amounts payable under this subsection.
This covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder. As
promptly as practicable under the circumstances, each Lender shall
provide Borrower with its written calculation of all amounts payable
pursuant to this Section 1.13(b), and such calculation shall be binding
on the parties hereto unless Borrower shall object in writing within
ten (10) Business Days of receipt thereof, specifying the basis for
such objection in reasonable detail.
1.14. Access; Appraisals; Mystery Shopping.
(a) Each Credit Party which is a party hereto shall, during
normal business hours, from time to time, upon reasonable advance
notice, three times each calendar year, or more frequently as
determined by Agents in their reasonable good faith judgment as being
necessary in light of any factor which could adversely affect the
ability of Lenders to receive payment in full of the Obligations: (a)
provide Agents and any of their officers, employees and agents access
to its properties, facilities, advisors and employees (including
officers) of each Credit Party and to the Collateral, (b) permit
Agents, and any of their officers, employees and agents, to inspect,
audit and make extracts from any Credit Party's books and records, and
(c) permit Agents, and their officers, employees and agents, to
inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Credit Party. If a
Default or Event of Default shall have occurred and be continuing or if
access is necessary to preserve or protect the Collateral as reasonably
determined by the Agents in good faith, each such Credit Party shall
provide such access to Agents and to each Lender at all times and
without advance notice. Furthermore, so long as any Event of Default
shall have occurred and be continuing, Borrower shall provide Agents
and each Lender with access to its suppliers and customers. Subject to
the foregoing, Each Credit Party shall make available to Agents and
their counsel, as quickly as is possible under the circumstances,
originals or copies of all books and records which Agents may request.
Each Credit Party shall deliver any document or instrument necessary
for Agents, as they may from time to time request, to obtain records
from any service bureau or other Person which maintains records for
such Credit Party, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by
such Credit Party to the extent necessary as determined by such Credit
Party's reasonable business judgment. Agents will give Lenders at
least fifteen (15) days' prior written notice of regularly scheduled
audits. Representatives of other Lenders may accompany Agents'
representatives on regularly scheduled audits at no charge to Borrower.
(b) Agents, three times each calendar year, or more
frequently as determined by Agents in their reasonable good faith
judgment as being necessary in light of any factor which could
adversely affect the ability of Lenders to receive payment in full of
the Obligations, may obtain appraisal reports in form and substance
satisfactory to Agents stating (i) the then current fair market,
orderly liquidation and forced liquidation value of all or any part of
the Collateral, and (ii) the then current value of each of Holdings,
Borrower and their Subsidiaries.
(c) Agent or Oversight Agent may from time to time conduct
"mystery shopping" visits to any or all of Borrower's or any of its
Subsidiaries' business premises. A copy of any written report of the
results of such "mystery shopping" prepared by Agent, Oversight Agent
or any third party "mystery shopper" engaged under this Section 1.14(c)
shall be provided to Borrower.
(d) All reasonable expenses incurred by Agents in connection
with this Section 1.14 shall be reimbursed by Borrower pursuant to
Section 11.3 hereof, provided that so long as no Event of Default shall
have occurred and be continuing, Borrower shall not be required to
reimburse expenses incurred under this Section 1.14 which exceed
$60,000 in the aggregate, plus reasonable out-of-pocket expenses, per
annum.
1.15. Taxes.
(a) Any and all payments by Borrower hereunder or under the
Notes shall be made, in accordance with this Section 1.15, free and
clear of and without deduction for any and all present or future Taxes.
If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under the Notes, (i) the sum
payable shall be increased as much as shall be necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 1.15) Agent or Lenders, as
applicable, receive an amount equal to the sum they would have received
had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable
law. Upon Agent's reasonable request, Borrower shall furnish to Agent
evidence of the payment thereof in a form reasonably acceptable to
Agent.
(b) Each Credit Party that is a signatory hereto shall
indemnify and, within ten (10) days of demand therefor, pay Agent and
each Lender for the full amount of Taxes (including any Taxes imposed
by any jurisdiction on amounts payable under this Section 1.15) paid by
Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to
be made under this Agreement or under the Notes are exempt from United
States withholding tax under an applicable statute or tax treaty shall
provide to Borrower and Agent a properly completed and executed IRS
Form 4224 or Form 1001 or other applicable form, certificate or
document prescribed by the IRS or the United States certifying as to
such Foreign Lender's entitlement to such exemption (a "Certificate of
Exemption"). Any foreign Person that seeks to become a Lender under
this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder. No foreign Person may
become a Lender hereunder if such Person is unable to deliver a
Certificate of Exemption.
1.16. Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law,
treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or
similar requirements or compliance by any Lender with any request or
directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case,
adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing
the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on
such Lender's capital as a consequence of its obligations hereunder,
then Borrower shall from time to time upon ten (10) days' written
demand by such Lender (with a copy of such demand to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation
thereof submitted by such Lender to Borrower and to Agent shall, absent
manifest error, be final, conclusive and binding for all purposes.
Each Lender shall allocate the effect of such reduction among its
customers in good faith.
(b) If, due to either (i) the enactment of or any change in
any law or regulation (or any change in the interpretation thereof) or
(ii) the compliance with any guideline or request from any central bank
or other Governmental Authority (whether or not having the force of
law), in each case adopted after the Closing Date, there shall be any
increase in the cost to any Lender of agreeing to make or making,
funding or maintaining any Loan, then Borrower shall from time to
time, upon ten (10) days' written demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to Borrower and to Agent by such Lender, shall be conclusive
and binding on Borrower for all purposes, absent error. Each Lender
agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such
increased cost, the affected Lender shall, to the extent not
inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrower pursuant to this
Section 1.16(b). Each Lender shall allocate such increased costs among
its customers in good faith.
(c) Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in any law or regulation
(or any change in the interpretation thereof) shall make it unlawful,
or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender to agree to make or to make or to
continue to fund or maintain any LIBOR Loan, then, unless that Lender
is able to make or to continue to fund or to maintain such LIBOR Loan
at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to
Borrower through Agent, (i) the obligation of such Lender to agree to
make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) Borrower shall forthwith prepay in full all
outstanding LIBOR Loans owing to such Lender, together with interest
accrued thereon, unless Borrower, within five (5) Business Days after
the delivery of such notice and demand, converts all such Loans into a
Loan bearing interest based on the Index Rate.
(d) Replacement of Lender in Respect of Increased Costs.
Within fifteen (15) days after receipt by Borrower of written notice
and demand from any Lender (an "Affected Lender") for payment of
additional amounts or increased costs as provided in Section 1.15(a),
1.16(a) or 1.16(b), Borrower may, at its option, notify Agent and such
Affected Lender of its intention to replace the Affected Lender. So
long as no Default or Event of Default shall have occurred and be
continuing, Borrower, with the consent of Agent, may obtain, at
Borrower's expense, a replacement Lender ("Replacement Lender") for the
Affected Lender, which Replacement Lender must be an Eligible Assignee
in the case of a Tranche A Revolving Lender being replaced. If
Borrower obtains a Replacement Lender following notice of its intention
to do so, the Affected Lender must sell and assign its Loans and
Commitments to such Replacement Lender for an amount equal to the
principal balance of all Loans held by the Affected Lender and all
accrued interest and Fees with respect thereto through the date of such
sale, provided that Borrower shall have reimbursed such Affected Lender
for the additional amounts or increased costs that it is entitled to
receive under this Agreement through the date of such sale and
assignment. Notwithstanding the foregoing, Borrower shall not have the
right to obtain a Replacement Lender if the Affected Lender rescinds
its demand for increased costs or additional amounts within fifteen
(15) days following its receipt of Borrower's notice of intention to
replace such Affected Lender. Furthermore, if Borrower gives a notice
of intention to replace and does not so replace such Affected Lender,
Borrower's rights under this Section 1.16(d) shall terminate and
Borrower shall promptly pay all increased costs or additional amounts
demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a)
and 1.16(b).
1.17. Single Loan. All Loans to Borrower and all of the
other Obligations of Borrower arising under this Agreement and the
other Loan Documents shall constitute one general obligation of
Borrower secured, until the Termination Date, by all of its Collateral.
1.18. Priority of Obligations and Lenders' Liens.
(a) The priority of Lenders' Liens on the Collateral shall
be set forth in the Interim Order and the Final Order.
(b) All Obligations shall constitute administrative expenses
of Borrower in the Chapter 11 Case, with administrative priority and
senior secured status under Sections 364(c)(1)and 364(d) of the
Bankruptcy Code. Subject to the Senior Claims and allowed claims as to
the Reserve Fund up to the Reserve Fund Amount (all of the foregoing as
defined in the Orders), such administrative claim shall have priority
over all other costs and expenses of the kinds specified in, or ordered
pursuant to, Sections 105, 326, 330, 331, 503(b), 506(c), 507(a),
507(b), 553, 726 or any other provision of the Bankruptcy Code and
shall at all times be senior to the rights of the Credit Parties, the
estates of Credit Parties, and any successor trustee or estate
representative in the Chapter 11 Case or any subsequent proceeding or
case under the Bankruptcy Code. The liens and security interests
granted to Lenders, and the priorities accorded to the Obligations
shall have the priority and senior secured status afforded by Section
364(d)(1) of the Bankruptcy Code (all as more fully set forth in the
Orders) senior to all claims and interests other than the Senior
Claims.
(c) Lenders' Liens on the Collateral and its administrative
claim under Sections 364(c)(1) and 364(d) of the Bankruptcy Code
afforded the Obligations shall, following the occurrence and during the
continuation of an Event of Default, be subject to only the allowed
claims with respect to the Reserve Fund up to the Reserve Fund Amount,
all as more fully set forth in the Orders. The Reserve Fund Escrow
Agent (as defined in the Orders) shall hold and maintain the Reserve
Fund in trust for the benefit of the Bankruptcy Professionals (defined
below) and shall not disburse or encroach upon the same unless and
until ordered to do so by the Bankruptcy Court or to pay court-approved
fees and expenses in the event the Credit Parties have insufficient
cash flow to pay such amounts when due. Such Reserve Fund shall be
subject to and designed for the payment of unpaid fees and expenses
incurred on and after the Petition Date by professionals retained under
Sections 327 or 1103 of the Bankruptcy Code by the Credit Parties or
the Committees (the "Bankruptcy Professionals"), and any statutorily
mandated costs and fees of the United States Trustee and the Clerk of
the Bankruptcy Court including, without limitation, those pursuant to
28 U.S.C. 1930(a) with respect to the Chapter 11 Case (collectively,
the "Professional Fees") in the event the Credit Parties have
insufficient cash flow to pay such amounts when due up to a maximum
aggregated amount not exceeding the Reserve Fund Amount. For purposes
of this Section 1.18(c), valid claims upon the Reserve Fund shall not
include (i) any other claims that are or may be senior to or pari passu
with any claims upon the Reserve Fund or any Professional Fees and
expenses of a Chapter 7 trustee, (ii) any pre-petition retainer paid to
Credit Parties' counsel in connection with or related to the Chapter 11
Case, or (iii) any fees and/or expenses of the Bankruptcy Professionals
incurred in connection with the commencement or continuation of any
suit, motion action or other proceeding challenging the extent,
validity, perfection, enforceability or priority of the Lenders' claims
or liens arising under or in connection with the Pre-Petition Loan
Agreement.
20 CONDITIONS PRECEDENT
2.1. Conditions to the Initial Loans. No Lender shall be
obligated to make any Loan or incur any Letter of Credit Obligations on
the Closing Date, or to take, fulfill, or perform any other action
hereunder, until the following conditions have been satisfied or
provided for in a manner reasonably satisfactory to Agent and Lenders,
or waived in writing by Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or
counterparts hereof shall have been duly executed by, and delivered to,
Borrower, Agents and Lenders; and Agents shall have received such
documents, instruments, agreements and legal opinions as Agents shall
reasonably request in connection with the transactions contemplated by
this Agreement and the other Loan Documents, including all those listed
in the Closing Checklist attached hereto as Annex D, each in form and
substance reasonably satisfactory to Agents provided that if Agents
shall not have received such documents on the Closing Date as
reasonably requested by them and the delivery of such documents is not
governed by a post-closing side letter, Borrower's failure to have
delivered the same on the Closing Date shall not be deemed a Default
provided (i) Borrower's failure to deliver such documents is not a
breach of any other provision of this Agreement, and (ii) Borrower and
Agents shall act reasonably in agreeing upon a reasonable period of
time within which Borrower shall deliver such documents to Agents.
(b) [Intentionally Deleted.]
(c) Approvals. Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents
and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this
Agreement and the other Loan Documents and the consummation of the
Related Transactions or (ii) an officer's certificate in form and
substance satisfactory to Agent affirming that no such consents or
approvals are required.
(d) Opening Availability. The Eligible Accounts and
Eligible Inventory of Borrower supporting the initial Revolving Credit
Advance and the initial Letter of Credit Obligations incurred and the
amount of the Reserves to be established on the Closing Date shall be
sufficient in value, as determined by Agents, to provide Borrower with
Net Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the incurrence of any initial Letter of
Credit Obligations and the consummation of the Related Transactions (on
a pro forma basis and expenses and liabilities being paid in the
ordinary course of business and without acceleration of sales) of at
least $25,000,000.
(e) Payment of Fees. Borrower shall have paid the Fees
required to be paid on the Closing Date in the respective amounts
specified in Section 1.9 (including the Fees specified in the GE
Capital Fee Letter and the Paragon Fee Letter), and shall have
reimbursed Agents for all reasonable fees, costs and expenses of
closing presented as of the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital
structure of each Credit Party and the terms and conditions of all
Indebtedness of each Credit Party shall be acceptable to Agent in its
reasonable discretion.
(g) The automatic stay shall have been modified to permit
the creation and perfection of Lenders' Liens and security interests
and shall have been automatically vacated to permit enforcement of
Lenders' rights and remedies under this Agreement subject to the terms
hereof and the Orders.
(h) The Interim Order, in form and substance satisfactory to
Agents, approving the transactions contemplated hereby and granting a
first priority perfected security interest in the Collateral subject
only to Senior Claims (as defined in the Interim Order) and the Carve-
Out Expenses up to the Reserve Fund Amount shall have been entered by
the Bankruptcy Court.
(i) Agents shall be satisfied with the corporate structure,
capital structure, debt instruments, material contracts, and governing
documents of each Credit Party, and the tax effects resulting from the
commencement of the Chapter 11 Case and the credit facility evidenced
by this Agreement.
2.2. Further Conditions to Each Loan. Except as otherwise
expressly provided herein, no Lender shall be obligated to fund any
Loan, convert or continue any Loan as a LIBOR Loan or incur any Letter
of Credit Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party
contained herein or in any of the other Loan Documents shall be untrue
or incorrect as of such date, except to the extent that such
representation or warranty expressly relates to an earlier date and
except for changes therein expressly permitted or expressly
contemplated by this Agreement; or
(b) Any event or circumstance having a Material Adverse
Effect shall have occurred since the date hereof; or
(c) (i) Any Event of Default shall have occurred and be
continuing or would result after giving effect to any Loan (or the
incurrence of any Letter of Credit Obligations), or (ii) a Default
shall have occurred and be continuing or would result after giving
effect to any Loan, and (A) Agent or Requisite Lenders, or (B) in the
event of a Default which would under Section 8.2(a)(ii) provide the
Tranche B Revolving Lenders with the right to suspend their obligation
to make Tranche B Revolving Credit Advances, Requisite Tranche B
Lenders, shall have determined not to make any Loan or incur any Letter
of Credit Obligation so long as that Default is continuing; or
(d) After giving effect to any Advance (or the incurrence of
any Letter of Credit Obligations), the outstanding principal amount of
the Tranche A Revolving Loan would exceed the lesser of (i) the Tranche
A Borrowing Base and the Maximum Tranche A Amount, less, in each case,
the then outstanding principal amount of the Swing Line Loan, less the
sum of Letter of Credit Obligations or (ii) the outstanding principal
amount of the Tranche B Revolving Loan would exceed the lesser of the
Tranche B Borrowing Base and the Maximum Tranche B Amount; or
(e) After giving effect to any Swing Line Advance, the
outstanding principal amount of the Swing Line Loan would exceed Swing
Line Availability. The request and acceptance by Borrower of the
proceeds of any Loan, the incurrence of any Letter of Credit
Obligations or the conversion or continuation of any Loan into, or as,
a LIBOR Loan, as the case may be, shall be deemed to constitute, as of
the date of such request or acceptance, (i) a representation and
warranty by Borrower that the conditions in this Section 2.2 have been
satisfied and (ii) a reaffirmation by Borrower of the granting and
continuance of Agent's Liens, on behalf of itself and Lenders, pursuant
to the Collateral Documents; or
(f) (i) The Bankruptcy Court shall not have entered the
Final Order on or before the date that is 25 days after the Petition
Date, (ii) the Bankruptcy Court shall not have entered the Final Order
following the expiration of the Interim Order, or (iii) the Interim
Order or the Final Order, as the case may be, shall have been vacated,
reversed, modified or amended without Lenders' consent, or an appeal of
any such order shall have been timely filed and a stay of such order
pending appeal shall not be presently effective.
30 REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of
Credit Obligations, the Credit Parties executing this Agreement,
jointly and severally, make the following representations and
warranties to Agent and each Lender with respect to all Credit Parties,
each and all of which shall survive the execution and delivery of this
Agreement. Notwithstanding anything to the contrary set forth in this
Article 3, it is understood and agreed that each of the representations
and warranties made in this Article 3 are and shall be (i) subject to
(x) compliance by the Credit Parties with any applicable provisions of
the Bankruptcy Code and (y) the entry of the Interim Order and the
Final Order, and (ii) qualified to the extent (x) noncompliance results
from the commencement of the Chapter 11 Case and the actions,
proceedings and other matters related thereto, or (y) noncompliance is
permitted or compliance is prohibited by the Bankruptcy Code or the
Bankruptcy Court.
3.1. Corporate Existence; Compliance with Law. Each Credit
Party (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (b) is
duly qualified to conduct business and is in good standing in each
other jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses,
damages or liabilities in excess of $50,000; (c) has the requisite
corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now,
heretofore and proposed to be conducted; (d) subject to specific
representations regarding Environmental Laws, has all material
licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter
and by-laws; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in
compliance with all applicable provisions of law, except where the
failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.2. Executive Offices; FEIN. As of the Closing Date, the
current location of each Credit Party's chief executive office and
principal place of business, as well as the location of Borrower's
Stores, warehouses and corporate books and records, is set forth in
Disclosure Schedule (3.2). In addition, Disclosure Schedule (3.2)
lists the federal employer identification number of each Credit Party.
3.3. Corporate Power, Authorization, Enforceable Obligations.
The execution, delivery and performance by each Credit Party of the
Loan Documents to which it is a party and the creation of all Liens
provided for therein: (a) are within such Person's corporate power; (b)
have been duly authorized by all necessary or proper corporate and
shareholder action; (c) do not contravene any provision of such
Person's charter or bylaws; (d) do not violate any law or regulation,
or any order or decree of any court or Governmental Authority; (e) have
been, or by the Closing Date will be, duly authorized by the Bankruptcy
Court; (f) do not conflict with or result in the breach or termination
of, constitute a default under or accelerate or permit the acceleration
of any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (g) do not result
in the creation or imposition of any Lien upon any of the property of
such Person other than those in favor of Agent, on behalf of itself and
Lenders, pursuant to the Loan Documents; and (h) do not require the
consent or approval of any Governmental Authority or any other Person,
except for those referred to in Section 2.1(c), all of which will have
been duly obtained, made or complied with prior to the Closing Date.
On or prior to the Closing Date, each of the Loan Documents shall have
been duly executed and delivered by each Credit Party thereto, and each
such Loan Document shall constitute a legal, valid and binding
obligation of such Credit Party enforceable against it in accordance
with its terms, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditor's rights and except to
the extent that the availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
3.4. Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning Holdings and its
Subsidiaries which are referenced below have been prepared in
accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to
unaudited Financial Statements, for the absence of footnotes and normal
year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates
thereof and the results of their operations and cash flows for the
periods then ended.
(a) The following Financial Statements attached hereto as
Disclosure Schedule (3.4) have been delivered on the date hereof:
(i) The audited consolidated balance sheets at January
30, 1999 and the related statements of income and cash flows of
Holdings and its Subsidiaries for the Fiscal Years then ended,
certified by Arthur Andersen LLP.
(ii) The unaudited balance sheet(s) at May 29, 1999 and
the related statement(s) of income and cash flows of Holdings and
its Subsidiaries for the four (4) Fiscal Months then ended.
3.5. Material Adverse Effect. Since January 30, 1999, (a) no
Credit Party has incurred any obligations, contingent or non-contingent
liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments which are not reflected in the
Projections, alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, (b) no contract, lease or other
agreement or instrument has been entered into by any Credit Party or
has become binding upon any Credit Party's assets and no law or
regulation applicable to any Credit Party has been adopted which has
had or could reasonably be expected to have a Material Adverse Effect,
and (c) no Credit Party is in default and to the best of Borrower's
knowledge no third party is in default under any material contract,
lease or other agreement or instrument, which alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect. Except
as described in Disclosure Schedule (3.5), between January 30, 1999 and
the Closing Date no event has occurred, which alone or together with
other events, could reasonably be expected to have a Material Adverse
Effect.
3.6. Ownership of Property; Liens. As of the Closing Date,
the real estate ("Real Estate") listed on Disclosure Schedule (3.6(a))
constitutes all of the real property owned, leased, subleased, or used
by any Credit Party. Each Credit Party owns good and marketable fee
simple title to all of its owned real estate, and valid and marketable
leasehold interests in all of its leased Real Estate, all as described
on Disclosure Schedule (3.6(a)), and copies of all leases for Stores
located in Virginia, Pennsylvania, Florida, New Jersey and Washington
and copies of all other leases requested by Agents have been delivered
to Agents. Except as described in Disclosure Schedule (3.6(b)), none
of Holdings, Borrower or their Subsidiaries are in default or violation
beyond any applicable notice or cure period, or have received any
notice or threat of cancellation, in respect of any leases to which
such Person is a party. Borrower and Holdings hereby authorize Agents
at any time and from time to time to contact any of their landlords in
order to confirm the continued compliance of Holdings, Borrower or
their Subsidiaries with the terms and conditions of the relevant
leases. Disclosure Schedule (3.6(c)) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or
assignor as of the Closing Date. Each Credit Party also has good and
marketable title to, or valid leasehold interests in, all of its
personal properties and assets. None of the properties and assets of
any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions
known to any Credit Party that may result in any Liens (including Liens
arising under Environmental Laws) other than Permitted Encumbrances and
mechanic liens in the approximate amount of $200,000 filed against the
Borrower's property located in the National Press Building in
Washington D.C. Agents acknowledge that there is located in
Borrower's Stores and warehouses (x) certain Inventory and other assets
owned by various third-party licensees operating leased departments in
Borrower's Stores pursuant to the license agreements described on
Disclosure Schedule (3.6(d)) and (y) certain Equipment which has been
leased to Borrower by third parties. Except as described in Disclosure
Schedule (3.6(b)), Borrower has not granted, or been granted, any
purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate. No portion of any Credit Party's
Real Estate has suffered any material damage by fire or other casualty
loss which has not heretofore been repaired and restored in all
material respects to its original condition or otherwise remedied. As
of the Closing Date, all material permits required to have been issued
or appropriate to enable the Real Estate to be lawfully occupied and
used for all of the purposes for which they are currently occupied and
used have been lawfully issued and are in full force and effect.
3.7. Labor Matters. As of the Closing Date (a) no strikes or
other material labor disputes against any Credit Party are pending or,
to any Credit Party's knowledge, threatened; (b) hours worked by and
payment made to employees of each Credit Party comply with the Fair
Labor Standards Act and each other federal, state, local or foreign law
applicable to such matter; (c) all payments due from any Credit Party
for employee health and welfare insurance have been paid or accrued as
a liability on the books of such Credit Party; (d) except as set forth
in Disclosure Schedule (3.7), no Credit Party is a party to or bound by
any collective bargaining agreement, management agreement, consulting
agreement or any employment agreement (and true and complete copies of
any agreements described on Disclosure Schedule (3.7) have been
delivered to Agent); (e) except as described in Disclosure Schedule
3.7, there is no organizing activity involving any Credit Party pending
or, to any Credit Party's knowledge, threatened by any labor union or
group of employees; (f) there are no representation proceedings pending
or, to any Credit Party's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any
Credit Party has made a pending demand for recognition; and (g) except
as set forth in Disclosure Schedule (3.7), there are no complaints or
charges against any Credit Party pending or, to the knowledge of any
Credit Party, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by any Credit
Party of any individual.
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness. Except as set forth in Disclosure Schedule (3.8), no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other
Person. The stockholders having beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities Exchange Commission
under the Securities Exchange Act of 1934, as amended) of 5% or more of
the issued and outstanding Stock of each Credit Party as of May 5,
1999, together with the amount of such ownership as of such date, are
set forth in Disclosure Schedule (3.8). No Credit Party has been
notified since May 5, 1999 of any change to the information set forth
in Disclosure Schedule (3.8). Except as described on Disclosure
Schedule (3.8), there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which any Credit
Party may be required to issue, sell, repurchase or redeem any of its
Stock or other equity securities or any Stock or other equity
securities of its Subsidiaries. All outstanding Indebtedness of each
Credit Party as of the Closing Date is described in Section 6.3
(including Disclosure Schedule (6.3)). None of the Credit Parties
other than Borrower has any material assets (except Stock of their
Subsidiaries) or any Indebtedness or Guaranteed Indebtedness (except
the Obligations and in the case of Holdings, consisting of numerous
guarantees by Holdings of the obligations of Borrower under real estate
and personal property leases and other contracts.
3.9. Government Regulation. No Credit Party is an
"investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940 as amended. No Credit
Party is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Indebtedness or
to perform its obligations hereunder. The making of the Loans by
Lenders to Borrower, the incurrence of the Letter of Credit Obligations
on behalf of Borrower, the application of the proceeds thereof and
repayment thereof and the consummation of the Related Transactions will
not violate any provision of any such statute or any rule, regulation
or order issued by the Securities and Exchange Commission.
3.10. Margin Regulations. No Credit Party is engaged,
nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin security" as such terms are defined in
Regulation U or G of the Federal Reserve Board as now and from time to
time hereafter in effect (such securities being referred to herein as
"Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or
carry any Margin Stock or for any other purpose which might cause any
of the Loans or other extensions of credit under this Agreement to be
considered a "purpose credit" within the meaning of Regulation G, T, U
or X of the Federal Reserve Board. No Credit Party will take or permit
to be taken any action which might cause any Loan Document to violate
any regulation of the Federal Reserve Board.
3.11. Taxes. All tax returns, reports and statements,
including information returns, required by any Governmental Authority
to be filed by any Credit Party have been filed with the appropriate
Governmental Authority and all Charges have been paid prior to the date
on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof (or any such fine, penalty, interest,
late charge or loss has been paid), excluding Charges or other amounts
being contested in accordance with Section 5.2(b). Proper and accurate
amounts have been withheld by each Credit Party from its respective
employees for all periods in full and complete compliance with all
applicable federal, state, local and foreign law and such withholdings
have been timely paid to the respective Governmental Authorities.
Disclosure Schedule (3.11) sets forth as of the Closing Date those
taxable years for which any Credit Party's tax returns are currently
being audited by the IRS or any other applicable Governmental Authority
and any assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described on
Disclosure Schedule (3.11), no Credit Party has executed or filed with
the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties
and their respective predecessors are liable for any Charges: (a) under
any agreement (including any tax sharing agreements) or (b) to each
Credit Party's knowledge, as a transferee. As of the Closing Date, no
Credit Party has agreed or been requested to make any adjustment under
IRC Section 481(a), by reason of a change in accounting method or
otherwise, which would have a Material Adverse Effect.
3.12. ERISA.
(a Disclosure Schedule (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree
Welfare Plans. Copies of all such listed Plans, together with a copy
of the latest form 5500 for each such Plan, have been delivered to
Agent. Except with respect to Multiemployee Plans, each Qualified Plan
has been determined by the IRS to qualify under Section 401 of the IRC,
and the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the IRC, and nothing
has occurred which would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance with the applicable
provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. No Credit Party or ERISA Affiliate has
failed to make any contribution or pay any amount due as required by
either Section 412 of the IRC or Section 302 of ERISA or the terms of
any such Plan. No Credit Party or ERISA Affiliate has engaged in a
prohibited transaction, as defined in Section 4975 of the IRC, in
connection with any Plan, which would subject any Credit Party to a
material tax on prohibited transactions imposed by Section 4975 of the
IRC.
(b Except as set forth in Disclosure Schedule (3.12): (i)
no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA
Event or event described in Section 4062(e) of ERISA with respect to
any Title IV Plan has occurred or is reasonably expected to occur;
(iii) there are no pending, or to the knowledge of any Credit Party,
threatened claims (other than claims for benefits in the normal
course), sanctions, actions or lawsuits, asserted or instituted against
any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no
Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal
from a Multiemployer Plan; (v) within the last five years no Title IV
Plan with Unfunded Pension Liabilities has been transferred outside of
the "controlled group" (within the meaning of Section 4001(a)(14) of
ERISA) of any Credit Party or ERISA Affiliate; and (vi) no liability
under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the
Standard & Poor's Corporation or the equivalent by another nationally
recognized rating agency.
3.13. No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any
Credit Party, threatened against any Credit Party, before any
Governmental Authority or before any arbitrator or panel of arbitrators
(collectively, "Litigation"), (a) which challenges any Credit Party's
right or power to enter into or perform any of its obligations under
the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or
(b) which has a reasonable risk of being determined adversely to any
Credit Party and which, if so determined, could have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13), as of the
Closing Date there is no Litigation pending or threatened which seeks
damages in excess of $250,000 or injunctive relief or alleges criminal
misconduct of any Credit Party.
3.14. Brokers. No broker or finder acting on behalf of
any Credit Party brought about the obtaining, making or closing of the
Loans or the Related Transactions, and no Credit Party has any
obligation to any Person in respect of any finder's or brokerage fees
in connection therewith.
3.15. Intellectual Property. As of the Closing Date,
each Credit Party owns or has rights to use all Intellectual Property
necessary to continue to conduct its business as now or heretofore
conducted by it or proposed to be conducted by it, and each Patent,
Trademark, Copyright and License is listed, together with application
or registration numbers, as applicable, in Disclosure Schedule (3.15)
hereto. Each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any
other Person.
3.16. Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other reports from time to time
delivered hereunder or any written statement furnished by or on behalf
of any Credit Party to Agents or any Lender pursuant to the terms of
this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary
to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. The Liens
granted to Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times (other than at times Inventory
is in transit from one Permitted Inventory Location to another
Permitted Inventory Location or in transit outside the jurisdiction of
the United States) be fully perfected first priority Liens in and to
the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances with respect to the Collateral other than
Accounts.
3.17. Environmental Matters.
(a To the best of each Credit Party's knowledge, except as
set forth in Disclosure Schedule (3.17), as of the Closing Date: (i)
the Real Estate is free of contamination from any Hazardous Material
except for such contamination that would not adversely impact the value
or marketability of such Real Estate and which would not result in
Environmental Liabilities which could reasonably be expected to exceed
$250,000; (ii) no Credit Party has caused or suffered to occur any
Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate; (iii) the Credit Parties are and have
been in compliance with all Environmental Laws, except for such
noncompliance which would not result in Environmental Liabilities which
could reasonably be expected to exceed $250,000; (iv) the Credit
Parties have obtained, and are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their
respective businesses as presently conducted or as proposed to be
conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities
which could reasonably be expected to exceed $250,000, and all such
Environmental Permits are valid, uncontested and in good standing; (v)
no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities
of such Credit Party which could reasonably be expected to exceed
$250,000, and no Credit Party has permitted any current or former
tenant or occupant of the Real Estate to engage in any such operations;
(vi) there is no Litigation arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material which
seeks damages, penalties, fines, costs or expenses in excess of
$100,000 or injunctive relief, or which alleges criminal misconduct by
any Credit Party; (vii) no notice has been received by any Credit Party
identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the
knowledge of the Credit Parties, there are no facts, circumstances or
conditions that may result in any Credit Party being identified as a
"potentially responsible party" under CERCLA or analogous state
statutes; and (viii) the Credit Parties have provided to Agent copies
of all existing environmental reports, reviews and audits and all
written information pertaining to actual or potential Environmental
Liabilities, in each case relating to any Credit Party.
(b Each Credit Party hereby acknowledges and agrees that
Agent (i) is not now, and has not ever been, in control of any of the
Real Estate or any Credit Party's affairs, and (ii) does not have the
capacity through the provisions of the Loan Documents or otherwise to
influence any Credit Party's conduct with respect to the ownership,
operation or management of any of its Real Estate or compliance with
Environmental Laws or Environmental Permits.
3.18. Insurance. Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Closing Date,
for current occurrences by each Credit Party, as well as a summary of
the terms of each such policy.
3.19. Deposit and Disbursement Accounts. Disclosure
Schedule (3.19) lists all banks and other financial institutions at
which any Credit Party maintains deposits and/or other accounts as of
the Closing Date, including any Disbursement Accounts, and such
Schedule correctly identifies the name, address and telephone number of
each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number.
Borrower acknowledges and agrees that Schedule C hereto is
substantially the same as the Borrower's pre-petition cash management
system and that such system, including all accounts established
thereto, shall continue to govern the rights of the respective parties
thereto, and shall be applicable under this Agreement. On or prior to
the fifth Business Day prior to the date scheduled for the hearing on
the Final Order, Borrower shall notify the banks and financial
institutions maintaining such accounts of the continuing validity and
enforceability of Lenders' rights thereto.
3.20. Government Contracts. Except as set forth in
Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is
a party to any contract or agreement with any Governmental Authority
and no Credit Party's Accounts are subject to the Federal Assignment of
Claims Act, as amended (31 U.S.C. Section 3727) or any similar state or
local law.
3.21. [Intentionally Deleted.]
3.22. Agreements and Other Documents. As of the Closing
Date, each Credit Party has provided to Agent or its counsel, on behalf
of Lenders, accurate and complete copies (or summaries) of all of the
following agreements or documents to which it is subject and each of
which are listed on Disclosure Schedule (3.22): supply agreements and
purchase agreements not terminable by such Credit Party within sixty
(60) days following written notice issued by such Credit Party and
involving transactions in excess of $1,000,000 per annum (other than
inventory purchase orders entered into by Borrower in the ordinary
course of its business on an order by order basis); the lease covering
the POS System; any inventory consolidator lease; any department
license agreement or any lease of displays or cash registers having a
remaining term of one year or longer and requiring aggregate rental and
other payments in excess of $500,000 per annum; licenses and permits
held by the Credit Parties, the absence of which could be reasonably
likely to have a Material Adverse Effect; instruments or documents
evidencing Indebtedness in excess of $500,000 of such Credit Party and
any security interest granted by such Credit Party with respect
thereto; and instruments and agreements evidencing the issuance of any
equity securities, warrants, rights or options to purchase equity
securities of such Credit Party.
3.23. [Intentionally Deleted.]
3.24. Year 2000 Representations.
Each Credit Party has completed a Year 2000 Assessment
and a Year 2000 Corrective Plan, copies of which have been delivered to
Agent, and each Credit Party shall complete all Year 2000 Corrective
Actions by October 31, 1999.
3.25. Status of Holdings. Prior to the Closing Date,
Holdings will not have engaged in any business or incurred any
Indebtedness or any other liabilities (except in connection with its
corporate formation, the Related Transactions Documents, this Agreement
and except as set forth in Section 3.8 and Disclosure Schedule (6.3)).
3.26. Credit Card Providers. Disclosure Schedule (3.26)
lists all Credit Card Providers engaged by Borrower to process its
credit card receipts.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. Reports and Notices.
(a Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it
shall deliver to Agents, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons
and in the manner set forth in Annex E.
(b Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it
shall deliver to Agents, as required, the various Collateral Reports
(including Notices of Revolving Credit Advance/Borrowing Base
Certificates in the form of Exhibit 1.1(a)(i)) at the times, to the
Persons and in the manner set forth in Annex F.
4.2. Communication with Accountants. Each Credit Party
executing this Agreement authorizes Agents and, so long as a Default or
Event of Default shall have occurred and be continuing, each Lender, to
communicate directly with its independent certified public accountants
including Arthur Andersen LLP, and authorizes and shall instruct those
accountants and advisors to disclose and make available to Agents any
and all Financial Statements and other supporting financial documents,
schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business,
financial condition and other affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that from and after the date
hereof and until the Termination Date:
5.1. Maintenance of Existence and Conduct of Business.
Except as occasioned by the Chapter 11 Case, each Credit Party shall:
do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and
franchises; continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder; at all times maintain,
preserve and protect all of its assets and properties used or to the
extent necessary to the conduct of its business, and keep the same in
good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry
practices; and transact business only in such corporate and trade
names as are set forth in Disclosure Schedule (5.1). To the extent
permitted under Section 6.1 hereof, nothing contained herein shall
prohibit Borrower or any Subsidiary of Borrower from engaging in retail
internet sales.
5.2. Payment of Obligations.
(a With the exception of mechanic's liens filed against the
National Press Building located in Washington, D.C. as referenced in
Section 3.6, subject to Section 5.2(b), and except as nonpayment is
permitted or payment is prohibited by the Bankruptcy Code or the
Bankruptcy Court, each Credit Party shall pay and discharge or cause to
be paid and discharged promptly all post-petition Charges payable by
it, including (A) post-petition Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all post-
petition Charges with respect to tax, social security and unemployment
withholding with respect to its employees, and (B) lawful claims for
which a mechanic's lien may be filed for labor, materials, supplies and
services or otherwise, before any thereof shall become past due.
(b Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges or
claims described in Section 5.2(a); provided, that (i) adequate
reserves with respect to such contest are maintained on the books of
such Credit Party, in accordance with GAAP, (ii) no Lien shall be
imposed to secure payment of such Charges that is superior to any of
the Liens securing payment of the Obligations and such contest is
maintained and prosecuted continuously and with diligence and operates
to suspend collection or enforcement of such Charges, (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such
contest, (iv) such Credit Party shall promptly pay or discharge such
contested Charges or claims and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Agent evidence
acceptable to Agent of such compliance, payment or discharge, if such
contest is terminated or discontinued adversely to such Credit Party or
the conditions set forth in this Section 5.2(b) are no longer met, and
(v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result
in a Material Adverse Effect.
5.3. Books and Records. Each Credit Party shall keep
adequate books and records with respect to its business activities in
which proper entries, reflecting all financial transactions, are made
in accordance with GAAP and on a basis consistent with the Financial
Statements attached as Disclosure Schedule (3.4).
5.4. Insurance; Damage to or Destruction of Collateral.
(a The Credit Parties shall, at their sole cost and
expense, maintain the policies of insurance described on Disclosure
Schedule (3.18) as in effect on the date hereof or otherwise in form
and amounts and with insurers reasonably acceptable to Agent. If any
Credit Party at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay all
premiums relating thereto, Agent may at any time or times thereafter
obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which Agent reasonably
deems advisable. Agent shall have no obligation to obtain insurance
for any Credit Party or pay any premiums therefor. By doing so, Agent
shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party's failure to maintain such insurance or
pay any premiums therefor. All sums so disbursed, including reasonable
attorneys' fees, court costs and other reasonable charges related
thereto, shall be payable on demand by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.
(b Agent reserves the right at any time upon any change in
any Credit Party's risk profile (including any change in the product
mix maintained by any Credit Party or any laws affecting the potential
liability of such Credit Party) to require additional forms and limits
of insurance to, in Agent's reasonable opinion, adequately protect both
Agent's and Lender's interests in all or any portion of the Collateral
and to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary for its industry. If requested by
Agent, each Credit Party shall deliver to Agent from time to time a
report of a reputable insurance broker, reasonably satisfactory to
Agent, with respect to its insurance policies. Agent agrees that
Borrower's present insurance broker (the McCarthy Companies) is
satisfactory to Agent.
(c Each Credit Party shall deliver to Agent, in form and
substance satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and
Lenders, as loss payee, and (ii) all general liability and other
liability policies naming Agent, on behalf of itself and Lenders, as
additional insured. Each Credit Party irrevocably makes, constitutes
and appoints Agent (and all officers, employees or agents designated by
Agent), so long as any Default or Event of Default shall have occurred
and be continuing or the anticipated insurance proceeds exceed
$500,000, as each Credit Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting
claims under such "All Risk" policies of insurance, endorsing the name
of each Credit Party on any check or other item of payment for the
proceeds of such "All Risk" policies of insurance and for making all
determinations and decisions with respect to such "All Risk" policies
of insurance. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney.
Borrower shall promptly notify Agent of any loss, damage, or
destruction to the Collateral in the amount of $500,000 or more,
whether or not covered by insurance. After deducting from such
proceeds the expenses, if any, incurred by Agent in the collection or
handling thereof, Agent may, at its option, apply such proceeds to the
reduction of the Obligations in accordance with Section 1.3(d),
provided that in the case of insurance proceeds pertaining to any
Credit Party, such insurance proceeds shall be applied to the Loans
owing by Borrower, or permit or require each Credit Party to use such
money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the
loss, damage or destruction. Notwithstanding the foregoing, if the
casualty giving rise to such insurance proceeds would not reasonably be
expected to have a Material Adverse Effect and such insurance proceeds
do not exceed $500,000 in the aggregate, Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild the
property; provided that if such Credit Party has not completed or
entered into binding agreements to complete such replacement,
restoration, repair or rebuilding within 120 days of such casualty,
Agent may apply such insurance proceeds to the Obligations in
accordance with Section 1.3(d). All insurance proceeds which are to be
made available to Borrower to replace, repair, restore or rebuild the
Collateral shall be applied by Agent to reduce the outstanding
principal balance of the Tranche A Revolving Loan (which application
shall not result in a permanent reduction of the Tranche A Revolving
Loan Commitment) and upon such application, Agent shall establish a
Reserve against the Tranche A Borrowing Base in an amount equal to the
amount of such proceeds so applied. All insurance proceeds made
available to any Credit Party that is not a Borrower to replace,
repair, restore or rebuild Collateral shall be deposited in a cash
collateral account. Thereafter, such funds shall be made available to
Borrower to provide funds to replace, repair, restore or rebuild the
Collateral as follows: (i) Borrower shall request a Tranche A Revolving
Credit Advance or release from the cash collateral account be made to
Borrower in the amount requested to be released; (ii) so long as the
conditions set forth in Section 2.2 have been met, Tranche A Revolving
Lenders shall make such Tranche A Revolving Credit Advance or Agent
shall release funds from the cash collateral account; and (iii) in the
case of insurance proceeds applied against the Tranche A Revolving
Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Tranche A Revolving Credit
Advance. To the extent not used to replace, repair, restore or rebuild
the Collateral, such insurance proceeds shall be applied in accordance
with Section 1.3(d); provided that in the case of insurance proceeds
pertaining to any Credit Party other than Borrower, such insurance
proceeds shall be applied to the Loans owing by Borrower.
5.5. Compliance with Laws. Except as noncompliance is
permitted or compliance is prohibited by the Bankruptcy Code or
Bankruptcy Court, each Credit Party shall comply with all federal,
state, local and foreign laws and regulations applicable to it,
including those relating to ERISA and labor matters and Environmental
Laws and Environmental Permits, except to the extent that the failure
to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
5.6. Supplemental Disclosure. From time to time as may be
requested by Agents (which request will not be made more frequently
than once each year absent the occurrence and continuance of an Event
of Default), the Credit Parties shall supplement each Disclosure
Schedule hereto, or any representation herein or in any other Loan
Document, with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or as
an exception to such representation or which is necessary to correct
any information in such Disclosure Schedule or representation which has
been rendered inaccurate thereby (and, in the case of any supplements
to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that
(a) no such supplement to any such Disclosure Schedule or
representation shall be or be deemed a waiver of any Default or Event
of Default resulting from the matters disclosed therein, except as
consented to by Agents and Requisite Lenders in writing; and (b) no
supplement shall be required as to representations and warranties that
relate solely to the Closing Date.
5.7. Intellectual Property. Each Credit Party will conduct
its business and affairs without infringement of or interference with
any Intellectual Property of any other Person in any material respect.
5.8. Environmental Matters. Each Credit Party shall and
shall cause each Person within its control to: (a) conduct its
operations and keep and maintain its Real Estate in compliance with all
Environmental Laws and Environmental Permits other than noncompliance
which could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal
and response actions which are appropriate or necessary to maintain the
value and marketability of the Real Estate or to otherwise comply with
Environmental Laws and Environmental Permits pertaining to the
presence, generation, treatment, storage, use, disposal, transportation
or Release of any Hazardous Material on, at, in, under, above, to, from
or about any of its Real Estate; (c) notify Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from
or about any Real Estate which is reasonably likely to result in
Environmental Liabilities in excess of $100,000 and (d) promptly
forward to Agent a copy of any order, notice, request for information
or any communication or report received by such Credit Party in
connection with any such violation or Release or any other matter
relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess
of $100,000 in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action
in connection with any such violation, Release or other matter. If
Agent at any time has a reasonable basis to believe that there may be a
violation of any Environmental Laws or Environmental Permits by any
Credit Party or any Environmental Liability arising thereunder, or a
Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate, which, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party
shall, upon Agent's written request (i) in the case of leased Real
Estate, subject to the terms of Borrower's applicable lease, cause the
performance of such environmental audits including subsurface sampling
of soil and groundwater, and preparation of such environmental reports,
at Borrower's expense, as Agent may from time to time reasonably
request, which shall be conducted by reputable environmental consulting
firms reasonably acceptable to Agent and shall be in form and substance
acceptable to Agent, and (ii) permit Agent or its representatives to
have access to all Real Estate (in the case of leased Real Estate,
subject to the terms of Borrower's applicable Lease) for the purpose of
conducting such environmental audits and testing as Agent reasonably
deems appropriate, including subsurface sampling of soil and
groundwater. Borrower shall reimburse Agent for the reasonable costs
of such audits and tests and the same will constitute a part of the
Obligations secured hereunder.
5.9. Landlords' Agreements, Mortgagee Agreements and Bailee
Letters. Each Credit Party shall obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of
each leased property located in Florida, Virginia, Pennsylvania, New
Jersey and Washington state (collectively, the "Landlord Waiver
States") or mortgagee of owned property or with respect to any
warehouse, processor or converter facility or other location where
Collateral is located, which agreement or letter shall contain a waiver
or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Inventory or Collateral at that location,
and shall otherwise be reasonably satisfactory in form and substance to
Agents. With respect to such locations or warehouse space leased in the
Landlord Waiver States or owned as of the Closing Date and thereafter,
if Agent has not received a landlord or mortgagee agreement or bailee
letter as of the Closing Date (or, if later, as of the date such
location is acquired or leased), Borrower's Eligible Inventory at that
location shall, in Agents' discretion, be excluded from the Borrowing
Base or be subject to such Reserves as may be established by Agents in
their reasonable credit judgment. After the Closing Date, if any
Inventory is shipped to real property or warehouse space leased or
acquired by any Credit Party in the Landlord Waiver States, or to a
processor, consolidator or converter under arrangements established
after the Closing Date, Agents may exclude from the Borrowing Base of
Eligible Inventory such Inventory at that location unless and until a
satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such
location or Agents shall have established Reserves acceptable to
Agents. Each Credit Party shall timely and fully pay and perform
(within any applicable grace periods provided such non-performance does
not provide the applicable landlord with any right of eviction or
termination) its obligations under all leases and other agreements with
respect to each leased location or public warehouse where any
Collateral is or may be located. For purposes of this Section 5.9, a
landlord waiver in substantially the form annexed hereto as Exhibit
5.9(a) shall be deemed satisfactory to Agents, provided that in the
event Borrower is unable to obtain a landlord waiver in such form after
using good faith and reasonable efforts, a landlord waiver in
substantially the form annexed hereto as Exhibit 5.9(b) shall be deemed
satisfactory to Agents.
5.10. Further Assurances. Each Credit Party executing
this Agreement agrees that it shall and shall cause each other Credit
Party to, at such Credit Party's expense and upon request of Agents,
duly execute and deliver, or cause to be duly executed and delivered,
to Agents such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of
Agents to carry out more effectively the provisions and purposes of
this Agreement or any other Loan Document.
5.11. Year 2000 Problems.
On or before October 15, 1999, each Credit Party shall
complete Year 2000 Implementation Testing. On or before October 31,
1999, each Credit Party shall eliminate all Year 2000 Problems, except
where the failure to correct the same could not reasonably be expected
to have a Material Adverse Effect, individually or in the aggregate.
5.12. Credit Card Notices. Prior to the entry of the
Final Order, each Credit Party shall execute Credit Card Notices in
favor of Agent to any Credit Card Provider with which it establishes a
credit card processing arrangement, substantially in the form annexed
hereto as Exhibit 5.12.
5.13. Point of Sale System. Borrower shall establish and
maintain a point-of-sale cash register computer system ("POS System")
on terms and conditions reasonably acceptable to Agents in a minimum
amount of $5,000,000. Such POS System shall be 75% completed on or
before September 15, 1999, and Borrower shall have provided Agent with
satisfactory evidence of such implementation as Agent may reasonably
request from time to time.
5.14. Leasehold Mortgages. Upon request of Agents,
Borrower shall grant leasehold mortgages on any leasehold which may be
mortgaged by Borrower without the consent of any third party.
5.15. Reclamation Claims. Within 5 (five days after the
entry of the Final Order, Borrower shall have delivered to Agents a
report in form reasonably satisfactory to Agents scheduling all
reclamation claims asserted by creditors of Borrower with respect to
Inventory shipped prior to the Petition Date.
5.16. Financial Advisor. Within thirty (30) days after
the Closing Date, Borrower shall file an application to retain a
consulting firm, reasonably satisfactory to Agents, as a financial
advisor and shall continue to retain such firm in such capacity for a
period of no less than six months.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and
severally agrees as to all Credit Parties that, without the prior
written consent of Agent and the Requisite Lenders (except as otherwise
provided in Section 11.2), from and after the date hereof until the
Termination Date:
6.1. Mergers, Subsidiaries, Etc.
No Credit Party shall directly or indirectly, by operation of
law or otherwise, (a) form or acquire any Subsidiary, or (b) merge
with, consolidate with, acquire all or substantially all of the assets
or capital stock of, or otherwise combine with or acquire, any Person
except (i) the merger or consolidation of one or more of Subsidiaries
of Borrower with and into Borrower, (ii) subject to the other
requirements of this Agreement, the opening of up to four (4) new
Filene's Basement and/or Aisle 3 Stores by Borrower provided that
immediately before and after the opening of any such new Store (A) no
Event of Default shall have occurred and be continuing, and (B)
Borrower shall have Eligible Inventory, valued at cost, of not less
than $95,000,000, or (iii) the formation of a subsidiary for the
purpose of conducting internet retail sales provided that: (X) such
Subsidiary shall be wholly-owned by Borrower, (Y) such Subsidiary will
become a Credit Party and Agent will be granted a first priority Lien
(subject to Permitted Encumbrances) in all of the assets of such
Subsidiary and receive a pledge of the capital stock of such
Subsidiary, and (Z) Borrower shall not invest in such Subsidiary, an
amount (exclusive of Inventory which is Eligible Inventory) which when
combined with Indebtedness permitted by Section 6.3(a)(ix) and
investments permitted by Section 6.2(d), exceeds $1,250,000 in the
aggregate at any time.
6.2. Investments; Loans and Advances. Except as otherwise
expressly permitted by this Section 6, no Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist
loans or advances of money to, any Person, through the direct or
indirect lending of money, holding of securities or otherwise, except
that (a) each Credit Party may maintain its existing investments in its
Subsidiaries as of the Closing Date; (b) so long as no Loans are
outstanding, Borrower may make investments, subject to a perfected
security interest in favor of Agent for the benefit of Lenders, in (i)
marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency thereof maturing within one
year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one year from the date of creation thereof and
currently having the highest rating obtainable from either Standard &
Poor's Ratings Group or Moody's Investors Service, Inc., (iii)
certificates of deposit, maturing no more than one year from the date
of creation thereof, issued by commercial banks incorporated under the
laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $300,000,000 and having
a senior unsecured rating of "A" or better by a nationally recognized
rating agency (an "A Rated Bank"), (iv) time deposits, maturing no more
than 30 days from the date of creation thereof with A Rated Banks and
(v) mutual funds that invest solely in one or more of the investments
described in clauses (i) through (iv) above, (c) investments on the
date hereof and listed on Schedule 6.2 hereof, and (d) other
investments of strategic importance to the business plan of Borrower
previously delivered to Agent and Lenders, an amount (exclusive of
Inventory which is deemed by Agents to be Eligible Inventory) of which
when combined with investments permitted by Section 6.1(b)(iii)(Z) and
Indebtedness permitted by Section 6.3(a)(ix), shall not exceed
$1,250,000 in the aggregate at any outstanding time.
6.3. Indebtedness.
(a No Credit Party shall create, incur, assume or permit to
exist any Indebtedness, except (without duplication) (i) Indebtedness
secured by purchase money security interests and Capitalized Leases
permitted in clause (c) of Section 6.7, (ii) the Loans and the other
Obligations, (iii) unfunded pension fund and other employee benefit
plan obligations and liabilities to the extent they are permitted to
remain unfunded under applicable law, (iv) existing Indebtedness
described in Disclosure Schedule (6.3) and refinancings thereof or
amendments or modifications thereof which do not have the effect of
increasing the principal amount thereof or changing the amortization
thereof (other than to extend the same) and which are otherwise on
terms and conditions no less favorable to any Credit Party, Agent or
any Lender than the terms of the Indebtedness being refinanced, amended
or modified, (v) current liabilities of Holdings, Borrower or any
Subsidiary incurred in the ordinary course of business not incurred
through (A) the borrowing of money, or (B) the obtaining of credit
except for credit on an open account basis customarily extended and in
fact extended in connection with the normal purchase of goods and
services; (vi) Indebtedness in an aggregate outstanding amount not to
exceed $1,000,000 at any time, to any federal or state chartered bank
which is a Relationship Bank (other than any of the Lenders) in respect
of overdrafts on demand deposit accounts maintained with such bank;
(vii) Indebtedness with respect to the Supplemental Executive
Retirement Plan not to exceed $4,000,000 at any time, (viii)
Indebtedness (including any guaranties of Borrower) with respect to the
Monogram Agreement; (ix) Indebtedness of Borrower or Holdings
(including guaranties by Borrower or Holdings) with respect to the
obligations of any Person, the business of which Person is of strategic
importance in the business plan of Borrower previously delivered to
Agent and Lenders, so long as the maximum contingent or actual
liability of Borrower and Holdings in respect of all such Indebtedness,
together with investments described in Section 6.1(b)(iii)(Z) and
Section 6.2(d) hereof, does not exceed $1,250,000 in the aggregate at
any time and (x) Indebtedness consisting of intercompany loans and
advances made by Borrower to any other Credit Party that is a Guarantor
or by any such Guarantor to Borrower; provided that (A) Borrower shall
have executed and delivered to each such Guarantor, and each such
Guarantor shall have executed and delivered to Borrower a demand note
(collectively, the "Intercompany Notes") to evidence any such
intercompany Indebtedness owing at any time by Borrower to such
Guarantor or by such Guarantor to Borrower, which Intercompany Notes
shall be in form and substance satisfactory to Agent and shall be
pledged and delivered to Agent pursuant to the applicable Pledge
Agreement or Security Agreement as additional collateral security for
the Obligations; (B) Borrower shall record all intercompany
transactions on its books and records in a manner reasonably
satisfactory to Agent; (C) the obligations of Borrower under any such
Intercompany Notes shall be subordinated to the Obligations of Borrower
hereunder in a manner reasonably satisfactory to Agent; (D) no Default
or Event of Default would occur and be continuing after giving effect
to any such proposed intercompany loan; (E) the aggregate amount of
such intercompany loans owing by Borrower to all such Guarantors shall
not exceed $500,000 at any one time outstanding; (F) the aggregate
balance of all such intercompany loans owing to Borrower shall not
exceed $500,000 at any time; and (G) the recipient of any such
intercompany loans shall be creditworthy as reasonably determined by
Agent.
(b No Credit Party shall, directly or indirectly,
voluntarily purchase, redeem, defease or prepay any principal of,
premium, if any, interest or other amount payable in respect of any
Indebtedness, other than (i) the Obligations, and (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with
Sections 6.8(b), (c), (d) or (e).
6.4. Employee Loans and Affiliate Transactions.
(a Except as otherwise expressly permitted in this Section
6 with respect to Affiliates, no Credit Party shall enter into or be a
party to any transaction with any other Credit Party or any Affiliate
thereof except in the ordinary course of and pursuant to the reasonable
requirements of such Credit Party's business and upon fair and
reasonable terms that are no less favorable to such Credit Party than
would be obtained in a comparable arm's length transaction with a
Person not an Affiliate of such Credit Party. In addition, if any such
transaction or series of related transactions involves payments in
excess of $500,000 in the aggregate, the terms of such transactions
must be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described on Disclosure
Schedule (6.4(a)).
(b No Credit Party shall enter into any lending or
borrowing transaction with any employees of any Credit Party, except
(i) loans existing as of the date hereof as described on Disclosure
Schedule (6.4(b)) and (ii) loans to their respective employees on an
arm's-length basis in the ordinary course of business consistent with
past practices for travel expenses, relocation costs and similar
purposes up to a maximum of $50,000 to any employee and up to a maximum
of $250,000 in the aggregate at any one time outstanding.
Notwithstanding anything to the contrary herein, Borrower shall be
permitted to amend the Carothers Notes provided such amendment does not
increase the principal balance of such notes (other than as a result of
the capitalization of any interest thereon).
6.5. Capital Structure and Business. No Credit Party shall
(a) make any changes in any of its business objectives, purposes or
operations which could in any way adversely affect the repayment of the
Loans or any of the other Obligations or could reasonably be expected
to have or result in a Material Adverse Effect, (b) make any change in
its capital structure as described on Disclosure Schedule (3.8),
including the issuance of any shares of Stock, warrants or other
securities convertible into Stock or any revision of the terms of its
outstanding Stock, except that (i) Holdings may issue shares of its
common Stock (A) for cash consideration at fair market value so long as
the proceeds thereof are applied in prepayment of the Obligations as
required by Section 1.3(b)(iv), and no Change of Control occurs after
giving effect thereto, and (B) upon exercise of the options outstanding
on the Closing Date and listed on Disclosure Schedule 3.8 as long as no
Change of Control occurs after giving effect thereto and (ii) Holdings
may issue shares of its capital stock, warrants or options provided no
Change of Control occurs after giving effect thereto and such issuance
is authorized by its shareholders, Articles of Incorporation or
Holdings' Board of Directors, or (c) amend its charter or bylaws in a
manner which would adversely affect Agent or Lenders or such Credit
Party's duty or ability to repay the Obligations. No Credit Party
shall engage in any business other than the businesses currently
engaged in by it or businesses reasonably related thereto, such
business reasonably related thereto including without limitation,
retail internet sales.
6.6. Guaranteed Indebtedness. No Credit Party shall create,
incur, assume or permit to exist any Guaranteed Indebtedness except (a)
by endorsement of instruments or items of payment for deposit to the
general account of any Credit Party, and (b) for Guaranteed
Indebtedness incurred for the benefit of any other Credit Party if the
primary obligation is expressly permitted by this Agreement.
6.7. Liens. No Credit Party shall create, incur, assume or
permit to exist any Lien on or with respect to its Accounts or any of
its other properties or assets including, but not limited to any Real
Estate, (whether now owned or hereafter acquired) except for (a)
Permitted Encumbrances; (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7a) and (c) Liens created after
the date hereof by conditional sale or other title retention agreements
(including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures acquired by any
Credit Party in the ordinary course of business, involving the
incurrence of an aggregate amount of (i) purchase money Indebtedness of
not more than $3,000,000 at any one time and (ii) Capital Lease
Obligations of not more than $10,000,000 less the amount of obligations
under Capital Leases set forth on Disclosure Schedule 6.7(b)
outstanding at any one time, (provided that such Liens attach only to
the assets subject to such purchase money debt and such Indebtedness is
incurred within twenty (20) days following such purchase and does not
exceed 100% of the purchase price of the subject assets); and (d) Liens
in favor of Monogram Credit Card Bank of Georgia (or any successor
thereto on terms acceptable to Agents) created by the Monogram
Agreement. In addition, no Credit Party shall become a party to any
agreement, note, indenture or instrument, or take any other action,
which would prohibit the creation of a Lien on any of its properties or
other assets in favor of Agent, on behalf of itself and Lenders, as
additional collateral for the Obligations, except operating leases,
Capital Leases or Licenses which prohibit Liens upon the assets that
are subject thereto. The prohibition provided for in this Section 6.7
specifically includes, without limitation, any effort by a Credit Party
in any manner whatsoever (including, without limitation, any effort in
support of any other Person) to prime or create pari passu to any
claims or interest of Lenders any Lien (other than for the Carve-Out
Expenses up to the Reserve Fund Amount) irrespective of whether such
claims or interest may be "adequately protected".
6.8. Sale of Stock and Assets. Excepted as otherwise
expressly permitted in this Section 6, no Credit Party shall sell,
transfer, convey, assign or otherwise dispose of any of its properties
or other assets, including the capital Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise) or any of
their Accounts, other than (a) the sale of Inventory in the ordinary
course of business; (b) the sale, transfer, conveyance or other
disposition by a Credit Party of Equipment, Fixtures or Real Estate
that are obsolete or no longer used or useful in such Credit Party's
business and having a value not exceeding $500,000 in any single
transaction or $1,500,000 in the aggregate in any Fiscal Year; (c) the
sale or other disposition of assets described on Disclosure Schedule
6.8; (d) the licensing in the ordinary course of business of intangible
assets, including trade names, trademarks, service marks and copyrights
of Borrower, provided that such licenses do not individually or in the
aggregate materially impair the usefulness and value of any of such
intangible asset(s) used or to be used in the business or operations of
Borrower as now conducted or as proposed to be conducted; (e) the
disposition of assets constituting Inventory in connection with the
discontinuation or partial discontinuation of a product line, provided
such Inventory is disposed of in the ordinary course of Borrower's
business operations and provided further that such disposition shall
not exceed five percent (5%) of the consolidated Inventory of Borrower,
Holdings and their Subsidiaries; (f) the closing of those Stores and
the disposition of other assets identified in the Projections attached
hereto as Disclosure Schedule (3.4(B)), provided that in advance of
each such closing, Borrower and Agents agree to a liquidation strategy,
reasonably acceptable to Agents; (g) the closing of additional Stores
upon twenty (20) Business Days' notice to Agents, provided that (i) in
advance of each closing Borrower has delivered to Agents a liquidation
plan (including acceptable fee arrangements) reasonably acceptable to
Agents, and (ii) the results of each such liquidation sale are
delivered to Agents contemporaneously with the delivery of such
information to Borrower, but in any event, no less than weekly; (h) in
connection with Store closings permitted under this Section 6.8, the
sale, transfer, conveyance or other disposition of leases (and with
respect to leases subject to a leasehold mortgage in favor of Agent
only in the event such lease is sold at a price at least equal to
seventy percent (70%) of the NLV of such lease); and (i) settlements by
Borrower of amounts due or to become due under any lease covering a
Store being closed pursuant to this Section 6.8, provided that if any
such settlement proposes to pay a landlord an amount greater than one
year's rent under such lease, Borrower shall obtain Agents' consent,
which consent shall not be unreasonably withheld. With respect to any
disposition of assets and/or leases permitted above other than any
disposition pursuant to clause (a), (A) no such disposition shall be
permitted if any Default or Event of Default shall have occurred and be
continuing, or would result after giving effect to such disposition;
(B) all proceeds of any such dispositions shall be applied by Agent in
accordance with Section 1.3(c) and Section 1.11 hereof. With respect
to any disposition of assets or other properties permitted pursuant to
clauses (b) (c) (d) (e) (f) and (g) above, Agent agrees on reasonable
prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect
such disposition and shall execute and deliver to Borrower, at
Borrower's expense, appropriate UCC-3 termination statements and other
releases as reasonably requested by Borrower.
6.9. ERISA. No Credit Party shall, or shall cause or permit
any ERISA Affiliate to, cause or permit to occur an event which could
result in the imposition of a Lien under Section 412 of the IRC or
Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event
to the extent such ERISA Event could reasonably be expected to have a
Material Adverse Effect.
6.10. Financial Covenants. Borrower shall not breach or
fail to comply with any of the Financial Covenants (the "Financial
Covenants") set forth in Annex G.
6.11. Hazardous Materials. No Credit Party shall cause a
Release of any Hazardous Material on, at, in, under, above, to, from or
about any of the Real Estate where such Release would (a) violate in
any respect, or form the basis for any Environmental Liabilities under,
any Environmental Laws or Environmental Permits or (b) otherwise
adversely impact the value or marketability of any of the Real Estate
or any of the Collateral, other than such violations or Environmental
Liabilities which could not reasonably be expected to have a Material
Adverse Effect.
6.12. Sale-Leasebacks. No Credit Party shall engage in
any sale-leaseback, synthetic lease or similar transaction involving
any of its assets.
6.13. Cancellation of Indebtedness. No Credit Party
shall cancel any claim or debt owing to it, except for reasonable
consideration negotiated on an arm's-length basis and in the ordinary
course of its business consistent with past practices. Notwithstanding
the foregoing, Borrower may cancel all or any portion of the Carothers
Notes for so long as W. Jay Carothers continues to be a senior
executive of Borrower.
6.14. Restricted Payments. No Credit Party shall make
any Restricted Payment, except (a) intercompany loans and advances
between Borrower and Guarantors to the extent permitted by Section 6.3
above, (b) dividends and distributions by Subsidiaries of Borrower paid
to Borrower, (c) employee loans permitted under Section 6.4(b) above.
6.15. Change of Corporate Name or Location; Change of
Fiscal Year. No Credit Party shall (a) change its corporate name, or
(b) change its chief executive office, principal place of business,
corporate offices or warehouses or locations at which Collateral is
held or stored, or the location of its records concerning the
Collateral, in any case without at least thirty (30) days prior written
notice to Agent and after Agent's written acknowledgment that any
reasonable action requested by Agent in connection therewith, including
to continue the perfection of any Liens in favor of Agent, on behalf of
Lenders, in any Collateral, has been completed or taken, and provided
that any such new location shall be in the continental United States.
Without limiting the foregoing, no Credit Party shall change its name,
identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith
seriously misleading within the meaning of Section 9-402(7) of the Code
or any other then applicable provision of the Code except upon prior
written notice to Agent and Lenders and after Agent's written
acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens
in favor of Agent, on behalf of Lenders, in any Collateral, has been
completed or taken. No Credit Party shall change its Fiscal Year.
Notwithstanding the foregoing, each Credit Party shall be permitted to
(A) transport Inventory from one Permitted Inventory Location to
another Permitted Inventory Location, provided such Inventory remains
in transit for not more than three (3) Business Days and (B)
consolidate its Inventory located in Northborough, Massachusetts to its
warehouse located in Auburn, Massachusetts upon twenty (20) Business
Days' notice to Agents.
6.16. No Impairment of Intercompany Transfers. No Credit
Party shall directly or indirectly enter into or become bound by any
agreement, instrument, indenture or other obligation (other than this
Agreement and the other Loan Documents) which could directly or
indirectly restrict, prohibit or require the consent of any Person with
respect to the payment of dividends or distributions or the making or
repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
6.17. No Speculative Transactions. No Credit Party shall
engage in any transaction involving commodity options, futures
contracts or similar transactions, except solely to hedge against
fluctuations in the prices of commodities owned or purchased by it and
the values of foreign currencies receivable or payable by it and
interest swaps, caps or collars.
6.18. Credit Parties Other than Borrower. None of the
Credit Parties other than Borrower (or a Subsidiary of Borrower formed
as permitted under Section 6.1 hereof) shall engage in any trade or
business, or own any assets (other than Stock of their Subsidiaries) or
incur any Indebtedness or Guaranteed Indebtedness (other than the
Obligations and in the case of Holdings, guarantees of the present and
future liabilities, obligations and indebtedness of Borrower or any
other Subsidiary of Borrower permitted to be formed under this
Agreement.
6.19. Amendments to Material Agreements. Borrower shall
not amend any of the Material Agreements described on Disclosure
Schedule 6.19 unless such amendment (a) will not cause a Material
Adverse Effect on the Collateral; and (b) will not in any other manner
have a Material Adverse Effect.
6.20. Credit Card Notices. Borrower shall not deliver to
the Credit Card Providers any instructions which modify or amend the
Credit Card Notices or in any manner attempt to change the delivery of
Borrower's credit card receipts to Agent.
6.21. Amendments to Interim Order; Final Order; Pre-
Petition Indebtedness. No Credit Party shall consent to any amendment,
supplement or other modification of any of the terms or provisions
contained in, or applicable to, (a) the Interim Order or the Final
Order or (b) the Pre-Petition Indebtedness. Except for (i) claims of
employees for unpaid wages, bonuses, accrued vacation and sick leave
time, business expenses and contributions to employee benefit plans for
the period immediately preceding the Petition Date and severance
obligations incurred prior to the Petition Date, in each case to the
extent permitted to be paid by order of the Bankruptcy Court, (ii)
claims arising under certain pre-petition customer service programs in
an amount agreed to by Agents and to the extent permitted to be paid by
order of the Bankruptcy Court, (iii) payment of certain trust fund
taxes and pre-petition shipping charges to the extent permitted to be
paid by order of the Bankruptcy Court, (iv) cure payments made in
accordance with Section 365(b)(1)(a) of the Bankruptcy Code, (v)
utility deposits made in accordance with Section 366 of the Bankruptcy
Code, and (vi) payment of items specifically contemplated by Section
1.4, no Credit Party shall make any payment in respect of, or
repurchase, redeem, retire or defease any, Pre-Petition Indebtedness.
Any payments made under this Section 6.21 shall not be materially
inconsistent with the terms of the Budget then most recently approved
by Agents.
6.22. No Return of Inventory. No Credit Party shall enter
into any agreement to return any of its Inventory to any of its
creditors for application against any Pre-Petition Indebtedness under
Section 546(g)* of the Bankruptcy Code or allow any creditor to take
any setoff against any of its Pre-Petition Indebtedness based upon any
such return pursuant to Section 553(b)(1) of the Bankruptcy Code or
otherwise.
7. TERM
7.1. Termination. The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and
the Loans and all other Obligations shall be automatically due and
payable in full on such date.
7.2. Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in
any way affect or impair the obligations, duties and liabilities of the
Credit Parties or the rights of Agent and Lenders relating to any
unpaid portion of the Loans or any other Obligations, due or not due,
liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date.
Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights
of Agent and each Lender, all as contained in the Loan Documents, shall
not terminate or expire, but rather shall survive any such termination
or cancellation and shall continue in full force and effect until the
Termination Date; provided, however, that in all events the provisions
of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. Events of Default. Notwithstanding the provisions of
Section 362 of the Bankruptcy Code and without application or motion to
the Bankruptcy Court, the occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute
an "Event of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of,
or interest on, or Fees owing in respect of, the Loans or any of the
other Obligations when due and payable, provided that such failure is
not the result of the Concentration Account Bank's failure to forward
amounts received in the Concentration Account to the Collection Account
and such failure was in no manner caused by Borrower, or (ii) fails to
pay or reimburse Agents or Lenders for any expense reimbursable
hereunder or under any other Loan Document within ten (10) days
following Agents' written demand for such reimbursement or payment of
expenses.
(b) Any Credit Party shall fail or neglect to perform, keep
or observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any
of the provisions set forth in Annexes C or G, respectively, provided
that with respect to any failure to comply with the provisions set
forth in Annex C, such failure is not the result of non-performance by
any of the Relationship Banks or the Concentration Account Bank, and
such non-performance was in no manner caused by Borrower.
(c) Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Section 4 or any provisions set forth
in Annexes E or F, respectively, and the same shall remain unremedied
for three (3) Business Days or more following Agent's written notice of
such failure or neglect.
(d) Any Credit Party shall fail or neglect to perform, keep
or observe any other provision of this Agreement or of any of the other
Loan Documents (other than any provision embodied in or covered by any
other clause of this Section 8.1) and the same shall remain unremedied
for forty-five (45) days or more upon the earlier of (i) written notice
from Agent, or (ii) Borrower's actual knowledge of such Default unless
Borrower's lack of actual knowledge results from negligence, then in
such event, Borrower shall be deemed to have had actual knowledge from
the date Borrower should have been, through the exercise of reasonable
business practices, aware of the Default.
(e) Except for defaults occasioned by the filing of the
Chapter 11 Case and defaults resulting from obligations with respect to
which the Bankruptcy Code prohibits any Credit Party from complying or
permits any Credit Party not to comply, a default or breach shall occur
under any other agreement, document or instrument to which any Credit
Party is a party which is not cured within any applicable grace period,
and such default or breach (i) involves the failure to make any payment
when due in respect of any Indebtedness (other than the Obligations) of
any Credit Party in excess of $500,000 in the aggregate excluding any
matters which any Credit Party is disputing in good faith, or (ii)
causes, or permits any holder of such Indebtedness or a trustee to
cause, Indebtedness or a portion thereof in excess of $500,000 in the
aggregate to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, regardless of whether such
default is waived, or such right is exercised, by such holder or
trustee.
(f) Any information contained in any Notice of Revolving
Credit Advance/Borrowing Base Certificate is untrue or incorrect in any
respect, or any representation or warranty herein or in any Loan
Document or in any written statement, report, financial statement or
certificate (other than a Notice of Revolving Credit Advance/Borrowing
Base Certificate) made or delivered to Agent, Oversight Agent or any
Lender by any Credit Party is untrue or incorrect in any material
respect as of the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of
$250,000 or more shall be attached, seized, levied upon or subjected to
a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors
of any Credit Party and such condition continues for sixty (60) days or
more without being discharged or bonded over.
(h) [Intentionally Deleted.]
(i) [Intentionally Deleted.]
(j) A post-petition judgment or judgments for the payment of
money in excess of $500,000 (net of insurance proceeds available to pay
such judgment provided Borrower has submitted a claim under its
applicable insurance policy and reasonably believes in good faith that
the insurer is required to pay) in the aggregate at any time
outstanding shall be rendered against any Credit Party and the same
shall not, within sixty (60) days after the entry thereof, have been
discharged or execution thereof stayed or bonded pending appeal, or
shall not have been discharged prior to the expiration of any such
stay.
(k) Any material provision of any Loan Document shall for
any reason cease to be valid, binding and enforceable in accordance
with its terms (or any Credit Party shall challenge the enforceability
of any Loan Document or shall assert in writing, or engage in any
action or inaction based on any such assertion, that any provision of
any of the Loan Documents has ceased to be or otherwise is not valid,
binding and enforceable in accordance with its terms), or any security
interest created under any Loan Document shall cease to be a valid and
perfected first priority security interest or Lien (except as otherwise
permitted herein or therein) in any of the Collateral purported to be
covered thereby having a value which when aggregated with Collateral
purportedly covered by any Loan Document previously or concurrently
affected, is in excess of $500,000 unless the absence of a valid and
perfected first priority security interest or Lien in such Collateral
would adversely affect Agents' and Lenders' ability to realize upon the
Collateral.
(l) Any Change of Control shall occur.
(m) Any Material Adverse Effect shall occur.
(n) Any material default or breach by Borrower shall occur
and be continuing under any of the Material Agreements or any of the
Material Agreements shall be terminated for any reason unless disputed
in good faith by Borrower.
(o) Any Credit Party shall bring a motion, take any action
or file any plan of reorganization or disclosure statement in the
Chapter 11 Case or otherwise: (i) to obtain financing from any Person
other than Lenders under Section 364(c) or (d) of the Bankruptcy Code
(other than with respect to a financing used, in whole or in part, to
repay in full the Obligations); (ii) to grant any Lien other than
Permitted Encumbrances upon or affecting any Collateral; (iii) except
as provided in the Interim Order or the Final Order, as the case may
be, to use Cash Collateral of Lenders under Section 363(c) of the
Bankruptcy Code without Agents' and Lenders' prior written consent; or
(iv) to recover from any portions of the Collateral any costs or
expenses of preserving or disposing of such Collateral under Section
506(c) of the Bankruptcy Code.
(p) Any Credit Party or any other Person shall obtain the
entry of an order authorizing any other action or actions adverse to
Lenders, or its rights and remedies hereunder or its interests in the
Collateral, that would, individually or in the aggregate, have a
Material Adverse Effect.
(q) The allowance of any claim or claims (other than Senior
Claims (as defined in the Orders)) under the Bankruptcy Code (including
those under Section 506(c) thereof) against or with respect to any
Collateral in excess of $250,000 in the aggregate.
(r) The entry by the Bankruptcy Court of an order without
Agents' consent authorizing the appointment of an interim or permanent
trustee in the Chapter 11 Case or the appointment of an examiner in the
Chapter 11 Case with expanded powers to operate or manage the financial
affairs, business, or reorganization of Borrower or Holdings.
(s) The Chapter 11 Case shall be dismissed or converted from
one under Chapter 11 to one under Chapter 7 of the Bankruptcy Code.
(t) The entry of an order by the Bankruptcy Court granting
relief from or modifying the automatic stay of Section 362 of the
Bankruptcy Code (i) to allow any creditor (other than Agent on behalf
of itself and Lenders) to execute upon or enforce a Lien on any
Collateral if such action could reasonably be expected to have a
Material Adverse Effect, or (ii) with respect to any Lien of, or the
granting of any Lien on any Collateral to, any state or local
environmental or regulatory agency or authority that could reasonably
be expected to have a Material Adverse Effect.
(u) The Interim Order, the Final Order or the Loan Documents
shall be amended, modified or supplemented in any material respect, or
revoked, vacated, stayed or supplemented without Agents' and Lenders'
prior written consent in all of such instances.
(v) There shall commence any suit or any action against
either Agent, Oversight Agent or any Lenders by or on behalf of (i) any
Credit Party, (ii) the Environmental Protection Agency or any other
governmental agency, (iii) any state environmental protection or health
and safety agency, or (iv) any official committee in the Chapter 11
Case, in each case that asserts a claim or seeks a legal or equitable
remedy that would have the effect of subordinating the claim or Lien of
Agents and Lenders and, if such suit or action is commenced by any
Person other than any Credit Party or any Subsidiary, officer, or
employee of any Credit Party, such suit or action shall not have been
dismissed or stayed within 45 days (it being understood that neither a
Default nor an Event of Default shall result under this clause until
the end of such 45-day period) after service thereof on Agents or
Lenders, as the case may be, and, if stayed, such stay shall have been
lifted.
(w) The Final Order is not entered immediately following the
expiration of the Interim Order.
(x) The entry of an order approving a disclosure statement
and allowing solicitation of a plan of reorganization and such approved
disclosure statement attendant thereto by Borrower or any other Person
to which the Agents and Lenders do not consent or otherwise agree to
the treatment of their claims.
(y) The entry of an order confirming a plan of
reorganization that does not require repayment in full of all of the
Borrower's Obligations under the Loan Documents on the earlier of the
effective date of such plan of reorganization or the date thirty (30)
days following entry of the order confirming such plan of
reorganization, unless one or more Lenders are providing "exit
financing" in connection with such plan of reorganization (provided
that all of Borrower's Obligations to any Lenders who are not providing
such exit financing are paid in full).
(z) The sale without Agents' and Lenders' consent, of all or
substantially all of Borrower's assets either through a sale under
Section 363 of the Bankruptcy Code, through a confirmed plan of
reorganization in the Chapter 11 Case, or otherwise, that does not
provide for payment in full of the Obligations and termination of
Lenders' commitment to make Loans.
8.2. Remedies. (a) If any Event of Default shall have
occurred and be continuing, or if a Default shall have occurred and be
continuing and (i) with respect to all Advances, Agent or Requisite
Lenders shall have determined not to make any Advances or incur any
Letter of Credit Obligations so long as that specific Default is
continuing, Agent may (and at the written request of the Requisite
Lenders shall), without notice, suspend the Revolving Loan facility
with respect to further Advances and/or the incurrence of further
Letter of Credit Obligations whereupon any further Advances and Letter
of Credit Obligations shall be made or extended in Agent's sole
discretion (or in the sole discretion of the Requisite Lenders, if such
suspension occurred at their direction) so long as such Default or
Event of Default is continuing, and (ii) with respect to Tranche B
Revolving Credit Advances, in the event (A) of a failure to make any
payment due to the Tranche B Revolving Lenders (whether by operation of
Section 1.11(b) or otherwise) and such payment default remains
outstanding and continuing for ten (10) Business Days after written
notice of such default to Agent, (B) of a breach of the Minimum
Eligible Inventory Level or the Total Outstandings to Eligible
Inventory Ratio, in each case as set forth in Annex G, (C) a breach of
the collateral reporting requirements in Annex F, (D) of the creation
of any Liens or Indebtedness (except as otherwise permitted under this
Agreement) senior to the Tranche B Revolving Lenders, (E) the
outstanding balance of Inventory Loans exceeds the Tranche B Inventory
Loan Limit as determined by the most recent appraisal of Oversight
Agent, or (F) Borrower fails to provide Oversight Agent with
information reasonably required by Oversight Agent to prepare an
appraisal of Eligible Inventory necessary to determine whether the
Tranche B Inventory Loan Limit has been reached, Requisite Tranche B
Revolving Lenders may in their discretion determine to immediately
suspend (without being required to wait until the expiration of the ten
(10) Business Day period described in clause (ii) above) or terminate
(which termination only shall be effective after ten (10) days' notice
which period shall run concurrently with the ten (10) Business Day
period referred to in clause (ii)) their obligation to make Tranche B
Revolving Credit Advances. The events specified in this Section
8.2(a)(ii)(A) through (F) shall hereinafter be collectively referred to
as the "Tranche B Super Defaults."
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the Requisite
Lenders, and in the event of a Tranche B Super Default at the direction
of Agents and the Requisite Tranche B Lenders shall), without notice,
(i) terminate the Revolving Loan facility with respect to further
Advances or the incurrence of further Letter of Credit Obligations;
(ii) declare all or any portion of the Obligations, including all or
any portion of any Loan to be forthwith due and payable, and require
that the Letter of Credit Obligations be cash collateralized as
provided in Annex B, all without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; (iii) revoke Borrower's rights to
use Cash Collateral in which Lenders have an interest; and (iv) five
(5) Business Days after receipt of written notice by Borrower and
counsel for the official committee of unsecured creditors in the
Chapter 11 Case from Agents, exercise any rights and remedies provided
to Agents under the Loan Documents and/or at law or equity, including
the right to appoint a receiver or custodian and all remedies provided
under the Code; provided, however, that upon the occurrence of an Event
of Default specified in Section 8.1(r) or (s), the Revolving Loan
facility shall be immediately terminated and all of the Obligations,
including the Revolving Loan, shall become immediately due and payable
without declaration, notice or demand by any Person. Pursuant to the
Interim Order and the Final Order, the automatic stay of Section 362 of
the Bankruptcy Code shall be modified and vacated to permit Agents and
Lenders to exercise their remedies five (5) Business Days after receipt
of written notice by Borrower and counsel for the official committee of
unsecured creditors in the Chapter 11 Case from Agents under this
Agreement and the other Loan Documents, without further application or
motion to, or order from, the Bankruptcy Court. Upon
the occurrence of an Event of Default and the exercise by Agents and
Lenders of their rights and remedies under this Agreement and the other
Loan Documents pursuant to clause (iii) above, Borrower shall assist
Agents in effecting a sale or other disposition of the Collateral upon
such terms as are designed to maximize the proceeds obtainable from
such sale or other disposition.
(c) In the event that (i) any two (2) Tranche B Super
Defaults (which may be two different Tranche B Super Defaults or the
same Tranche B Super Default occurring twice) occur during any fifteen
(15) day period, notwithstanding the prior cure or waiver of any such
Tranche B Super Defaults, and (ii) a conflict arises among the Agents
and the Tranche B Revolving Lenders with respect to their right to
accelerate the Obligations pursuant to Section 8.2(b), Agents and
Tranche B Revolving Lenders shall use their good faith efforts to
resolve such conflict. If such conflict is not resolved within twenty-
four hours, Requisite Tranche B Revolving Lenders may require that
advance rates applicable to Eligible Inventory be reduced at the rate
of one and one-half percent (1.5%) per day until the amount of
Inventory Loans is equal to seventy percent (70%) of the Net Retail
Liquidation Value of Borrower's Eligible Inventory. Any exercise by
Requisite Tranche B Revolving Lenders of its rights under this Section
8.2(c) shall in no manner subject the Tranche A Revolving Lenders to
any subordination whatsoever for Inventory Overadvances, if any,
resulting from such exercise.
8.3. Waivers by Credit Parties. Except as otherwise provided
for in this Agreement or by applicable law, each Credit Party waives:
(a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in
any way be liable, and hereby ratifies and confirms whatever Agent may
do in this regard, (b) all rights to notice and a hearing prior to
Agent's taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security which
might be required by any court prior to allowing Agent to exercise any
of its remedies, and (c) the benefit of all valuation, appraisal,
marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS
9.1. Assignment and Participations.
(a) The Credit Parties signatory hereto consent to any
Lender's assignment to, in the case of Tranche A Revolving Loans, an
Eligible Assignee, and in the case of Tranche B Revolving Loans, any
Person, of, or sale of participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment
or of any portion thereof or interest therein, including any Lender's
rights, title, interests, remedies, powers or duties thereunder,
whether evidenced by a writing or not. Any assignment by a Lender
shall (i) with respect to Tranche A Revolving Lenders only, require the
consent of Agent (which shall not be unreasonably withheld or delayed
with respect to an Eligible Assignee) and the execution of an
assignment agreement (an "Assignment Agreement" substantially in the
form attached hereto as Exhibit 9.1(a) and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent; (ii)
with respect to Tranche A Revolving Lenders only, require the consent
of Borrower which consent shall not be unreasonably withheld or delayed
with respect to an Eligible Assignee; provided that no such consent
shall be required so long as any Event of Default has occurred and is
continuing; (iii) be conditioned on such assignee Lender representing
to the assigning Lender and Agent that it is purchasing the applicable
Loans to be assigned to it for its own account, for investment purposes
and not with a view to the distribution thereof; (iv) if a partial
assignment, be in an amount at least equal to $5,000,000 and, after
giving effect to any such partial assignment, the assigning Lender
shall have retained Commitments in an amount at least equal to
$5,000,000; (v) include a payment to Agent of an assignment fee of
$3,500; and (vi) in the case of Tranche A Revolving Loans, only be to
an Eligible Assignee. In the case of an assignment by a Lender under
this Section 9.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned
portion thereof from and after the date of such assignment but shall
remain liable for matters which arose prior to the effective date of
such assignment. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the
assignee and that the assignee shall be considered to be a "Lender".
In all instances, each Lender's liability to make Loans hereunder shall
be several and not joint and shall be limited to such Lender's Pro Rata
Share of the applicable Commitment. In the event Agent or any Lender
assigns or otherwise transfers all or any part of the Obligations,
Agent or any such Lender shall so notify Borrower and Borrower shall,
upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. Notwithstanding the foregoing
provisions of this Section 9.1(a), any Lender may at any time pledge
the Obligations held by it and such Lender's rights under this
Agreement and the other Loan Documents to a Federal Reserve Bank, and
any lender that is an investment fund may assign the Obligations held
by it and such Lender's rights under this Agreement and the other Loan
Documents to another investment fund managed by the same investment
advisor; provided, however, that no such pledge to a Federal Reserve
Bank shall release such Lender from such Lender's obligations hereunder
or under any other Loan Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts
payable by Borrower hereunder shall be determined as if that Lender had
not sold such participation, and that the holder of any such
participation shall not be entitled to require such Lender to take or
omit to take any action hereunder except actions directly affecting (i)
any reduction in the principal amount of, or interest rate or Fees
payable with respect to, any Loan in which such holder participates,
(ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final
maturity date thereof, and (iii) any release of all or substantially
all of the Collateral (other than in accordance with the terms of this
Agreement, the Collateral Documents or the other Loan Documents).
Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower
acknowledges and agrees that a participation shall give rise to a
direct obligation of Borrower to the participant and the participant
shall be considered to be a "Lender". Except as set forth in the
preceding sentence neither Borrower nor any other Credit Party shall
have any obligation or duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had
occurred. Neither Agent nor any Lender (other than the Lender selling
a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if
no such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrower and that Lender, or Agent and that
Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Loans, the Notes or other
Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist
any Lender permitted to sell assignments or participations under this
Section 9.1 as reasonably required to enable the assigning or selling
Lender to effect any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other
documents and instruments as reasonably shall be requested and the
preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each
Credit Party executing this Agreement shall certify the correctness,
completeness and accuracy of all descriptions of the Credit Parties and
their affairs contained in any selling materials provided by it and all
other information provided by it and included in such materials, except
that any Projections delivered by Borrower shall only be certified by
Borrower as having been prepared by Borrower in compliance with the
representations contained in Section 3.4(c).
(e) A Lender may furnish any information concerning Credit
Parties in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants).
Prior to furnishing any such information, each Lender shall obtain from
assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and
be continuing, no Lender shall assign or sell participations in any
portion of its Loans or Commitments to a potential Lender or
participant, if, as of the date of the proposed assignment or sale, the
assignee Lender or participant would be subject to capital adequacy or
similar requirements under Section 1.16(a), increased costs under
Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a).
9.2. Appointment of Agents. GE Capital is hereby appointed
to act on behalf of all Lenders as Agent under this Agreement and the
other Loan Documents. The provisions of this Section 9.2 are solely
for the benefit of Agents and Lenders and no Credit Party nor any other
Person shall have any rights as a third party beneficiary of or shall
otherwise be affected by any of the provisions hereof. In performing
its functions and duties under this Agreement and the other Loan
Documents, Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party or any
other Person. Agents shall have no duties or responsibilities except
for those expressly set forth in this Agreement and the other Loan
Documents. The duties of Agents shall be mechanical and administrative
in nature and Agents shall not have, or be deemed to have, by reason of
this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender. Neither Agent nor any of their
Affiliates nor any of their respective officers, directors, employees,
agents or representatives shall be liable to any Lender for any action
taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Requisite Tranche A Lenders, Requisite Tranche B Lenders, Supermajority
Tranche A Revolving Lenders, Supermajority Tranche B Revolving Lenders
or all affected Lenders with respect to any act or action (including
failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received
instructions from Requisite Lenders, Requisite Tranche A Lenders,
Requisite Tranche B Lenders, Supermajority Tranche A Revolving Lenders,
Supermajority Tranche B Revolving Lenders or all affected Lenders, as
the case may be, and Agent shall not incur liability to any Person by
reason of so refraining. Agents shall be fully justified in failing or
refusing to take any action hereunder or under any other Loan Document
(a) if such action would, in the opinion of Agents, be contrary to law
or the terms of this Agreement or any other Loan Document, (b) if such
action would, in the opinion of Agents, expose Agents to Environmental
Liabilities or (c) if Agents shall not first be indemnified to its
satisfaction against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Lender shall have any right
of action whatsoever against Agents as a result of Agents acting or
refraining from acting hereunder or under any other Loan Document in
accordance with the instructions of Requisite Lenders, Supermajority
Tranche A Revolving Lenders, Requisite Tranche A Lenders, Requisite
Tranche B. Lenders, Supermajority Tranche B Revolving Lenders or all
affected Lenders, as applicable.
As among Agents and Lenders, in determining whether a
Material Adverse Effect has occurred, such determination shall be made
by Agents or Requisite Lenders.
9.3. Agents' Reliance, Etc. Neither Agent or Oversight Agent
nor any of their Affiliates nor any of their respective directors,
officers, agents or employees shall 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 damages caused by its
or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing: (a) Agents may treat
the payee of any Note as the holder thereof until Agent or Oversight
Agent, as the case may be, receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to Agent
or Oversight Agent, as the case may be; (b) Agents may consult with
legal counsel, 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; (c) Agents make no warranty or
representation to any Lender and shall not be responsible to any Lender
for any statements, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (d) Agents
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 Credit
Party or to inspect the Collateral (including the books and records) of
any Credit Party; (e) Agents 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 (f) Agents shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties. Notwithstanding
anything herein which may be construed to the contrary, Lender and
Borrower acknowledge and agree that (A) Agent has engaged Paragon as
the Oversight Agent pursuant to the Oversight Agreement as it may be
modified and amended from time to time, (B) the Oversight Agent may
carry out its duties as set forth in such agreement, and (C) Oversight
Agent may not be removed without the consent of the Requisite Tranche A
Lenders and the Requisite Tranche B Lenders. The foregoing shall not
relieve the Agent of its responsibilities for any duties assigned or
delegated, if any, to the Oversight Agent.
9.4. GE Capital, Paragon and Affiliates. With respect to its
Commitments hereunder, GE Capital and Paragon shall have the same
rights and powers under this Agreement and the other Loan Documents as
any other Lender and may exercise the same as though it were not an
Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include GE Capital and Paragon, each in its
individual capacity. GE Capital, Paragon and their Affiliates may lend
money to, invest in, and generally engage in any kind of business with,
any Credit Party, any of their Affiliates and any Person who may do
business with or own securities of any Credit Party or any such
Affiliate, all as if GE Capital and Paragon were not Agents and without
any duty to account therefor to Lenders. GE Capital, Paragon and their
Affiliates may accept fees and other consideration from any Credit
Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders. Each Lender
acknowledges the potential conflict of interest between GE Capital and
Paragon as Lenders holding disproportionate interests in the Loans and
GE Capital and Paragon as Agents.
9.5. Lender Credit Decision. Except as provided in Section
12(d) of the Oversight Agreement, each Lender acknowledges that it has,
independently and without reliance upon Agents or any other Lender and
based on the Financial Statements referred to in Section 3.4(a) and
such other documents and information as it has deemed appropriate, made
its own credit and financial analysis of the Credit Parties and its own
decision to enter into this Agreement. Each Lender also acknowledges
that it will, independently and without reliance upon Agents or any
other 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. Each Lender
acknowledges the potential conflict of interest of each other Lenders
as a result of Lenders holding disproportionate interests in the Loans,
and expressly consents to, and waives any claim based upon, such
conflict of interest.
9.6. Indemnification. Lenders agree to indemnify Agents (to
the extent not reimbursed by Credit Parties and without limiting the
obligations of Borrower hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against Agents in any way
relating to or arising out of this Agreement or any other Loan Document
or any action taken or omitted by Agents in connection therewith;
provided, however, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from
Agents' gross negligence or wilful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse Agents promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel
fees) incurred by Agents in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agents are
not reimbursed for such expenses by Credit Parties.
9.7. Successor Agents. Agent or Oversight Agent, as the case
may be, may resign at any time by giving not less than forty-five (45)
days' prior written notice thereof to Lenders and Borrower. Upon any
such resignation, the Requisite Tranche A Lenders and Requisite Tranche
B Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Requisite Tranche A
Lenders and Requisite Tranche B Lenders and shall have accepted such
appointment within 45 days after the resigning Agent's giving notice of
resignation, then the resigning Agent may, on behalf of Lenders,
appoint a successor Agent, which shall be a Lender, if a Lender is
willing to accept such appointment, or otherwise shall be a commercial
bank or financial institution or a subsidiary of a commercial bank or
financial institution if such commercial bank or financial institution
is organized under the laws of the United States of America or of any
State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation
was given by the resigning Agent, such resignation shall become
effective and the Tranche A Requisite Lenders and the Requisite Tranche
B Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Tranche A Requisite Lenders and the
Requisite Tranche B Lenders appoint a successor Agent as provided
above. Any successor Agent appointed by Tranche A Requisite Lenders and
the Requisite Tranche B Lenders hereunder shall be subject to the
approval of Borrower, such approval not to be unreasonably withheld or
delayed; provided that such approval shall not be required if a Default
or an Event of Default shall have occurred and be continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a
successor Agent or the effective date of the resigning Agent's
resignation, the resigning Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents,
except that any indemnity rights or other rights in favor of such
resigning Agent shall continue and Agent shall remain liable for
matters arising prior to the effective date of such resignation. After
any resigning Agent's resignation hereunder, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and the other
Loan Documents.
9.8. Setoff and Sharing of Payments. Subject to Section 1.10
of this Agreement, in addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any
other Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all balances held by it at any
of its offices for the account of Borrower or any Guarantor (regardless
of whether such balances are then due to Borrower or any Guarantor) and
any other properties or assets any time held or owing by that Lender or
that holder to or for the credit or for the account of Borrower or any
Guarantor against and on account of any of the Obligations which are
not paid when due. Any Lender or holder of any Note exercising a right
to set off or otherwise receiving any payment on account of the
Obligations in excess of its Pro Rata Share thereof shall purchase for
cash (and the other Lenders or holders shall sell) such participations
in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the
amount so set off or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares. Each
Tranche A Revolving Lender's obligation under this Section 9.8 shall be
in addition to and not limitation of its obligations to purchase a
participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under Section 1.1. Borrower and each Guarantor agrees, to
the fullest extent permitted by law, that (a) any Lender or holder may
exercise its right to set off with respect to amounts in excess of its
Pro Rata Share of the Obligations and may sell participations in such
amount so set off to other Lenders and holders and (b) any Lender or
holders so purchasing a participation in the Loans made or other
Obligations held by other Lenders or holders may exercise all rights of
set-off, bankers' lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct
holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of
the set-off amount or payment otherwise received is thereafter
recovered from the Lender that has exercised the right of set-off, the
purchase of participations by that Lender shall be rescinded and the
purchase price restored without interest.
9.9. Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.
(a) Advances; Payments. (i) Tranche A Revolving Lenders
shall refund or participate in the Swing Line Loan in accordance with
clauses (iii) and (iv) of Section 1.1(b). If the Swing Line Lender
declines to make a Swing Line Loan or if Swing Line Availability is
zero, Agent shall notify Revolving Lenders promptly after receipt of a
Notice of Revolving Advance/Borrowing Base Certificate and in any event
prior to 1:00 p.m. (New York time) on the date such Notice of Revolving
Advance/Borrowing Base Certificate is received, by telecopy, telephone
or other similar form of transmission of the requested Revolving Credit
Advance and whether and to the extent that such Advance shall be a
Tranche A Revolving Credit Advance or a Tranche B Revolving Credit
Advance, or both. Each Revolving Lender shall make the amount of such
Lender's Pro Rata Share of such Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent's account as set
forth in Annex H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan and not later
than 11:00 a.m. (New York time) on the requested funding date in the
case of a LIBOR Loan, provided, however, that, Agent shall not request
any Tranche A Revolving Lender to make, and no Tranche A Revolving
Lender shall have the obligation to make any Tranche A Revolving Credit
Advance in excess of Tranche A Borrowing Availability if Agent shall
have received written notice from any Tranche A Revolving Lender, or
otherwise has knowledge that the requested Tranche A Revolving Credit
Advance would result in the outstanding Tranche A Revolving Credit
Advances and Letter of Credit Obligations exceeding the Tranche A
Borrowing Availability on such funding date; provided further, however,
that Agent shall not request any Tranche B Revolving Lender to make,
and no Tranche B Revolving Lender shall have the obligation to make,
any Tranche B Revolving Credit Advance in excess of Tranche B Borrowing
Availability, if Agent shall have received written notice from any
Tranche B Revolving Lender, or otherwise has knowledge that the
requested Tranche B Revolving Advance would exceed the Tranche B
Borrowing Availability on such funding date. Notwithstanding the
foregoing, if any requested Revolving Credit Advance exceeds Borrowing
Availability, Lenders shall make Advances up to that amount otherwise
available under the terms of this Agreement. After receipt of such
wire transfers (or, in the Agent's sole discretion, before receipt of
such wire transfers), subject to the terms hereof, Agent shall make the
requested Revolving Credit Advance to Borrower. All payments by each
Revolving Lender shall be made without setoff, counterclaim or
deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar
week or more frequently as aggregate cumulative payments in excess
of $3,000,000 are received with respect to the Loans (other than
the Swing Line Loan) (each, a "Settlement Date"), Agent will
advise each Lender by telephone, or telecopy of the amount of such
Lender's Pro Rata Share of principal, interest and Fees paid for
the benefit of Lenders with respect to each applicable Revolving
Loan. Provided that such Lender has funded all payments and
Advances required to be made by it and purchased all
participations required to be purchased by it under this Agreement
and the other Loan Documents as of such Settlement Date, Agent
will pay to each Lender such Lender's Pro Rata Share of principal,
interest and Fees paid by Borrower since the previous Settlement
Date for the benefit of that Lender on the Loans held by it. To
the extent that any Lender (a "Non-Funding Lender") has failed to
fund all such payments and Advances or failed to fund the purchase
of all such participations, Agent shall be entitled to set off the
funding short-fall against that Non-Funding Lender's Pro Rata
Share of all payments received from Borrower. Such payments shall
be made by wire transfer to such Lender's account (as specified by
such Lender in Annex H or the applicable Assignment Agreement) not
later than 2:00 p.m. (New York time) on the next Business Day
following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may
assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date. If
such Pro Rata Share is not, in fact, paid to Agent by such Revolving
Lender when due, Agent will be entitled to recover such amount on
demand from such Revolving Lender without set-off, counterclaim or
deduction of any kind. If any Revolving Lender fails to pay the amount
of its Pro Rata Share forthwith upon Agent's demand, Agent shall
promptly notify Borrower and Borrower shall immediately repay such
amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Agent
to advance funds on behalf of any Revolving Lender or to relieve any
Revolving Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrower may have against any
Revolving Lender as a result of any default by such Revolving Lender
hereunder. To the extent that Agent advances funds to Borrower on
behalf of any Revolving Lender and is not reimbursed therefor on the
same Business Day as such Advance is made, Agent shall be entitled to
retain for its account all interest accrued on such Advance until
reimbursed by the applicable Revolving Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related
payment is not received by Agent, then Agent will be entitled to
recover such amount from such Lender on demand without set-off,
counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to
Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent will
not be required to distribute any portion thereof to any Lender.
In addition, each Lender will repay to Agent on demand any portion
of such amount that Agent has distributed to such Lender, together
with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim or
deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding
Lender to make any Revolving Credit Advance or any payment required by
it hereunder, or, in the case of a Tranche A Revolving Lender, to
purchase any participation in any Swing Line Loan to be made or
purchased by it on the date specified therefor, shall not relieve any
other Revolving Lender (each such other Revolving Lender, an "Other
Lender") of its obligations to make such Advance or purchase such
participation on such date, but neither any Other Lender nor Agent
shall be responsible for the failure of any Non-Funding Lender to make
an Advance or to purchase a participation required hereunder.
Notwithstanding anything set forth herein to the contrary, a Non-
Funding Lender shall not have any voting or consent rights under or
with respect to any Loan Document or constitute a "Lender" (or be
included in the calculation of "Requisite Lenders", "Requisite Tranche
A Lenders", Requisite Tranche B Lenders" or "Supermajority Tranche A
Revolving Lenders" or "Supermajority Tranche B Revolving Lenders"
hereunder) for any voting or consent rights under or with respect to
any Loan Document.
(e) Dissemination of Information. Agent will use reasonable
efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any Credit
Party, with notice of any Event of Default of which Agent has actually
become aware and with notice of any action taken by Agent following any
Event of Default; provided, however, that Agent shall not be liable to
any Lender for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful
misconduct.
(f) Actions in Concert. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other
Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement or the Notes (including exercising
any rights of set-off but not including the exercise by the Tranche B
Revolving Lenders of their rights under Section 8.2(a)(ii), (b) and
(c)) without first obtaining the prior written consent of Agent and
Requisite Lenders, it being the intent of Lenders that any such action
to protect or enforce rights under this Agreement and the Notes shall
be taken in concert and at the direction or with the consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1. Successors and Assigns. This Agreement and the
other Loan Documents shall be binding on and shall inure to the benefit
of each Credit Party, Agent, Lenders and their respective successors
and assigns (including, in the case of any Credit Party, a debtor-in-
possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or
duties hereunder or under any of the other Loan Documents without the
prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit
Party without the prior express written consent of Agent and Lenders
shall be void. The terms and provisions of this Agreement are for the
purpose of defining the relative rights and obligations of each Credit
Party, Agent and Lenders with respect to the transactions contemplated
hereby and no Person shall be a third party beneficiary of any of the
terms and provisions of this Agreement or any of the other Loan
Documents.
11. MISCELLANEOUS
11.1. Complete Agreement; Modification of Agreement. The
Loan Documents constitute the complete agreement between the parties
with respect to the subject matter thereof and may not be modified,
altered or amended except as set forth in Section 11.2 below. Any
letter of interest, commitment letter and/or fee letter (other than the
GE Capital Fee Letter and the Paragon Fee Letter ) and/or
confidentiality agreement between any Credit Party and Agents or any
Lender or any of their respective affiliates, predating this Agreement
and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.
11.2. Amendments and Waivers. (a) Except for actions
expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any of the
Notes, or any consent to any departure by any Credit Party therefrom,
shall in any event be effective unless the same shall be in writing and
signed by Agent and Borrower, and by such of the Agents and such of the
Lenders as required hereby or all affected Lenders, as applicable as
set forth in Section 11.2 (b) and (c). Except as set forth in clauses
(b) and (c) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written
consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which (i)
increases the percentage advance rates set forth in the definition of
the Tranche A Borrowing Base or the Tranche B Borrowing Base, (ii)
makes less restrictive the nondiscretionary criteria for exclusion from
Eligible Accounts and Eligible Inventory set forth in Sections 1.6 and
1.7, (iii) makes less restrictive the Minimum Eligible Inventory Level
or the Total Outstandings to Eligible Inventory Ratio as set forth in
Annex G, (iv) makes less restrictive the collateral reporting
requirements in Annex F, or (v) permits any Liens or Indebtedness
senior to the Tranche B Revolving Lenders shall be effective unless the
same shall be in writing and signed by Agents, Supermajority Tranche A
Revolving Lenders, Supermajority Tranche B Revolving Lenders and
Borrower. No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which waives
compliance with the conditions precedent set forth in Section 2.2 to
the making of any Loan or the incurrence of any Letter of Credit
Obligations shall be effective unless the same shall be in writing and
signed by (i) Agent, Requisite Lenders and Borrower, or (ii) in the
case of Section 2.2(c)(ii)(B), Agent, Requisite Tranche B Revolving
Lenders and Borrower. Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any
Default (if in connection therewith Agent, Requisite Lenders or
Requisite Tranche B Lenders, as the case may be, have exercised its or
their right to suspend or terminate the making or incurrence of further
Advances or Letter of Credit Obligations pursuant to Section 8.2(a) or
(b)) or any Event of Default shall be effective for purposes of the
conditions precedent to the making of Loans or the incurrence of Letter
of Credit Obligations set forth in Section 2.2 unless the same shall be
in writing and signed by (i) Agent, Requisite Lenders and Borrower, or
(ii) in the case of Section 2.2(c)(ii)(B), Agent, Requisite Tranche B
Revolving Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly affected
thereby, do any of the following: (i) increase the principal amount of
any Lender's Commitment or the rate of interest (which action shall be
deemed to directly affect all Lenders); (ii) change the principal of,
rate of interest on or Fees payable with respect to any Loan or Letter
of Credit Obligations of any affected Lender; (iii) extend any
scheduled payment date or final maturity date of the principal amount
of any Loan of any affected Lender; (iv) waive, forgive, defer, extend
or postpone any payment of interest or Fees as to any affected Lender;
(v) release any Guaranty or, except as otherwise permitted herein or in
the other Loan Documents, release, or permit any Credit Party to sell
or otherwise dispose of, except as otherwise expressly permitted
hereunder, any Collateral with a value exceeding $5,000,000 in the
aggregate (which action shall be deemed to directly affect all
Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which shall be required
for Lenders or any of them to take any action hereunder; (vii) amend
Sections 1.1(a)(ii), 1.3(c), 1.11(a), (b) or (c), 2.2 or 8.2 and (viii)
amend or waive this Section 11.2 or the definitions of the terms
"Requisite Lenders", "Requisite Tranche A Lenders", "Requisite Tranche
B Lenders", "Supermajority Tranche A Revolving Lenders", "Supermajority
Tranche B Revolving Lenders", "Senior Obligations", "Inventory Loans",
"Inventory Overadvances", "Tranche A Inventory Loan Limit", "Tranche B
Inventory Loan Limit", "Super Tranche B Default", or "Reserves" insofar
as such definitions affect the substance of this Section 11.2.
Furthermore, no amendment, modification, termination or waiver
affecting the rights or duties of either Agent or Oversight Agent under
this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent or Oversight Agent, as the case may be, in
addition to Lenders required hereinabove to take such action. Each
amendment, modification, termination or waiver shall be effective only
in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan
Document. No amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written
concurrence of the holder of that Note. No notice to or demand on any
Credit Party in any case shall entitle such Credit Party or any other
Credit Party to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be
binding upon each Lender.
(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the
consent of Requisite Lenders is obtained, but the consent of
other Lenders whose consent is required is not obtained (any
such Lender whose consent is not obtained as described this
clause (i) and in clauses (ii), (iii) and (iv) below being
referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Requisite Lenders, the
consent of Lenders holding 51% or more of the aggregate
Commitments is obtained, but the consent of Requisite Lenders
is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's
request Agent, or a Person acceptable to Agent, shall have the right
with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such Non-
Consenting Lenders agree that they shall, upon Agent's request, sell
and assign to Agent or such Person, all of the Commitments of such Non-
Consenting Lender for an amount equal to the principal balance of all
Loans held by the Non-Consenting Lender and all accrued interest and
Fees with respect thereto through the date of sale, such purchase and
sale to be consummated pursuant to an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and
performance of all of the Obligations (other than indemnification
Obligations under Section 1.13), termination of the Commitments and a
release of all claims (other than claims for gross negligence, willful
misconduct or breach of the terms of this Agreement or any other Loan
Documents) against Agents and Lenders, and so long as no suits, actions
proceedings, or claims are pending or threatened against any
Indemnified Person asserting any damages, losses or liabilities that
are Indemnified Liabilities, Agent shall deliver to Borrower
termination statements, mortgage releases and other documents necessary
or appropriate to evidence the termination of the Liens securing
payment of the Obligations.
11.3. Fees and Expenses. Borrower shall reimburse Agents
for all reasonable out-of-pocket expenses incurred in connection with
the preparation of the Loan Documents (including the reasonable fees
and expenses of all of its special loan counsel, advisors, consultants
and auditors retained in connection with the Loan Documents and the
Related Transactions and advice in connection therewith). Borrower
shall reimburse Agents (and, with respect to clauses (c), (d) and (e)
below, all Lenders) for all reasonable fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and
appraisers) for advice, assistance, or other representation in
connection with:
(a) the forwarding to Borrower or any other Person on behalf
of Borrower by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans
made pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, Borrower or any other
Person) in any way relating to the Collateral, any of the Loan
Documents, the Pre-Petition Loan Agreement or any other agreement to be
executed or delivered in connection therewith or herewith (excluding
any litigation asserted against Agents and/or Lenders that is resolved
in favor of Borrower by a court of competent jurisdiction by final and
nonappealable judgment which is based upon Agents' and/or Lenders'
willful misconduct, gross negligence or breach of the terms of this
Agreement), whether as party, witness, or otherwise, including any
litigation, contest, dispute, suit, case, proceeding or action, and any
appeal or review thereof, in connection with a case commenced by or
against Borrower or any other Person that may be obligated to Agent by
virtue of the Loan Documents; including any such litigation, contest,
dispute, suit, proceeding or action arising in connection with any work-
out or restructuring of the Loans during the pendency of one or more
Events of Default; provided that in the case of reimbursement of
counsel for Lenders other than Agents, such reimbursement shall be
limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies, during the pendency
of an Event of Default, of Agent or any Lender against any or all of
the Credit Parties or any other Person that may be obligated to Agent
or any Lender by virtue of any of the Loan Documents; including any
such attempt to enforce any such remedies in the course of any work-out
or restructuring of the Loans during the pendency of one or more Events
of Default; provided that in the case of reimbursement of counsel for
Lenders other than Agents, such reimbursement shall be limited to one
counsel for all such Lenders;
(e) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties
or their respective affairs, and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any
of the Collateral provided, however that so long as no Event of Default
shall have occurred and be continuing, any fees and expenses incurred
by Agents and Lenders pursuant to this Section 11.3(f), together with
expenses (other than the Monthly Oversight Fee as defined in the
Oversight Agreement) incurred by Agents pursuant to Section 1.14, shall
only be reimbursable up to the amount of $60,000, plus reasonable out-
of-pocket expenses, per annum; including, as to each of clauses (a)
through (f) above, all reasonable attorneys' and other professional and
service providers' reasonable fees arising from such services,
including those in connection with any appellate proceedings; and all
reasonable expenses, costs, charges and other fees incurred by such
counsel and others in any way or respect arising in connection with or
relating to any of the events or actions described in this Section 11.3
shall be payable, on demand, by Borrower to Agents. Without limiting
the generality of the foregoing, such reasonable expenses, costs,
charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and
other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and
expenses for travel, lodging and food paid or incurred in connection
with the performance of such legal or other advisory services;
(g) the obtaining of approval of the Loan Documents by the
Bankruptcy Court;
(h) the preparation and review of pleadings, documents and
reports related to the Chapter 11 Case and any subsequent case under
Chapter 7 of the Bankruptcy Code, attendance at meetings, court
hearings or conferences related to the Chapter 11 Case and any
subsequent case under Chapter 7 of the Bankruptcy Code, and general
monitoring of the Chapter 11 Case and any subsequent case under
Chapter 7 of the Bankruptcy Code.
11.4. No Waiver. Agent's or any Lender's failure, at any
time or times, to require strict performance by the Credit Parties of
any provision of this Agreement and any of the other Loan Documents
shall not waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver of an Event of Default shall not suspend, waive or
affect any other Event of Default whether the same is prior or
subsequent thereto and whether the same or of a different type.
Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit
Party contained in this Agreement or any of the other Loan Documents
and no Default or Event of Default by any Credit Party shall be deemed
to have been suspended or waived by Agent or any Lender, unless such
waiver or suspension is by an instrument in writing signed by an
officer of or other authorized employee of Agent and the applicable
required Lenders and directed to Borrower specifying such suspension or
waiver.
11.5. Remedies. Agent's and Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies which Agent or any Lender may have under any other
agreement, including the other Loan Documents, by operation of law or
otherwise. Recourse to the Collateral shall not be required.
11.6. Severability. Wherever possible, each provision of
this Agreement and the other Loan Documents shall be interpreted in
such a manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.7. Conflict of Terms. Except as otherwise provided in
this Agreement or any of the other Loan Documents by specific reference
to the applicable provisions of this Agreement, if any provision
contained in this Agreement is in conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
11.8. Confidentiality. Agent and each Lender agree to
use commercially reasonable efforts (equivalent to the efforts Agent or
such Lender applies to maintain the confidentiality of its own
confidential information) to maintain as confidential all proprietary
and confidential information provided to them by the Credit Parties and
designated as confidential from the date of receipt thereof through the
later of (i) February 23, 2001, or (ii) the second anniversary of the
Commitment Termination Date, except that Agent and each Lender may
disclose such information (a) to Persons employed or engaged by Agent
or such Lender to the extent necessary for them to perform their duties
in evaluating, approving, structuring or administering the Loans and
the Commitments; (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed in writing to comply
with the covenant contained in this Section 11.8 (and any such bona
fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as
described in clause (a) above); (c) as required or requested by any
Governmental Authority or reasonably believed by Agent or such Lender
to be compelled by any court decree, subpoena or legal or
administrative order or process, provided that if Agent or such Lender
is requested by any Government Authority, but does not believe it is
compelled by law to disclose such information, Agent or such Lender
shall provide Borrower with five (5) Business Days' notice of such
request prior to disclosing the requested information; (d) as, on the
advise of Agent's or such Lender's counsel, required by law; (e) as is
reasonably necessary to the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or
such Lender is a party; or (f) which ceases to be confidential through
no fault of Agent or such Lender. All business plans and projections
of any Credit Party shall be deemed to be confidential whether or not
specifically designated as confidential.
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS
AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.
LENDERS, AGENTS AND EACH CREDIT PARTY HEREBY CONSENT AND AGREE THAT THE
BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENTS AND
LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS, PROVIDED, THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY
HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED,
CERTIFIED MAIL OR BY REPUTABLE OVERNIGHT COURIER ADDRESSED TO SUCH
CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH CREDIT PARTY'S
ACTUAL RECEIPT THEREOF OR REFUSAL OF DELIVERY.
11.10. Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by any other parties, or
whenever any of the parties desires to give or serve upon any other
parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been
validly served, given or delivered (a) upon the earlier of actual
receipt or refusal of delivery, (b) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy as otherwise
provided in this Section 11.10), (c) one (1) Business Day after deposit
with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or
facsimile number indicated on Annex I or to such other address (or
facsimile number) as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay
in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person designated on Annex I
caused as a result of substitution of counsel or a Person's change of
address, telecopy or facsimile and such Person's failure to notify the
parties hereto of such change shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
11.11. Section Titles. The Section titles and Table of
Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.
11.12. Counterparts. This Agreement may be executed in
any number of separate counterparts, each of which shall collectively
and separately constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED
BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENTS, LENDERS AND ANY
CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED THERETO.
11.14. Press Releases. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future
issue any press releases or other public disclosure using the name of
GE Capital or its affiliates or referring to this Agreement, the other
Loan Documents or the Related Transactions Documents without at least
two (2) Business Days' prior notice to GE Capital and without the prior
written consent of GE Capital unless (and only to the extent that) such
Credit Party or Affiliate is required to do so under law and then, in
any event, such Credit Party or Affiliate will consult with GE Capital
before issuing such press release or other public disclosure. Each
Credit Party consents to the publication by Agent, Oversight Agent or
any Lender of a tombstone or similar advertising material relating to
the financing transactions contemplated by this Agreement. Agent or
such Lender shall provide a draft of any such tombstone or similar
advertising material to each Credit Party for review and comment prior
to the publication thereof. Agent reserves the right to provide to
industry trade organizations information necessary and customary for
inclusion in league table measurements with Borrower's consent which
shall not be unreasonably withheld or delayed.
11.15. Reinstatement. This Agreement shall remain in full
force and effect and continue to be effective should any petition be
filed by or against Borrower for liquidation or reorganization, should
Borrower become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for
all or any significant part of Borrower's assets, and shall continue to
be effective or to be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made.
In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11.16. Advice of Counsel. Each of the parties represents
to each other party hereto that it has discussed this Agreement and,
specifically, the provisions of Sections 11.9 and 11.13, with its
counsel.
11.17. Entities Related to Paragon. Borrower acknowledges
notice that Paragon is affiliated with The Ozer Group, LLC ("Ozer"),
Ozer Valuation Services, Inc. ("Ozer Valuation") and Ozer Wholesale
Services, Inc. ("OWS"), Ozer, Ozer Valuation, OWS and other entities
related to Paragon may, from time to time act as a merchant consultant
or provide other services to Paragon with respect to Borrower, provided
that services to be provided by such entities shall be at charges no
more than market rate for their services.
11.18. Entire Agreement. This Agreement and the other
Loan Documents embody the final, entire agreement among the parties
hereto and supersedes any and all prior commitments, proposals,
agreements, representations understandings, whether oral or written,
relating to the subject written hereof and may not be contradicted or
varied by evidence of prior, contemporaneous or subsequent oral
agreements of the parties.
11.19. Disclosure. Agents and Lenders acknowledge and
agree that any disclosure made by any of the Credit Parties in any of
the Disclosure Schedules shall constitute disclosure to Agents and
Lenders for all purposes of this Agreement and the other Loan
Documents, regardless of whether such disclosure is specifically
referenced in any other Disclosure Schedule and/or in any other section
of this Agreement and/or other Loan Documents.
11.20. Parties Including Trustees; Bankruptcy Court
Proceedings. This Agreement, the other Loan Documents, and all Liens
created hereby or pursuant hereto or to any other Loan Document shall
be binding upon each Credit Party, the estate of each Credit Party,
and any trustee or successor in interest of any Credit Party in the
Chapter 11 Case or any subsequent case commenced under Chapter 7 of the
Bankruptcy Code, and shall not be subject to Section 365 of the
Bankruptcy Code. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Agents and
Lenders and their respective assigns, transferees and endorsees. The
Liens created by this Agreement and the other Loan Documents shall be
and remain valid and perfected in the event of the substantive
consolidation or conversion of the Chapter 11 Case or any other
bankruptcy case of any Credit Party to a case under Chapter 7 of the
Bankruptcy Code or in the event of dismissal of the Chapter 11 case or
the release of any Collateral from the jurisdiction of the Bankruptcy
Court for any reason, without the necessity that Lenders file financing
statements or otherwise perfect its security interests or Liens under
applicable law.
11.21. Pre-Petition Loan Agreement. Borrower hereby
agrees that (i) this Agreement is separate and distinct from the Pre-
Petition Loan Agreement and (ii) the Pre-Petition Loan Agreement is in
full force and effect (it being understood and agreed that upon
indefeasible payment in full in cash of all Obligations, under and as
defined in the Pre-Petition Loan Agreement (subject to the
reinstatement provisions of Section 11.15 of the Pre-Petition Loan
Agreement), the Pre-Petition Loan Agreement shall terminate. Borrower
further agrees that by entering into this Agreement, Agents and Lenders
do not waive any Default or Event of Default under the Pre-Petition
Loan Agreement until such time as the Pre-Petition Loan Agreement
terminates as described in clause (ii) of the immediately preceding
sentence; provided, however that any defaults existing under the Pre-
Petition Loan Agreement but not this Agreement will not trigger the
subordination provisions of Section 1.11(b) hereof (it being understood
that this proviso is intended solely for the purpose of defining the
relative rights of the Tranche A Revolving Lenders on the one hand and
the Tranche B Revolving Lenders on the other, and shall not affect or
impair in any manner the liability of any Credit Party hereunder). The
Agents and Lenders hereby acknowledge and agree that the payment of the
fee under Section 1.9(c) of the Pre-Petition Loan Agreement shall not
be required in respect of the prepayment as a result of the Chapter 11
Case.
11.22. Termination of Letter Agreement. The parties
hereto agree that the letter agreement, dated July 28, 1999, by and
among Holdings, Borrower, Agent, Oversight Agent, and each of the
lenders under the Pre-Petition Loan Agreement regarding the efforts of
Agent to increase the Tranche A Revolving Loan Commitment by
$50,000,000, is hereby terminated and of no further force or effect.
11.23. Post-Closing Matters. Each of the Credit Parties
acknowledges and agrees that the Loan Documents (other than this
Agreement), instruments, agreements, legal opinions and other documents
listed on the Closing Checklist attached as Annex D have not been
delivered on the date hereof. Each of the Credit Parties hereby
covenants and agrees that, Borrower shall use its best efforts to
deliver within five (5) Business Days after the date hereof (but in no
event later than the day occurring five (5) Business Days prior to the
date scheduled for the hearing on the Final Order) each of the
documents, instruments, agreements and legal opinions listed in the
Closing Checklist attached hereto as Annex D. Failure of Borrower to
deliver such documents, instruments, agreements and legal opinions
within such period shall constitute an immediate Event of Default under
this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
FILENE'S BASEMENT, INC.,
Debtor and Debtor in Possession
By:/s/ Steven R. Siegel
Steven R. Siegel,
Executive Vice President
and Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ James F. Hogan
Title: Duly Authorized Signatory
PARAGON CAPITAL LLC, as
Oversight Agent and Lender
By: /s/ Andrew Moser
Title: President and CEO
B III CAPITAL PARTNERS, L.P.
By: DDJ CAPITAL III, LLC, its general partner
By: DDJ CAPITAL MANAGEMENT LLC, Manager
By: /s/ Judy K. Mencher_______
Title: Member____________________
The following Person is signatory to this Agreement in its
capacity as a Credit Party and not as Borrower.
FILENE'S BASEMENT CORP.,
Debtor and Debtor in Possession
By:/s/ Steven R. Siegel
Steven R. Siegel,
Executive Vice President
and Chief Financial Officer
ANNEX A (Recitals)
to
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the
following respective meanings and all section references in the
following definitions shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who may become
obligated to any Credit Party under, with respect to, or on account of,
an Account.
"Accounts" shall mean all "accounts," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party and,
in any event, including (a) all accounts receivable, other receivables,
book debts and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or owing to any
Credit Party, whether arising out of goods sold or services rendered by
it or from any other transaction (including any such obligations which
may be characterized as an account or contract right under the Code),
(b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or
services, (c) all of each Credit Party's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights
of rescission, replevin, reclamation and stoppage in transit and rights
to returned, reclaimed or repossessed goods), (d) all monies due or to
become due to any Credit Party, under all purchase orders and contracts
for the sale of goods or the performance of services or both by such
Credit Party or in connection with any other transaction (whether or
not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of
said purchase orders and contracts, and (e) all collateral security and
guarantees of any kind, now or hereafter in existence, given by any
Person with respect to any of the foregoing.
"Accounts Payable" shall mean all liabilities of Borrower for
the payment for Inventory.
"Advance" shall mean any Revolving Credit Advance or Swing
Line Advance, as the context may require."
Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, five
percent (5%) or more of the Stock having ordinary voting power in the
election of directors of such Persons, (b) each Person that controls,
is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers and partners and
(d) in the case of Borrower, the immediate family members, spouses and
lineal descendants of individuals who are Affiliates of Borrower. For
the purposes of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership
of voting securities, by contract or otherwise; provided, however, that
the term "Affiliate" shall specifically exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor solely in its
capacity as agent appointed pursuant to Section 9.7.
"Agent Advances" shall have the meaning assigned to it in
Section 1.1(d).
"Agents" means collectively, the Agent and the Oversight
Agent solely in their respective capacities as Agent and Oversight
Agent.
"Agreement" shall mean the Debtor in Possession Credit
Agreement by and among Borrower, the other Credit Parties named
therein, GE Capital, as Agent and Lender, Paragon, as Oversight Agent
and Lender, and the other Lenders signatory from time to time to the
Agreement.
"Appendices" shall have the meaning assigned to it in the
recitals to the Agreement.
"Applicable L/C Margin" shall mean the per annum fee, from
time to time in effect, payable with respect to outstanding Letter of
Credit Obligations as determined by reference to Section 1.5(a).
"Applicable Margins" means collectively the Applicable L/C
Margin, the Applicable Unused Line Fee Margin, the Applicable Tranche A
Revolver Index Margin, the Applicable Tranche B Revolver Index Margin
and the Applicable Tranche A Revolver LIBOR Margin.
"Applicable Tranche A Revolver Index Margin" shall mean the
per annum interest rate margin from time to time in effect and payable
in addition to the Index Rate applicable to the Tranche A Revolving
Loan, as determined by reference to Section 1.5(a) of the Agreement.
"Applicable Tranche A Revolver LIBOR Margin" shall mean the
per annum interest rate from time to time in effect and payable in
addition to the LIBOR Rate applicable to the Tranche A Revolving Loan,
as determined by reference to Section 1.5(a) of the Agreement.
"Applicable Tranche B Revolver Index Margin" shall mean the
per annum interest rate from time to time in effect and payable in
addition to the Index Rate applicable to the Tranche B Revolving Loan,
as determined by reference to Section 1.5(a) of the Agreement.
"Applicable Unused Line Margin" shall mean the per annum
amount, from time to time in effect, payable in respect to Borrower's
non-use of committed funds pursuant to Section 1.9(b), which amount is
determined by reference to Section 1.5(a).
"Assignment Agreement" shall have the meaning assigned to it
in Section 9.1(a).
"Bankruptcy Code" shall have the meaning assigned to it in
the Recitals.
"Bankruptcy Court" shall have the meaning assigned to it in
the Recitals.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy
Procedure, as the same may from time to time be in effect and
applicable to the Chapter 11 Case.
"Borrower" shall have the meaning assigned thereto in the
recitals to the Agreement.
"Borrower Accounts" shall have the meaning assigned to it in
Annex C.
"Borrower Pledge Agreement" shall mean the Pledge Agreement
of even date herewith executed by Borrower in favor of Agent, on behalf
of itself and Lenders, pledging all Stock of its Subsidiaries, if any,
and all Intercompany Notes owing to or held by it.
"Borrowing Availability" shall mean collectively, Tranche A
Borrowing Availability and Tranche B Borrowing Availability.
"Borrowing Base" shall mean collectively, the Tranche A
Borrowing Base and the Tranche B Borrowing Base.
"Budget" shall mean the operating budget delivered on the
Closing Date and any subsequent budget of Borrower relative to
Borrower's operations reasonably approved by Agents from time to time.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed
in the State of New York and in reference to LIBOR Loans shall mean any
such day that is also a LIBOR Business Day.
"Capital Expenditures" shall mean, with respect to any
Person, all expenditures (by the expenditure of cash or the incurrence
of Indebtedness) by such Person during any measuring period for any
fixed assets or improvements or for replacements, substitutions or
additions thereto, that have a useful life of more than one year and
that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person
as lessee that, in accordance with GAAP, would be required to be
classified and accounted for as a capital lease on a balance sheet of
such Person.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance
sheet of such lessee in respect of such Capital Lease.
"Carothers Notes" shall mean those certain promissory notes
executed by W. Jay Carothers in favor of Borrower and scheduled on
Disclosure Schedule 6.2.
"Carve-Out Expenses" shall have the meaning assigned to it in
Section 1.18(c).
"Cash Collateral" shall mean "cash collateral" as that phrase
is defined in Section 363(a) of the Bankruptcy Code.
"Cash Management Systems" shall have the meaning assigned to
it in Section 1.8.
"Change of Control" means any of the following: (a) any
person or group of persons (within the meaning 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 the Securities Exchange Act of
1934, as amended) of 30% or more of the issued and outstanding shares
of capital Stock of Holdings having the right to vote for the election
of directors of Holdings under ordinary circumstances; (b) during any
period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Holdings
(together with any new directors whose election by the board of
directors of Holdings or whose nomination for election by the
stockholders of Holdings was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of such period or whose elections or nomination for election
was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office,
(c) Holdings shall cease to own and control all of the economic and
voting rights associated with all of the outstanding capital Stock of
Borrower, (d) Borrower shall cease to own and control all of the
economic and voting rights associated with all of the outstanding
capital Stock of any of its Subsidiaries, or (e) any two (2) of
Kathleen Mason, Jay Carothers, Samuel Gerson or Steven Siegel shall
cease to act under any circumstances as officers of Borrower performing
duties essentially the same as those performed on the Closing Date.
"Chapter 11 Case" shall have the meaning assigned to it in
the Recitals.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes
owed to the PBGC at the time due and payable), levies, assessments,
charges, liens, claims or encumbrances upon or relating to (a) the
Collateral, (b) the Obligations, (c) the employees, payroll, income or
gross receipts of any Credit Party, (d) any Credit Party's ownership or
use of any properties or other assets, or (e) any other aspect of any
Credit Party's business.
"Chattel Paper" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located.
"Closing Date" shall mean August 23, 1999.
"Closing Checklist" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents
and information to be delivered in connection with the Agreement, the
other Loan Documents and the transactions contemplated thereunder,
substantially in the form attached hereto as Annex D.
"Code" shall mean the Uniform Commercial Code as the same
may, from time to time, be enacted and in effect in the State of New
York; provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority
of Agent's or any Lender's security interest in any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "Code" shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions
related to such provisions.
"Collateral" shall mean all existing and hereafter acquired
property of the Credit Parties and the Credit Parties' estates, of
whatever kind or nature, real or personal, whether acquired prepetition
or postpetition, including without limitation and by way of general
description only, all real estate interests; all interests under
leases, licenses or occupancy agreements covering personal or real
property, including all store leases; all motor vehicles; all accounts
and accounts receivable; all agreements, contracts, contract rights,
trademarks and patents and other general intangibles; all deposit
accounts, including those maintained with Agent, its affiliates or the
depository banks under the existing blocked accounts/concentration
account cash management system; instruments; documents; chattel paper;
all loan proceeds; all other obligations in whatever form owing to the
Credit Parties, and all rights in the merchandise or services which
give rise to any of the foregoing; all inventory, including, without
limitation, store merchandise, raw materials, work in process, finished
goods and other personal property held for lease or sale or to be
furnished under contracts for service, or to be consumed in the Credit
Parties' business; all machinery, equipment, furniture, furnishings,
fixtures and other personal property acquired for use primarily in the
Credit Parties' business; all causes of action, whether arising in
contract, tort or otherwise; all collateral as defined in the Pre-
Petition Loan Agreement and all other claims and property recovered by
or on behalf of the Credit Parties or the estates of the Credit Parties
(exclusive of any avoidance actions available to the bankruptcy estates
of the Credit Parties pursuant to Sections 544, 545, 547, 548, 549,
550, 553(b) or 724(a) of the Bankruptcy Code), together with the
property covered by the Security Agreement, the Mortgages and the other
Collateral Documents and any other property, real or personal, tangible
or intangible, now existing or hereafter acquired, that may at any time
be or become subject to a security interest or Lien in favor of Agent,
on behalf of itself and Lenders, to secure the Obligations.
"Collateral Documents" shall mean the Security Agreements,
the Pledge Agreements, the Guaranties, the Mortgages, the Intellectual
Property Security Agreement, the Orders and all similar agreements
entered into guaranteeing payment of, or granting a Lien upon property
as security for payment of, the Obligations.
"Collateral Reports" shall mean the reports with respect to
the Collateral referred to in Annex F.
"Collection Account" shall mean that certain account of
Agent, account number 502-328-54 in the name of Agent at Bankers Trust
Company in New York, New York or such other account as Agent shall
specify.
"Committees" shall mean collectively, the official committee
of unsecured creditors and any other committee formed, appointed or
approved in the Chapter 11 Case and each of such Committees shall be
referred to herein as a Committee.
"Commitment Termination Date" shall mean the earliest of (a)
February 23, 2001, (b) the date of termination of Lenders' obligations
to make Advances and/or incur Letter of Credit Obligations or permit
existing Loans to remain outstanding pursuant to Section 8.2(b), (c)
the date of indefeasible prepayment in full by Borrower of the Loans
and the cancellation and return (or stand-by guarantee) of all Letters
of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of the
Revolving Loan Commitment and the Swing Line Commitment to zero dollars
($0), (d) the date that is five days after the Petition Date if the
Interim Order has not been entered by the Bankruptcy Court by such
date, (e) the date that is 25 days after the Petition Date if the Final
Order has not been entered by the Bankruptcy Court by such date, unless
the Interim Order has been extended with Lenders' written consent to a
date acceptable to Lenders, (f) the first effective date of any plan of
reorganization in the Chapter 11 Case, and (g) the date of any sale,
transfer or other disposition of all or substantially all of the assets
or stock of Holdings or Borrower.
"Commitments" shall mean (a) as to any Lender, the aggregate
of such Lender's Revolving Loan Commitment (including without
duplication the Swing Line Lender's Swing Line Commitment as a subset
of its Revolving Loan Commitment) as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such
Lender and (b) as to all Lenders, the aggregate of all Lenders'
Revolving Loan Commitments (including without duplication the Swing
Line Lender's Swing Line Commitment as a subset of its Revolving Loan
Commitment) which aggregate commitment shall be One Hundred Thirty Five
Million Dollars ($135,000,000) on the Closing Date, as to each of
clauses (a) and (b), as such Commitments may be reduced, amortized or
adjusted from time to time in accordance with the Agreement.
"Compliance Certificate" shall have the meaning assigned to
it in Annex E.
"Concentration Account" shall have the meaning assigned to it
in Annex C.
"Contracts" shall mean all "contracts," as such term is
defined in the Code, now owned or hereafter acquired by any Credit
Party, in any event, including all contracts, undertakings, or
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which any Credit Party may now or hereafter
have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
"Copyright License" shall mean any and all rights now owned
or hereafter acquired by any Credit Party under any written agreement
granting any right to use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), now
owned or existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all applications in connection therewith,
including all registrations, recordings and applications in the United
States Copyright Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or
any political subdivision thereof, and (b) all reissues, extensions or
renewals thereof.
"Credit Card Notices" shall mean those certain notices issued
by Borrower in favor of Agent to the Credit Card Providers pursuant to
which such Credit Card Providers agree to transfer all credit card
receipts of Borrower into the Collection Account.
"Credit Card Providers" shall mean the banks and finance
companies listed on Disclosure Schedule 3.26, as updated or
supplemented from time to time.
"Credit Parties" shall mean Holdings, Borrower, and each of
their respective Subsidiaries.
"Default" shall mean any event which, with the passage of
time or notice or both, would, unless cured or waived, become an Event
of Default.
"Default Rate" shall have the meaning assigned to it in
Section 1.5(d).
"Disbursement Accounts" shall have the meaning assigned to it
on Annex C.
"Disclosure Schedules" shall mean the Schedules prepared by
Borrower and denominated as Disclosure Schedules 1.4 through 6.7 in the
Index to the Agreement.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located.
"Dollars" or "$" shall mean lawful currency of the United
States of America.
"EBITDA" shall mean, with respect to any Person for any
fiscal period, an amount equal to (a) consolidated net income of such
Person for such period, minus (b) the sum of (i) income tax credits,
(ii) interest income, (iii) gain from extraordinary items for such
period, (iv) any aggregate net gain (but not any aggregate net loss)
during such period arising from the sale, exchange or other disposition
of capital assets by such Person (including any fixed assets, whether
tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other non-
cash gains which have been added in determining consolidated net
income, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance
with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v)
amortized debt discount for such period, and (vi) the amount of any
deduction to consolidated net income as the result of any grant to any
members of the management of such Person of any Stock, in each case to
the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without
duplication. For purposes of this definition, the following items
shall be excluded in determining consolidated net income of a Person:
(1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (2) the income (or
deficit) of any other Person (other than a Subsidiary) in which such
Person has an ownership interest, except to the extent any such income
has actually been received by such Person in the form of cash dividends
or distributions; (3) the undistributed earnings of any Subsidiary of
such Person to the extent that the declaration or payment of dividends
or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of
law applicable to such Subsidiary; (4) any restoration to income of any
contingency reserve, except to the extent that provision for such
reserve was made out of income accrued during such period; (5) any
write-up of any asset; (6) any net gain from the collection of the
proceeds of life insurance policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of
any Indebtedness, of such Person, (8) in the case of a successor to
such Person by consolidation or merger or as a transferee of its
assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets, and (9) any deferred credit representing
the excess of equity in any Subsidiary of such Person at the date of
acquisition of such Subsidiary over the cost to such Person of the
investment in such Subsidiary.
"Eligible Accounts" shall have the meaning assigned to it in
Section 1.6 of the Agreement.
"Eligible Assignee" means with respect to any prospective
assignee of a Tranche A Revolving Loan (a) any Lender, any Affiliate of
any Lender and with respect to any Lender that is an investment fund
that invests in commercial loans, any other investment fund that is
managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor; (b) a commercial bank or
finance company organized under the laws of the United States, or any
State thereof or the District of Columbia, and having total assets in
excess of $500,000,000 and having a net worth in excess of $50,000,000;
(c) a savings and loan association or savings bank organized under the
laws of the United States, or any State thereof or the District of
Columbia, and having a net worth of at least $100,000,000, calculated
in accordance with generally accepted accounting principles; (d) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in
which it is organized or another country which is also a member of the
OECD; (e) the central bank of any country which is a member of the
OECD; and (f) if, but only if, any Event of Default has occurred and is
continuing, any other bank, insurance company, commercial finance
company or other financial institution approved by Agent, such approval
not to be unreasonably withheld, provided that no Person determined by
Agent to be acting in the capacity of a vulture fund or distressed debt
purchaser shall be an Eligible Assignee.
"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7 of the Agreement.
"Eligible Leasehold Real Estate" shall mean any Real Estate
which is leased to Borrower (other than under ground leases), which
satisfies each of the following conditions:
(a) the subject lease has a NLV of at least $300,000;
(b) Borrower has delivered to Oversight Agent such leasehold
mortgages and other documents as the Oversight Agent may reasonably
request to provide the Agent, for itself and Lenders, with a perfected
first-priority security interest in such leaseholds, and shall have
delivered title certifications, appraisals and other Real Estate
requirements, as reasonably required by Oversight Agent, including but
not limited to, those items required by FIRREA, provided, however, that
the foregoing conditions shall be deemed satisfied upon the entry of
the Orders in the form substantially attached hereto or otherwise in
form reasonably acceptable to the Tranche B Revolving Lenders;
(c) Borrower has provided Oversight Agent with evidence
satisfactory to Oversight Agent in its reasonable discretion of the
existence of all deeds, assignments, waivers, consents, non-disturbance
and recognition or similar agreements, bills of sale and other
documents and has duly effected all recordings, filings and other
actions necessary to establish, protect, and perfect Borrower's right,
title and interest in and to such Real Estate, provided, however, that
the foregoing conditions shall be deemed satisfied upon the entry of
the Orders in the form substantially attached hereto or otherwise in
form reasonably acceptable to the Tranche B Revolving Lenders;
(d) the Real Estate (i) is or was used by Borrower for the
conduct of a retail store business, provided, however no Real Estate
which was previously used by Borrower for the operation of a retail
store which is no longer in operation and is "dark" shall be eligible
unless such Real Estate is actively being marketed for sale in a
commercially reasonable manner; and
(e) Borrower has the legal right and authority to transfer
all of its right, title and interest in such leasehold without the
consent of landlords and free of any recapture, termination or other
similar rights of landlords, provided, however, that the foregoing
conditions shall be deemed satisfied upon the entry of the Orders in
the form substantially attached hereto or otherwise in form reasonably
acceptable to the Tranche B Revolving Lenders.
"Environmental Laws" shall mean all applicable federal,
state, local and foreign laws, statutes, ordinances, codes, rules,
standards and regulations, now or hereafter in effect, and in each case
as amended or supplemented from time to time, and any applicable
judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or
judgment, imposing liability or standards of conduct for or relating to
the regulation and protection of human health, safety, the environment
and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. 5101 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
136 et seq.); the Solid Waste Disposal Act (42 U.S.C. 6901 et seq.);
the Toxic Substance Control Act (15 U.S.C. 2601 et seq.); the Clean
Air Act (42 U.S.C. 7401 et seq.); the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.); the Occupational Safety and
Health Act (29 U.S.C. 651 et seq.); and the Safe Drinking Water Act
(42 U.S.C. 300(f) et seq.), each as from time to time amended, and
any and all regulations promulgated thereunder, and all analogous
state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
"Environmental Liabilities" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response,
remedial and removal costs, investigation and feasibility study costs,
capital costs, operation and maintenance costs, losses, damages,
punitive damages, property damages, natural resource damages,
consequential damages, treble damages, costs and expenses (including
all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a
result of or related to any claim, suit, action, investigation,
proceeding or demand by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil
statute or common law, including any arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any
Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real
or personal property.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals or registrations required by
any Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located and, in any event, including all such Credit
Party's machinery and equipment, including processing equipment,
conveyors, machine tools, data processing and computer equipment with
software and peripheral equipment (other than software constituting
part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive
equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature,
trade fixtures and fixtures not forming a part of real property, all
whether now owned or hereafter acquired, and wherever situated,
together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing,
fuel therefor, and all manuals, drawings, instructions, warranties and
rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974 (or any successor legislation thereto), as amended from
time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit
Party, any trade or business (whether or not incorporated) which,
together with such Credit Party, are treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or
any ERISA Affiliate, (a) any event described in Section 4043(c) of
ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit
Party or ERISA Affiliate from a Title IV Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (c) the complete or partial
withdrawal of any Credit Party or any ERISA Affiliate from any
Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the
failure by any Credit Party or ERISA Affiliate to make when due
required contributions to a Multiemployer Plan or Title IV Plan unless
such failure is cured within 30 days; (g) any other event or condition
which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241
of ERISA; (i) the loss of a Qualified Plan's qualification or tax
exempt status; or (j) the termination of a Plan described in Section
4064 of ERISA.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in
Section 8.1.
"Federal Funds Rate" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight federal funds
transactions among members of the Federal Reserve System, as determined
by Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto.
"Fees" shall mean any and all fees and compensation payable
to Agent, Oversight Agent or any Lender pursuant to the Agreement or
any of the other Loan Documents.
"Final Order" shall mean the order of the Bankruptcy Court
entered in the Chapter 11 Case after a final hearing pursuant to
Section 364 of the Bankruptcy Code and Bankruptcy Rule 4001, in form
and substance satisfactory to Agents and Lenders, and from which no
appeal has been timely filed, or if timely filed, no stay pending
appeal shall have been granted, together with all extensions,
modifications and amendments thereto, authorizing Borrower to obtain
credit, incur indebtedness, and grant Liens under this Agreement and
the other Loan Documents and providing for the superpriority of
Lenders' claims, all as set forth in such order.
"Financial Statements" shall mean the consolidated income
statements, statements of cash flows and balance sheets of Borrower
delivered in accordance with Section 3.4 of the Agreement and Annex E
to the Agreement, provided, however, that upon the formation of any
Subsidiaries as permitted under this Agreement, such statements and
balance sheets shall be prepared on a consolidated and consolidating
basis.
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of Borrower which quarterly accounting periods through the
Termination Date are as set forth on Schedule 10 annexed hereto.
"Fiscal Year" shall mean any of the annual accounting periods
of Borrower ending on the Saturday closest to January 31 of each year.
"Fixtures" shall mean any "fixtures" as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures,
or similar evidences of Indebtedness and which by its terms matures
more than one year from, or is directly or indirectly renewable or
extendible at such Person's option under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a
period of more than one year from the date of creation thereof, and
specifically including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible beyond
one year at the option of the debtor, and also including, in the case
of Borrower, the obligations and, without duplication, Guaranteed
Indebtedness consisting of guaranties of Funded Debt of other Persons.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, consistently applied, as such term is
further defined in Annex G to the Agreement.
"GE Capital Fee Letter" shall mean that certain letter, dated
as of August 23, 1999, between GE Capital and Borrower with respect to
certain Fees to be paid from time to time by Borrower to GE Capital,
and substantially in the form of Exhibit B-1 hereto.
"General Intangibles" shall mean any "general intangibles,"
as such term is defined in the Code, now owned or hereafter acquired by
any Credit Party, and, in any event, including all right, title and
interest which such Credit Party may now or hereafter have in or under
any Contract, all customer and mailing lists, web sites, domain names,
Licenses, Copyrights, Trademarks, Patents, and all applications
therefor and reissues, extensions or renewals thereof, rights in
Intellectual Property, interests in partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether
or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark
or Trademark License), all rights and claims in or under insurance
policies (including insurance for fire, damage, loss and casualty,
whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated
securities, choses in action, deposit, checking and other bank
accounts, rights to receive tax refunds and other payments, rights of
indemnification, all books and records, correspondence, credit files,
invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession
or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease,
dividend, or other obligation ("primary obligations") of any other
Person (the "primary obligor") in any manner, including any obligation
or arrangement of such Person (a) to purchase or repurchase any such
primary obligation, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of
the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) to indemnify the owner of such primary
obligation against loss in respect thereof. The amount of any
Guaranteed Indebtedness at any time shall be deemed to be an amount
equal to the lesser at such time of (x) the stated or determinable
amount of the primary obligation in respect of which such Guaranteed
Indebtedness is made and (y) the maximum amount for which such Person
may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness; or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect
thereof.
"Guaranties" shall mean, collectively, the Holdings Guaranty,
each Subsidiary Guaranty and any other guaranty executed by any
Guarantor in favor of Agent and Lenders in respect of the Obligations.
"Guarantors" shall mean Holdings, each Subsidiary of
Borrower, and each other Person, if any, which executes a guarantee or
other similar agreement in favor of Agent in connection with the
transactions contemplated by the Agreement and the other Loan
Documents.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability now or
hereafter under, any Environmental Laws, including any material or
substance which is (a) defined as a "solid waste," "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "pollutant," "contaminant,"
"hazardous constituent," "special waste," "toxic substance" or other
similar term or phrase under any Environmental Laws, (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls
(PCB's), or any radioactive substance.
"Holdings" shall have the meaning ascribed thereto in the
recitals to the Agreement.
"Holdings Guaranty" shall mean the guaranty of even date
herewith executed by Holdings in favor of Agent and Lenders.
"Holdings Pledge Agreement" shall mean the Pledge Agreement
of even date herewith executed by Holdings in favor of Agent, on behalf
of itself and Lenders, pledging all Stock of Borrower and its other
Subsidiaries and all Intercompany Notes owing to or held by it.
"Indebtedness" of any Person shall mean without duplication
(a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred six
(6) months or more, but excluding obligations to trade creditors
incurred in the ordinary course of business that are not overdue by
more than six (6) months unless being contested in good faith, (b) all
reimbursement and other obligations with respect to letters of credit,
bankers' acceptances and surety bonds, whether or not matured, (c) all
obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Capital
Lease Obligations and the present value (discounted at the Index Rate
as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all
obligations of such Person under any foreign exchange contract,
currency swap agreement, interest rate swap, cap or collar agreement or
other similar agreement or arrangement designed to alter the risks of
that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured, (h) all Indebtedness
referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property or other assets (including
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness, and (i) the Obligations. Indebtedness specifically does
not include, without limitation, Borrower's obligations under real
estate leases and other operating leases.
"Indemnified Liabilities" shall have the meaning assigned to
it in Section 1.13.
"Index Rate" shall mean, for any day, a floating rate equal
to the higher of (i) the rate publicly quoted from time to time by
The Wall Street Journal as the "base rate on corporate loans at large
U.S. money center commercial banks" (or, if The Wall Street Journal
ceases quoting a base rate of the type described, the highest per annum
rate of interest published by the Federal Reserve Board in Federal
Reserve statistical release H.15 (519) entitled "Selected Interest
Rates" as the Bank prime loan rate or its equivalent), and (ii) the
Federal Funds Rate plus fifty (50) basis points per annum. Each
change in any interest rate provided for in the Agreement based upon
the Index Rate shall take effect at the time of such change in the
Index Rate.
"Index Rate Loan" shall mean a Loan or portion thereof
bearing interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located, and, in any event, including all certificated
securities, all certificates of deposit, and all notes and other,
without limitation, evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute,
Chattel Paper.
"Intellectual Property" shall mean any and all Licenses,
Patents, Copyrights, Trademarks, trade secrets and customer lists.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement made in favor of Agent, on
behalf of itself and Lenders, by each applicable Credit Party.
"Intercompany Notes" shall have the meaning assigned to it in
Section 6.3.
"Interest Expense" shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such
Person determined in accordance with GAAP for the relevant period ended
on such date, including, in any event, interest expense with respect to
any Funded Debt of such Person and interest expense for the relevant
period that has been capitalized on the balance sheet of such Person.
"Interest Payment Date" means (a) as to any Index Rate Loan
or any Tranche B Revolving Loan (including any Tranche B Revolving Loan
based on Tranche B Real Estate Advances), the first Business Day of
each month to occur while such Loan is outstanding, (b) as to any LIBOR
Loan, the last day of the applicable LIBOR Period; provided, that in
the case of any LIBOR Period greater than three months in duration,
interest shall be payable at three month intervals and on the last day
of such LIBOR Period; and provided further that, in addition to the
foregoing, each of (x) the date upon which all of the Commitments have
been terminated and the Loans have been paid in full and (y) the
Commitment Termination Date shall be deemed to be an "Interest Payment
Date" with respect to any interest which is then accrued under the
Agreement.
"Interim Order" shall mean the interim order of the
Bankruptcy Court entered in the Chapter 11 Case after an interim
hearing (assuming satisfaction of the standards prescribed in Section
364 of the Bankruptcy Code and Bankruptcy Rule 4001 and other
applicable law), together with all extensions, modifications and
amendments thereto, in form and substance satisfactory to Agents and
Lenders, authorizing, on an interim basis, Borrower to execute and
perform under the terms of this Agreement and the other Loan Documents,
substantially in the form of Exhibit A-2.
"Inventory" shall mean any "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any Credit
Party, wherever located, and in any event including inventory,
merchandise, goods and other personal property which are held by or on
behalf of any Credit Party for sale or lease or are furnished or are to
be furnished under a contract of service, or which constitute raw
materials, work in process or materials used or consumed or to be used
or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same,
including other supplies.
"Inventory Loans" shall mean Revolving Loans advanced against
the Eligible Inventory portion of the Borrowing Base.
"Inventory Overadvances" shall mean that portion of Tranche A
Revolving Loans which results in the outstanding balance of the
Inventory Loans exceeding the Tranche A Inventory Loan Limit as
determined by the most recent appraisal of the Oversight Agent received
by Agent prior to any such Tranche A Revolving Loan, provided, however,
Tranche A Revolving Lenders (i) are entitled to rely absolutely on the
most recent appraisal provided by Oversight Agent in determining
whether Tranche A Revolving Loans to be made will constitute Inventory
Overadvances, and (ii) shall not be subject to any subordination
whatsoever for Inventory Overadvances made in the event subsequent
Reserves, changes in eligibility criteria, appraisals or other
valuation evidence indicate that outstanding Tranche A Revolving Loans
constituting Inventory Loans exceed the Tranche A Inventory Loan Limit
when at the time such Tranche A Revolving Loans were made, the Tranche
A Inventory Loan Limit had not been exceeded.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the Code in those jurisdictions in which such
definition has been adopted and shall include (i) all securities,
whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, including the rights of
such Credit Party to any securities account and the financial assets
held by a securities intermediary in such securities account and any
free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts held by any
Credit Party; (iv) all commodity contracts held by any Credit Party;
and (v) all commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Landlord Waiver States" shall have the meaning assigned to
such term in Section 5.9.
"L/C Issuer" shall have the meaning assigned to such term in
Annex B.
"Lenders" shall mean GE Capital, Paragon, the other Lenders
named on the signature page of the Agreement, and, if any such Lender
shall decide to assign all or any portion of the Obligations, such term
shall include such assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in
Annex B.
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Agent and Tranche A Revolving Lenders at the
request of Borrower, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance of a
reimbursement agreement or guaranty by Agent or purchase of a
participation as set forth in Annex B with respect to any Letter of
Credit. The amount of such Letter of Credit Obligations shall equal
the maximum amount which may be payable by Agent or Tranche A Revolving
Lenders thereupon or pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters
of credit issued for the account of Borrower by any L/C Issuer, and
bankers' acceptances issued by Borrower, for which Agent and Tranche A
Revolving Lenders have incurred Letter of Credit Obligations.
"LIBOR Business Day" shall mean a Business Day on which banks
in the city of London are generally open for interbank or foreign
exchange transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan,
each period commencing on a LIBOR Business Day selected by Borrower
pursuant to the Agreement and ending one, two or three months
thereafter, as selected by Borrower's irrevocable notice to Agent as
set forth in Section 1.5(e); provided that the foregoing provision
relating to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is
not a LIBOR Business Day, such LIBOR Period shall be extended to the
next succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior
to such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins
on the last LIBOR 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 LIBOR Period) shall end on the last LIBOR Business
Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require
a payment or prepayment of any LIBOR Loan during a LIBOR Period for
such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall
be no more than eight (8) separate LIBOR Loans in existence at any one
time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of
interest determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars
for the applicable LIBOR Period which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on the second full LIBOR Business Day next
preceding the first day of each LIBOR Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be
used); divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve system or other
governmental authority having jurisdiction with respect thereto, as now
and from time to time in effect) for Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board
which are required to be maintained by a member bank of the Federal
Reserve System.
If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from
such financial reporting service or other information as shall be
mutually acceptable to Agent and Borrower.
"License" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or
hereafter acquired by any Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or
nature whatsoever (including any lease or title retention agreement,
any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Liquidation Default" shall mean the occurrence of (i) any of
the events described in Sections 8.1(r), (s), (z), (ii) a sale of all
or substantially all of the assets of Holdings or Borrower, or (iii)
the exercise by Lenders and Agents of their rights under Section 8.2 to
liquidate the Collateral.
"Litigation" shall have the meaning assigned to it in Section
3.13.
"Loan Account" shall have the meaning assigned to it in
Section 1.12.
"Loan Documents" shall mean the Agreement, the Notes, the GE
Capital Fee Letter, the Paragon Fee Letter, the Oversight Agreement,
the Collateral Documents and all other agreements, instruments,
documents and certificates identified in the Closing Checklist executed
and delivered to, or in favor of, Agent and/or Lenders and including
all other pledges, powers of attorney, consents, assignments,
contracts, notices, and all other written matter whether heretofore,
now or hereafter executed by or on behalf of any Credit Party, or any
employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated hereby,
including the Interim Order and the Final Order. Any reference in the
Agreement or any other Loan Document to a Loan Document shall include
all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall
refer to such Agreement as the same may be in effect at any and all
times such reference becomes operative.
"Loans" shall mean the Tranche A Revolving Loan, the Tranche
B Revolving Loan and the Swing Line Loan.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the business, assets, operations, prospects or financial
or other condition of any Credit Party including, without limitation,
any material adverse change in the financial performance of any Credit
Party as compared to the Projections attached hereto as Schedule
3.4(C), (b) Borrower's ability to pay any of the Loans or any of the
other Obligations in accordance with the terms of the Agreement, (c)
the Collateral or Agent's Liens, on behalf of itself and Lenders, on
the Collateral or the priority of such Liens, or (d) Agent's or any
Lender's rights and remedies under the Agreement and the other Loan
Documents. A Material Adverse Effect shall not include the closing of
any Stores identified in the Projections attached hereto as Disclosure
Schedule 3.4(B) and/or the disposition of assets as permitted under
Section 6.8 hereof. Without limiting the foregoing, any event or
occurrence adverse to one or more Credit Parties which results or could
reasonably be expected to result in costs and/or liabilities and/or
loss of revenues, individually, or in the aggregate, to any Credit
Party in any 30-day period in excess of the lesser of $10,000,000 and
10% of Borrowing Availability as of any date of determination shall be
deemed to have had Material Adverse Effect.
"Material Agreements" shall mean those agreements identified
on Disclosure Schedule 6.19.
"Maximum Amount"means collectively, the Maximum Tranche A
Amount and the Maximum Tranche B Amount.
"Maximum Tranche A Amount" shall mean, at any particular
time, an amount equal to the Tranche A Revolving Loan Commitment of all
Tranche A Revolving Lenders.
"Maximum Tranche B Amount" shall mean, at any particular
time, an amount equal to the Tranche B Revolving Loan Commitment of all
Tranche B Revolving Lenders.
"Monogram Agreement" shall mean that certain Credit Card
Program dated as of July 20, 1995, among Borrower, Monogram Credit Card
Bank of Georgia and General Electric Capital Corporation, as amended
and in effect on the Closing Date, and as further amended in accordance
with Section 6.20 hereof, as the same may be replaced by Borrower with
Household Bank (SB), N.A., on substantially the same terms as the draft
of such agreement previously delivered to Agents.
"Mortgages" shall mean each of the mortgages, deeds of trust,
leasehold mortgages, leasehold deeds of trust, collateral assignments
of leases or other real estate security documents delivered by any
Credit Party to Oversight Agent with respect to Borrower's Real Estate,
all in form and substance satisfactory to Oversight Agent.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Credit Party
or ERISA Affiliate is making, is obligated to make, has made or been
obligated to make, contributions on behalf of participants who are or
were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
determination, the sum of Tranche A Borrowing Availability and Tranche
B Borrowing Availability.
"Net Retail Liquidation Value " shall mean the appraised
liquidation value of Eligible Inventory less liquidation expenses as
reasonably determined in good faith by Agents from time to time.
"Net Worth" shall mean, with respect to any Person as of any
date of determination, the book value of the assets of such Person,
minus (a) reserves applicable thereto, and minus (b) all of such
Person's liabilities on a consolidated basis (including accrued and
deferred income taxes), all as determined in accordance with GAAP.
"NLV" shall mean as to any Eligible Leasehold Real Estate,
the net liquidation value after all costs of such Eligible Leasehold
Real Estate determined in accordance with an appraisal acceptable to
Oversight Agent.
"Non-Funding Lender" shall have the meaning assigned to it in
Section 9.9(a)(ii).
"Notes" shall mean the Revolving Notes and the Swing Line
Note, collectively.
"Notice of Conversion/Continuation" shall have the meaning
assigned to it in Section 1.5(e).
"Notice of Revolving Credit Advance/Borrowing Base
Certificate" shall have the meaning assigned to it in Section 1.1(a).
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations, for the performance of covenants, tasks or
duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are
liquidated or determinable) owing by any Credit Party to Agents or any
Lender, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any
note, agreement or other instrument, arising under the Agreement or any
of the other Loan Documents. This term includes all principal,
interest (including all interest which accrues after the commencement
of any case or proceeding in bankruptcy after the insolvency of, or for
the reorganization of any Credit Party (including, the Chapter 11
Case), whether or not allowed in such proceeding), Fees, Charges,
expenses, attorneys' fees and any other sum chargeable to any Credit
Party under the Agreement or any of the other Loan Documents.
"Orders" means the Interim Order and the Final Order.
"Oversight Agent" means Paragon, solely in its capacity, as
oversight agent for the Agent under the Oversight Agreement, or such
other "oversight agent " designated by Agent, Requisite Tranche B
Lenders and approved by Borrower which consent of Borrower shall not
be unreasonably withheld or delayed; provided that no such consent
shall be required so long as any Event of Default has occurred and is
continuing.
"Oversight Agreement" means that certain Oversight Agent
Agreement, of even date herewith, among Agent, Lenders, Borrower and
Oversight Agent.
"Paragon" shall mean Paragon Capital LLC.
"Paragon Fee Letter" shall mean that certain letter, dated as
of August 23, 1999, between Paragon and Borrower with respect to
certain Fees to be paid from time to time by Borrower to Paragon, and
substantially in the form of Exhibit B-2 hereto.
"Patent License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party granting
any right with respect to any invention on which a Patent is in
existence.
"Patents" shall mean all of the following in which any Credit
Party now holds or hereafter acquires any interest: (a) all letters
patent of the United States or any other country, all registrations and
recordings thereof, and all applications for letters patent of the
United States or any other country, including registrations, recordings
and applications in the United States Patent and Trademark Office or in
any similar office or agency of the United States, any State or
Territory thereof, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Permitted Discretion" means Agents' reasonable good faith
judgment in consideration of any factor which (i) could adversely
affect the value of any Collateral, the ability to realize upon the
Collateral, the enforceability or priority of the liens thereon or the
amount that Agents and Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation thereof; or (ii) materially increases the likelihood that
Agents and Lenders would not receive payment for all of the
Obligations.
"Permitted Encumbrances" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other governmental
Charges not yet due and payable; (b) pledges or deposits of money
securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or
similar legislation (excluding Liens under ERISA); (c) pledges or
deposits of money securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party
is a party as lessee made in the ordinary course of business; (d)
inchoate and unperfected workers', mechanics' or similar liens arising
in the ordinary course of business, so long as such Liens attach only
to Equipment, Fixtures and/or Real Estate; (e) carriers', mechanics',
materialmen's, warehousemen's, suppliers' or other similar possessory
liens in existence less than 120 days from the date of creation thereof
in respect of obligations not overdue or otherwise discharged or bonded
over within sixty (60) days following the imposition of such liens
securing liabilities in an outstanding aggregate amount not in excess
of $500,000; (f) deposits securing, or in lieu of, surety, appeal or
customs bonds in proceedings to which any Credit Party is a party; (g)
any attachment or judgment lien not constituting an Event of Default
under Section 8.1(j); (h) zoning restrictions, easements, licenses, or
other restrictions on the use of any Real Estate or other minor
irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of
such Real Estate; (i) presently existing or hereinafter created Liens
in favor of Agent, on behalf of Lenders; and (j) Liens expressly
permitted under clauses (b), (c) and (d) of Section 6.7 of the
Agreement.
"Permitted Inventory Locations" shall mean those Stores and
warehouse facilities of Borrower located in the United States and
listed on Disclosure Schedule 3.2 hereto, as such Disclosure Schedule
3.2 may be supplemented from time to time in accordance with the
provisions of Section 5.6 hereof, subject to Agents' receipt of a
waiver, in form and substance reasonably satisfactory to Agents, with
respect to any inventory consolidator not identified on Disclosure
Schedule 3.2 on the Closing Date.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether
federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department
thereof).
"Petition Date" shall have the meaning assigned to it in the
Recitals.
"Plan" shall mean, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Credit Party maintains,
contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any Credit Party.
"Pledge Agreements" shall mean the Borrower Pledge Agreement,
the Holdings Pledge Agreement, and any other pledge agreement entered
into after the Closing Date by any Credit Party (as required by the
Agreement or any other Loan Document).
"POS System" shall have the meaning assigned to it in Section
5.13.
"Pre-Petition Indebtedness" shall mean all Indebtedness of
any Credit Party incurred or assumed prior to the Petition Date.
"Pre-Petition Loan Agreement" shall have the meaning assigned
to it in the Recitals.
"Prior Lender Obligations" shall mean all obligations and
liabilities of any Credit Party to the Prior Lenders pursuant to the
Pre-Petition Loan Agreement and all instruments and documents executed
pursuant thereto or in connection therewith.
"Prior Lenders" shall mean the lenders under the Pre-Petition
Loan Agreement.
"Proceeds" shall mean "proceeds," as such term is defined in
the Code and, in any event, shall include (a) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to any Credit
Party from time to time with respect to any of the Collateral, (b) any
and all payments (in any form whatsoever) made or due and payable to
any Credit Party from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any Governmental Authority (or any Person acting
under color of governmental authority), (c) any claim of any Credit
Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past,
present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries
by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral, and (e) any and
all other amounts from time to time paid or payable under or in
connection with any of the Collateral, upon disposition or otherwise.
"Projections" means Borrower's forecasted consolidated: (a)
balance sheets; (b) profit and loss statements; and (c) cash flow
statements prepared on a basis consistent with the historical
Financial Statements of Borrower, together with appropriate supporting
details and a statement of underlying assumptions, provided, however,
that upon the formation of any Subsidiaries as permitted under this
Agreement, such Projections shall be prepared on a consolidated and
consolidating basis.
"Pro Rata Share" shall mean with respect to all matters
relating to any Lender (a) with respect to the Tranche A Revolving Loan
(including the Swing Line Loan as a subset of the Swing Line Lender's
Tranche A Revolving Loan), the percentage obtained by dividing (i) the
Tranche A Revolving Loan Commitment of that Tranche A Revolving Lender
(including the Swing Line Commitment as a subset of the Swing Line
Lender's Tranche A Revolving Loan Commitment), by (ii) the aggregate
Tranche A Revolving Loan Commitments, (b) with respect to the Tranche B
Revolving Loan, the percentage obtained by dividing (i) the Tranche B
Revolving Loan Commitment of that Tranche B Revolving Lender by (ii)
the aggregate Tranche B Revolving Loan Commitments of all Tranche B
Revolving Lenders, as any such percentages may be adjusted by
assignments permitted pursuant to Section 9.1, (c) with respect to all
Loans, the percentage obtained by dividing (i) the aggregate
Commitments of that Lender by (ii) the aggregate Commitments of all
Lenders, and (d) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii)
the outstanding principal balance of the Loans held by all Lenders.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Real Estate" shall have the meaning assigned to it in
Section 3.6.
"Refinancing" shall mean the repayment in full by Borrower of
the Prior Lender Obligations.
"Refunded Swing Line Loan" shall have the meaning assigned to
it in Section 1.1(b)(iii).
"Related Transactions" means each borrowing under the
Revolving Loan on the Closing Date, the Refinancing, the payment of all
fees, costs and expenses associated with all of the foregoing and the
execution and delivery of all of the Related Transactions Documents.
"Related Transactions Documents" shall mean the Loan
Documents.
"Relationship Bank" shall have the meaning assigned to it in
Annex C.
"Release" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in
the air, soil, surface water, ground water or property.
"Requisite Lenders" shall mean (a) Lenders having more than
sixty-six and two-thirds percent (66-2/3%) of the Commitments of all
Lenders, or (b) if the Commitments have been terminated, more than
sixty-six and two-thirds percent (66-2/3%) of the aggregate outstanding
amount of the Loans.
"Requisite Tranche A Lenders" shall mean (a) Tranche A
Revolving Lenders having more than sixty-six and two-thirds percent
(66-2/3%) of the Commitments of all Tranche A Revolving Lenders, or (b)
if the Commitments have been terminated, more than sixty-six and two-
thirds percent (66-2/3%) of the aggregate amount outstanding of the
Tranche A Revolving Loans.
"Requisite Tranche B Lenders" shall mean (a) Tranche B
Revolving Lenders having more than sixty-six and two-thirds percent (66-
2/3%) of the Commitments of all Tranche B Revolving Lenders, or (b) if
the Commitments have been terminated, more than sixty-six and two-
thirds percent (66-2/3%) of the aggregate outstanding amount of the
Tranche B Revolving Loans.
"Reserve Fund Amount" shall have the meaning assigned to it
in the Interim Order or the Final Order, as the case may be.
"Reserves" shall mean as reasonably determined by Agents
subject to the last sentence of this definition, such amounts as Agents
may from time to time reasonably establish and revise, pursuant to
their Permitted Discretion, upon three (3) days' written notice to
Borrower (a) to reflect events, conditions, contingencies or risks
which (i) adversely affect either (A) any Collateral included in the
Borrowing Base, the rights of Agents or any of Lenders in any
Collateral included in the Borrowing Base or its value or (b) the
security interest and other rights of Agents or any of Lenders in the
Collateral included in the Borrowing Base (including the
enforceability, perfection and priority thereof) or (ii) adversely
affect in any material respect the business or financial condition of
Borrower or any of its Subsidiaries or (b) to reflect the belief (based
upon a comparison to historical information) of Agents that any
Borrowing Base Report or other collateral report or financial
information furnished by or on behalf of Borrower to Agents or any of
Lenders is or may have been incomplete, inaccurate or misleading in any
material respect. Initial Reserves to be established as of the Closing
Date will include an amount equal to the sum of (x) the aggregate
amount of one (1) month's rent for all of Borrower's Stores located in
the states of Pennsylvania, Florida, New Jersey, Virginia and
Washington, provided that the foregoing shall not apply to such
locations where landlord waivers in the form of Exhibits 5.9(a) or (b)
or otherwise on terms reasonably acceptable to Agents have been
received by Agents and (y) customer liability reserves equal to 50% of
gift and merchandise credits issued and outstanding during the last
twelve months and adjusted monthly. Reserves may include, but are not
limited to: rent, whether for personal or real property and, in the
case of rent fifteen (15) or more days past due, whether or not a
lessor's or landlord's waiver, reasonably acceptable to Agents, has
been received by Agents from such lessor or landlord; payables based
upon past due normal trade terms; taxes and other governmental charges,
whether ad valorem, personal or real property or otherwise if Agents
reasonably believe that the tax claims therefor may have priority over
Agents' security interest in any of the Collateral of if Agents
reasonably believe that such taxes or governmental charges may
adversely affect the recovery realized on the Collateral; and any
customs, duty, freight or other out-of-pocket costs or expenses
required or advisable to "land" any Eligible Inventory the purchase of
which is supported by a Letter of Credit. In the event (i) a conflict
arises between Agent and Oversight Agent as to the appropriate amount
of Reserves, and (ii) Agents, after using their best efforts in good
faith, are unable to resolve such dispute, the higher and more
conservative Reserve recommended in good faith by either Agent or
Oversight Agent shall be implemented.
"Restricted Payment" shall mean (a) the declaration or
payment of any dividend or the incurrence of any liability to make any
other payment or distribution of cash or other property or assets in
respect of a Person's Stock, (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of a
Person's Stock or any other payment or distribution made in respect
thereof, either directly or indirectly, (c) any payment made to redeem,
purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such
Person now or hereafter outstanding; (d) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising
from the purchase or sale of, any shares of such Person's Stock or of a
claim for reimbursement, indemnification or contribution arising out of
or related to any such claim for damages or rescission; (e) any
payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person other than payment of
compensation in the ordinary course to stockholders who are employees
of such Person; and (f) any payment of management fees (or other fees
of a similar nature) by such Person to any Stockholder of such Person
or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that
is a "welfare plan" as defined in Section 3(2) of ERISA, that provides
for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of
employment, other than continuation coverage provided pursuant to
Section 4980B of the IRC and at the sole expense of the participant or
the beneficiary of the participant.
"Revolving Credit Advance" shall mean any Tranche A Revolving
Credit Advance, and/or Tranche B Revolving Credit Advance, as
applicable.
"Revolving Loan" shall mean, at any time, the sum of (i) the
aggregate amount of Tranche A Revolving Credit Advances and Tranche B
Revolving Credit Advances outstanding to Borrower plus (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower.
Unless the context otherwise requires, references to the outstanding
principal balance of the Revolving Loan shall include the outstanding
balance of Letter of Credit Obligations.
"Revolving Loan Commitment" shall mean (a) as to any Tranche
A Revolving Lender, the aggregate commitment of such Tranche A
Revolving Lender to make Tranche A Revolving Credit Advances (including
without duplication Swing Line Advances as a subset of the Swing Line
Lender's Tranche A Revolving Loan Commitment) and/or incur Letter of
Credit Obligations, (b) as to any Tranche B Revolving Lender, the
aggregate commitment of such Tranche B Revolving Lender to make Tranche
B Revolving Credit Advances, or (c) as to all Revolving Lenders, the
aggregate commitment of all Revolving Lenders to make Revolving Credit
Advances (including without duplication Swing Line Advances as a subset
of the Swing Line Lender's Tranche A Revolving Loan Commitment) and/or
incur Letter of Credit Obligations, which aggregate commitment shall be
One Hundred and Thirty Five Million Dollars ($135,000,000) on the
Closing Date, as such amount may be adjusted, if at all, from time to
time in accordance with the Agreement.
"Revolving Notes" shall mean collectively, the Tranche A
Revolving Notes and the Tranche B Revolving Notes.
"Security Agreement" shall mean the Security Agreement of
even date herewith entered into among Agent, on behalf of itself and
Lenders, and each Credit Party that is a signatory thereto.
"Senior Obligations" shall mean all Obligations other than
the principal of and interest on the Tranche B Revolving Loan
(excluding any interest which accrues after the commencement of any
case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Credit Party only to the extent such interest is
not allowed in such proceeding).
"Senior Obligations Termination Date" shall mean the date on
which the Loans (other than the Tranche B Revolving Loan) have been
indefeasibly repaid in full and all other Senior Obligations under the
Agreement and the other Loan Documents have been completely discharged
and Letter of Credit Obligations have been cash collateralized,
canceled or backed by stand-by letters of credit in accordance with
Annex B, and Borrower shall have no further right to borrow any monies
under the Agreement.
"Solvent" shall mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (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 probably liability of such Person on
its debts as they become absolute and matured; (c) 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 (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction,
for which such Person's property would constitute an unreasonably small
capital. The amount of contingent liabilities (such as litigation,
guarantees and pension plan liabilities) at any time shall be computed
as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can be reasonably be
expected to become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity
whether voting or nonvoting, including common stock, preferred stock or
any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended).
"Stores" shall mean any retail store currently owned or
leased or hereafter acquired or leased by Holdings, Borrower or any of
their Subsidiaries.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of
the outstanding Stock having ordinary voting power to elect a majority
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) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote
or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%) or of which any such
Person is a general partner or may exercise the powers of a general
partner.
"Subsidiary Guaranty" shall mean the Subsidiary Guaranty of
even date herewith executed by each Subsidiary of Borrower in favor of
Agent, on behalf of itself and Lenders.
"Supermajority Tranche A Revolving Lenders" shall mean (a)
Tranche A Revolving Lenders having eighty percent (80%) or more of the
Tranche A Revolving Loan Commitments of all Tranche A Revolving
Lenders, or (b) if the Tranche A Revolving Loan Commitments have been
terminated, eighty percent (80%) or more of the aggregate outstanding
amount of the Tranche A Revolving Loan (with the Swing Line Loan being
attributed to the Tranche A Lenders making such Loan) and Letter of
Credit Obligations.
"Supermajority Tranche B Revolving Lenders" shall mean (a)
Tranche B Revolving Lenders having eighty percent (80%) or more of the
Tranche B Revolving Loan Commitments of all Tranche B Revolving
Lenders, or (b) if the Tranche B Revolving Loan Commitments have been
terminated, eighty percent (80%) or more of the aggregate outstanding
amount of the Tranche B Revolving Loan.
"Supplemental Executive Retirement Plan" shall mean
collectively, (a) the Supplementary Executive Retirement Plan of the
Borrower effective as of August 1, 1988, as amended by Amendment Number
1 dated as of August 1, 1988, by a Second Amendment dated as of August
1, 1995 and by Amendment No. 3 dated January 7, 1997; (b) the Executive
Severance Plan for Samuel Gerson, dated as of August, 1995; (c) the
Executive Split Dollar Life Insurance Agreement (Collateral Assignment
Method) between Borrower and Samuel Gerson, dated June 5, 1994; (d) the
Executive Severance Plan for Mone Anathan, III, dated August, 1995; (e)
the Executive Split Dollar Life Insurance Agreement (Collateral
Assignment Method) between Borrower and Mone Anathan, dated June 5,
1994; (f) the Executive Severance Plan Trust Agreement dated June 4,
1994 between Holdings and the trustee thereof; (g) the Executive
Severance Plan for Steven R. Siegel, Esq., dated July 15, 1997; (h) the
Executive Split Dollar Life Insurance Agreement (Collateral Assignment
Method) between the Borrower and Steven R. Siegel, Esq., dated July 15,
1997; and (i) plans of a similar type and nature created after January
30, 1998 for the benefit of W. Jay Carothers.
"Swing Line Advance" has the meaning assigned to it in
Section 1.1(b)(i).
"Swing Line Availability" has the meaning assigned to it in
Section 1.1(b)(i).
"Swing Line Commitment" shall mean, as to the Swing Line
Lender, the commitment of the Swing Line Lender to make Swing Line
Loans as set forth on Annex J to the Agreement, which commitment
constitutes a subfacility of the Revolving Loan Commitment of the Swing
Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean at any time, the aggregate
amount of Swing Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning assigned to it in Section
1.1(b)(ii).
"Tangible Net Worth" shall mean, with respect to any Person
at any date, the Net Worth of such Person at such date, excluding,
however, from the determination of the total assets at such date, (a)
all goodwill, capitalized organizational expenses, capitalized research
and development expenses, trademarks, trade names, copyrights, patents,
patent applications, licenses and rights in any thereof, and other
intangible items, (b) all unamortized debt discount and expense, (c)
treasury Stock, and (d) any write-up in the book value of any asset
resulting from a revaluation thereof.
"Taxes" shall mean taxes, levies, imposts, deductions,
Charges or withholdings, and all liabilities with respect thereto,
excluding taxes and franchise taxes imposed on or measured by the net
income of Agent or a Lender by the jurisdictions under the laws of
which Agent and Lenders are organized or any political subdivision
thereof.
"Termination Date" shall mean the date on which the Loans
have been indefeasibly repaid in full and all other Obligations under
the Agreement and the other Loan Documents have been completely
discharged and Letter of Credit Obligations have been cash
collateralized, canceled or backed by stand-by letters of credit in
accordance with Annex B, and Borrower shall not have any further right
to borrow any monies under the Agreement.
"Third Party Interactives" shall mean all Persons with whom
any Credit Party exchanges data electronically in the ordinary course
of business, including, without limitation, customers, suppliers, third-
party vendors, subcontractors, processors-converters, shippers and
warehousemen.
"Title IV Plan" shall mean an employee pension benefit plan,
as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan),
which is covered by Title IV of ERISA, and which any Credit Party or
ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any
of them.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party granting
any right to use any Trademark.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all trademarks, trade
names, domain names, corporate names, business names, trade styles,
service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature (whether registered or
unregistered), now owned or existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b)
all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.
"Tranche A Borrowing Availability" shall have the meaning
assigned to it in Section 1.1(a)(i).
"Tranche A Borrowing Base" shall mean, as of any date of
determination by Agents, from time to time, an amount equal to the sum
at such time of:
(a) up to eighty-five percent (85%) of the book value of
Borrower's Eligible Accounts, less any Reserves established by Agents
at such time; plus
(b) up to (i) the lesser of (A) seventy-five percent (75%)
of the Net Retail Liquidation Value of Borrower's Eligible Inventory,
or (B) sixty-five percent (65%), for the period October 16th through
June 14th inclusive, and seventy percent (70%) for the period June 15th
through October 15th inclusive, of the book value of Borrower's
Eligible Inventory valued on a first-in, first-out basis (at the lower
of cost or market), less any Reserves established by Agents at such
time; plus (ii) fifty percent (50%) of the aggregate amount of
documentary Letters of Credit issued and outstanding in connection with
the purchase of otherwise Eligible Inventory provided, however, that
with respect to Advances on Eligible Inventory, at no time shall such
Advances exceed one hundred percent (100%) of the Net Retail
Liquidation Value of Borrower's Eligible Inventory.
"Tranche A Inventory Loan Limit" shall mean the lesser of (i)
seventy-five percent (75%) of the Net Retail Liquidation Value of
Borrower's Eligible Inventory, or (ii) sixty-five percent (65%), for
the period October 16th through June 14th inclusive, and seventy
percent (70%) for the period June 15th through October 15th inclusive,
of the book value of Borrower's Eligible Inventory valued on a
first-in, first-out basis (at the lower of cost or market).
"Tranche A Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(a)(i).
"Tranche A Revolving Lenders" shall mean, as of any date of
determination, Lenders having a Tranche A Revolving Loan Commitment.
"Tranche A Revolving Loan" shall mean at any time, the (i)
aggregate amount of Tranche A Revolving Credit Advances outstanding to
Borrower plus (ii) the aggregate Letter of Credit Obligations incurred
on behalf of Borrower. Unless the context otherwise requires,
references to the outstanding principal balance of the Tranche A
Revolving Loan shall include the outstanding balance of Letter of
Credit Obligations.
"Tranche A Revolving Loan Commitment" shall mean (a) as to
any Lender with a Tranche A Revolving Loan Commitment, the commitment
of such Lender to make its Pro Rata Share of the Tranche A Revolving
Loan as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender, and (b) as to all Lenders
with a Tranche A Revolving Loan Commitment, the aggregate commitment of
all such Lenders to make the Tranche A Revolving Loan, which aggregate
commitment shall be Eighty Five Million Dollars ($85,000,000) on the
Closing Date, as to each of clauses (a) and (b), as such Tranche A
Revolving Loan Commitment may be reduced, amortized, or adjusted from
time to time in accordance with the Agreement.
"Tranche A Revolving Note" shall have the meaning assigned to
it in Section 1.1(a)(iv).
"Tranche B Borrowing Availability" shall have the meaning
assigned to it in Section 1.1(a)(ii).
"Tranche B Borrowing Base" shall mean, as of any date of
determination by Agents, from time to time, an amount equal to the sum
at such time of:
(a) up to the greater of (i) eight-five percent (85%), of
Borrower's Eligible Inventory valued on a first-in, first-out basis (at
the lower of cost of market), or (ii) one hundred percent (100%) of the
Net Retail Liquidation Value of Borrower's Eligible Inventory, less any
Reserves established by Agents at such time, less an amount equal to
the greater of (x) the then Tranche A Borrowing Availability minus the
outstanding Tranche A Revolving Credit Advances, or (y) the then
outstanding Tranche A Revolving Credit Advances and Letter of Credit
Obligations; provided, however, that with respect to Advances on
Eligible Inventory, at no time shall such Advances exceed one hundred
percent (100%) of the Net Retail Liquidation Value of Borrower's
Eligible Inventory; plus
(b) up to the lesser of (i) $15,000,000, or (ii) fifty
percent (50%) of the NLV of Eligible Leasehold Real Estate.
"Tranche B Inventory Loan Limit" shall mean the greater of
(i) one-hundred percent (100%) of the Net Retail Liquidation Value of
Borrower's Eligible Inventory, or (ii) eighty five percent (85%) of
Borrower's Eligible Inventory valued on a first-in first out basis (at
the lower of cost or market).
"Tranche B Real Estate Advances" shall have the meaning
assigned to it in Section 1.1(e).
"Tranche B Real Estate Advance Obligations" shall have the
meaning assigned to it in Section 1.11(c).
"Tranche B Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(a)(ii).
"Tranche B Revolving Lenders" shall mean, as of any date of
determination, Lenders having a Tranche B Revolving Loan Commitment.
"Tranche B Revolving Loan" shall mean at any time, the
aggregate amount of Tranche B Revolving Credit Advances outstanding to
Borrower.
"Tranche B Revolving Loan Commitment" shall mean (a) as to
any Lender with a Tranche B Revolving Loan Commitment, the commitment
of such Lender to make its Pro Rata Share of the Tranche B Revolving
Loan as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender, and (b) as to all Lenders
with a Tranche B Revolving Loan Commitment, the aggregate commitment of
all such Lenders to make the Tranche B Revolving Loan, which aggregate
commitment shall be Fifty Million Dollars ($50,000,000) on the Closing
Date, as to each of clauses (a) and (b), as such Tranche B Revolving
Loan Commitment may be reduced, amortized, or adjusted from time to
time in accordance with the Agreement.
"Tranche B Revolving Note"shall have the meaning assigned to
it in Section 1.1(a)(v).
"Tranche B Super Defaults"shall have the meaning assigned to
it in Section 8.2.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (a) the amount by which the
present value of all accrued benefits under each Title IV Plan exceeds
the fair market value of all assets of such Title IV Plan allocable to
such benefits in accordance with Title IV of ERISA, all determined as
of the most recent valuation date for each such Title IV Plan using the
actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of five (5) years following a transaction
which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided
by any Credit Party or any ERISA Affiliate as a result of such
transaction.
"Year 2000 Assessment" shall mean a comprehensive written
assessment of the nature and extent of each Credit Party's Year 2000
Problems and Year 2000 Date-Sensitive Systems/Components, including,
without limitation, Year 2000 Problems regarding data exchanges with
Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to each Credit
Party, all actions necessary to eliminate such Person's Year 2000
Problems, including, without limitation, computer code enhancements and
revisions, upgrades and replacements of Year 2000 Date-Sensitive
Systems/Components, and coordination of such enhancements, revisions,
upgrades and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" shall mean, with respect to each
Credit Party, a comprehensive plan to eliminate all of its Year 2000
Problems on or before October 31, 1999, including without limitation
(i) computer code enhancements or revisions, (ii) upgrades or
replacements of Year 2000 Date-Sensitive Systems/Components, (iii) test
and validation procedures, (iv) an implementation time line and budget
and (v) designation of specific employees who will be responsible for
planning, coordinating and implementing each phase or subpart of the
Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component" shall mean, as to
any Person, any system software, network software, applications
software, data base, computer file, embedded microchip, firmware or
hardware that accepts, creates, manipulates, sorts, sequences,
calculates, compares or outputs calendar-related data accurately; such
systems and components shall include, without limitation, mainframe
computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related
software, firmware or hardware and information processing and delivery
systems of any kind and telecommunications systems and other
communications processors, security systems, alarms, elevators and HVAC
systems.
"Year 2000 Implementation Testing" shall mean, as to each
Credit Party, (i) the performance of test and validation procedures
regarding Year 2000 Corrective Actions on a unit basis and on a
systemwide basis; (ii) the performance of test and validation
procedures regarding data exchanges among the Credit Parties' Year 2000
Date-Sensitive Systems/Components and data exchanges with Third Party
Interactives, and (iii) the design and implementation of additional
Corrective Actions, the need for which has been demonstrated by test
and validation procedures.
"Year 2000 Problems" shall mean, with respect to each Credit
Party, limitations on the capacity or readiness of any such Credit
Party's Year 2000 Date-Sensitive Systems/Components to accurately
accept, create, manipulate, sort, sequence, calculate, compare or
output calendar date information with respect to calendar year 1999 or
any subsequent calendar year beginning on or after January 1, 2000
(including leap year computations), including, without limitation,
exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Credit Parties and exchanges of information
among the Credit Parties and Year 2000 Date-Sensitive
Systems/Components of Third Party Interactives and functionality of
peripheral interfaces, firmware and embedded microchips.
All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code as in effect in the State of New York
to the extent the same are used or defined therein. Unless otherwise
specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or
clause as contained in the Agreement. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as
a whole, including all Annexes, Exhibits and Schedules, as the same may
from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the
Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and
the plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter genders. The
words "including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to Persons
include their respective successors and assigns (to the extent and only
to the extent permitted by the Loan Documents) or, in the case of
governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations
shall include any amendments of the same and any successor statutes and
regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are
intended to signify that such Credit Party has actual knowledge or
awareness of a particular fact or circumstance or that such Credit
Party, if it had exercised reasonable business diligence, would have
known or been aware of such fact or circumstance.
ANNEX B (Section 1.2)
to
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the
Agreement, Agent and Tranche A Revolving Lenders agree to incur, from
time to time prior to the Commitment Termination Date, upon the request
of Borrower and for Borrower's account, Letter of Credit Obligations by
causing Letters of Credit to be issued (by a bank or other legally
authorized Person selected by or acceptable to Agent in its sole
discretion and acceptable to Borrower in the event no Default or Event
of Default has occurred (each, an "L/C Issuer")) for Borrower's account
and guaranteed by Agent; provided, however, that if the L/C Issuer is a
Tranche A Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Tranche A Revolving Lender shall,
subject to the terms and conditions hereinafter set forth, purchase (or
be deemed to have purchased) risk participations in all such Letters of
Credit issued with the written consent of Agent, as more fully
described in paragraph (b)(ii) below. The aggregate amount of all such
Letter of Credit Obligations shall not at any time exceed the least of
(i) Twenty Five Million Dollars ($25,000,000) (the "L/C Sublimit"), and
(ii) the Tranche A Maximum Amount less the aggregate outstanding
principal balance of the Tranche A Revolving Credit Advances and the
Swing Line Loan, and (iii) the Tranche A Borrowing Base less the
aggregate outstanding principal balance of the Tranche A Revolving
Credit Advances and the Swing Line Loan. No such Letter of Credit
shall have an expiry date which is more than one year following the
date of issuance thereof, provided, however, in the event Borrower
requests a Letter of Credit be issued, extended or renewed with any
expiry date which will occur after the date which is fourteen (14) days
(or, if the Letter of Credit is confirmed by a confirmer or otherwise
provides for one or more nominated persons, forty-five (45)) days prior
to the Commitment Termination Date, Borrower shall, by not later than
(a) forty-five (45) days prior to the Commitment Termination Date for
standby Letters of Credit and (b) twenty-one (21) days prior to the
Commitment Termination Date for documentary Letters of Credit, deliver
to the L/C Issuer for the benefit of Lenders, cash in the amount of
one hundred three percent (103%) of the maximum drawing amount, to be
held as cash collateral by the L/C Issuer for the Letter of Credit
Obligations. All letters of credit issued under the Pre-Petition Loan
Agreement shall be deemed to have been issued under this Agreement and
shall for all purposes constitute "Letters of Credit" hereunder
(provided that no additional issuance fees shall be applicable in
respect of such Letters of Credit).
(b) Advances Automatic; Participations. (i) In the event
that Agent or any Tranche A Revolving Lender shall make any payment on
or pursuant to any Letter of Credit Obligation, such payment shall then
be deemed automatically to constitute a Tranche A Revolving Credit
Advance under Section 1.1(a) of the Agreement regardless of whether a
Default or Event of Default shall have occurred and be continuing and
notwithstanding Borrower's failure to satisfy the conditions precedent
set forth in Section 2, and each Tranche A Revolving Lender shall be
obligated to pay its Pro Rata Share thereof in accordance with the
Agreement. The failure of any Tranche A Revolving Lender to make
available to Agent for Agent's own account its Pro Rata Share of any
such Tranche A Revolving Credit Advance or payment by Agent under or in
respect of a Letter of Credit shall not relieve any other Tranche A
Revolving Lender of its obligation hereunder to make available to Agent
its Pro Rata Share thereof, but no Tranche A Revolving Lender shall be
responsible for the failure of any other Tranche A Revolving Lender to
make available such other Tranche A Revolving Lender's Pro Rata Share
of any such payment.
(ii) If it shall be illegal or unlawful for Borrower to
incur Tranche A Revolving Credit Advances as contemplated by paragraph
(b)(i) above or if it shall be illegal or unlawful for any Tranche A
Revolving Lender to be deemed to have assumed a ratable share of the
reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer
is a Tranche A Revolving Lender, then (i) immediately and without
further action whatsoever, each Tranche A Revolving Lender shall be
deemed to have irrevocably and unconditionally purchased from Agent (or
such L/C Issuer, as the case may be) an undivided interest and
participation equal to such Tranche A Revolving Lender's Pro Rata Share
(based on the Tranche A Revolving Loan Commitments) of the Letter of
Credit Obligations in respect of all Letters of Credit then outstanding
and (ii) thereafter, immediately upon issuance of any Letter of Credit,
each Tranche A Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case
may be) an undivided interest and participation in such Tranche A
Revolving Lender's Pro Rata Share (based on the Tranche A Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to
such Letter of Credit on the date of such issuance. Each Tranche A
Revolving Lender shall fund its participation in all payments or
disbursements made under the Letters of Credit in the same manner as
provided in the Agreement with respect to Tranche A Revolving Credit
Advances.
(c) Cash Collateral. If Borrower is required to provide
cash collateral for any Letter of Credit Obligations pursuant to the
Agreement prior to the Commitment Termination Date, Borrower will pay
to Agent for the benefit of Tranche A Revolving Lenders cash or cash
equivalents acceptable to Agent ("Cash Equivalents") in an amount equal
to 103% of the maximum amount then available to be drawn under each
applicable Letter of Credit outstanding. Such funds or Cash
Equivalents shall be held by Agent in a cash collateral account (the
"Cash Collateral Account") maintained at a bank or financial
institution acceptable to Agent. Cash Equivalents acceptable to Agent
shall include those investments described in Section 6.2(b)(i)-(v)
hereof. The Cash Collateral Account shall be in the name of Borrower
and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Tranche A Revolving Lenders, in a manner
reasonably satisfactory to Agent. Borrower hereby pledges and grants
to Agent, on behalf of Tranche A Revolving Lenders, a security interest
in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the
payment of all amounts due in respect of the Letter of Credit
Obligations and other Obligations, whether or not then due. The
Agreement, including this Annex B, shall constitute a security
agreement under applicable law.
If any Letter of Credit Obligations, whether or not then due
and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrower shall either (i) provide cash collateral
therefor in the manner described above, or (ii) cause all such Letters
of Credit and guaranties thereof to be canceled and returned, or (iii)
deliver a stand-by letter (or letters) of credit in guarantee of such
Letter of Credit Obligations, which stand-by letter (or letters) of
credit shall be of like tenor and duration (plus thirty (30) additional
days) as, and in an amount equal to 103% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which
such outstanding Letter of Credit Obligations relate and shall be
issued by a Person, and shall be subject to such terms and conditions,
as are be satisfactory to Agent in its sole discretion.
From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then
held in the Cash Collateral Account to the payment of any amounts, in
such order as Agent may elect, as shall be or shall become due and
payable by Borrower to Lenders with respect to such Letter of Credit
Obligations of Borrower and, upon the satisfaction in full of all
Letter of Credit Obligations of Borrower, to any other Obligations then
due and payable.
Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or
Cash Equivalents held in the Cash Collateral Account, except that upon
the termination of all Letter of Credit Obligations and the payment of
all amounts payable by Borrower to Tranche A Revolving Lenders in
respect thereof, any funds remaining in the Cash Collateral Account
shall be applied to other Obligations when due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid
to Borrower or as otherwise required by law.
(d) Fees and Expenses. Borrower agrees to pay to Agent for
the benefit of Tranche A Revolving Lenders, as compensation to such
Lenders for Letter of Credit Obligations incurred hereunder, (x) all
costs and expenses incurred by Agent or any Tranche A Revolving Lender
on account of such Letter of Credit Obligations, and (y) for each month
during which any Letter of Credit Obligation shall remain outstanding,
a fee (the "Letter of Credit Fee") in an amount equal to the Applicable
L/C Margin from time to time in effect multiplied by the maximum amount
available from time to time to be drawn under the applicable Letter of
Credit. Such fee shall be paid to Agent for the benefit of the Tranche
A Revolving Lenders in arrears, on the first day of each month. In
addition, Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer
in respect of the issuance, negotiation, acceptance, amendment,
transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such
Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations.
Borrower shall give Agent at least two (2) Business Days prior written
notice requesting the incurrence of any Letter of Credit Obligation,
specifying the date such Letter of Credit Obligation is to be incurred,
identifying the beneficiary to which such Letter of Credit Obligation
relates and describing the nature of the transactions proposed to be
supported thereby. The notice shall be accompanied by the form of the
Letter of Credit (which shall be acceptable to the L/C Issuer) to be
guarantied and, to the extent not previously delivered to Agent, copies
of all agreements between Borrower and the L/C Issuer pertaining to the
issuance of Letters of Credit. Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower and
approvals by Agent and the L/C Issuer may be made and transmitted
pursuant to electronic codes and security measures mutually agreed upon
and established by and among Borrower, Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to
reimburse Agent and Tranche A Revolving Lenders for payments made with
respect to any Letter of Credit Obligation shall be absolute,
unconditional and irrevocable, without necessity of presentment,
demand, protest or other formalities, and the obligations of each
Tranche A Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such
obligations of Borrower and Tranche A Revolving Lenders shall be paid
strictly in accordance with the terms hereof under all circumstances
including the following circumstances:
(i) any lack of validity or enforceability of any
Letter of Credit or the Agreement or the other Loan Documents or any
other agreement;
(ii) the existence of any claim, set-off, defense or
other right which Borrower or any of its Affiliates or any Tranche A
Revolving Lender may at any time have against a beneficiary or any
transferee of any Letter of Credit (or any Persons or entities for whom
any such transferee may be acting), Agent, any Tranche A Revolving
Lender, or any other Person, whether in connection with the Agreement,
the Letter of Credit, the transactions contemplated herein or therein
or any unrelated transaction (including any underlying transaction
between Borrower or any of its Affiliates and the beneficiary for which
the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other
document presented under any 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) payment by Agent (except as otherwise expressly
provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand,
draft or certificate or other document which does not comply with the
terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties. In
addition to amounts payable as elsewhere provided in the Agreement,
Borrower hereby agrees to pay and to protect, indemnify, and save
harmless Agent and each Tranche A Revolving Lender from and against any
and all claims, demands, liabilities, damages, losses, costs, charges
and expenses (including reasonable attorneys' fees and reasonably
allocated costs of internal counsel) which Agent or any Tranche A
Revolving Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or guaranty
thereof, or (B) the failure of Agent or any Tranche A Revolving Lender
seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of
any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority, in
each case other than to the extent as a result of the gross negligence
or willful misconduct of Agent or such Tranche A Lender (as finally
determined by a court of competent jurisdiction).
(i) As between Agent and any Tranche A Revolving Lender
and Borrower, Borrower assumes all risks of the acts and omissions of,
or misuse of any Letter of Credit by beneficiaries of any Letter of
Credit. In furtherance and not in limitation of the foregoing, to the
fullest extent permitted by law neither Agent nor any Tranche A
Revolving Lender shall be responsible for any of the following unless
caused by Agent's or any Tranche A Revolving Lender's gross negligence
or wilful misconduct: (A) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document issued by any
party in connection with the application for and issuance of any Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (C) for failure of
the beneficiary of any Letter of Credit to comply fully with conditions
required in order to demand payment under such Letter of Credit;
provided that, in the case of any payment by Agent under any Letter of
Credit or guaranty thereof, Agent shall be liable to the extent such
payment was made as a result of its gross negligence or willful
misconduct (as finally determined by a court of competent jurisdiction)
in determining that the demand for payment under such Letter of Credit
or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or
guaranty thereof; (D) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (E) for errors in
interpretation of technical terms; (F) for any loss or delay in the
transmission or otherwise of any document required in order to make a
payment under any Letter of Credit or guaranty thereof or of the
proceeds thereof; (G) for the credit of the proceeds of any drawing
under any Letter of Credit or guaranty thereof; and (H) for any
consequences arising from causes beyond the control of Agent or any
Tranche A Revolving Lender. None of the above shall affect, impair, or
prevent the vesting of any of Agent's or any Tranche A Revolving
Lender's rights or powers hereunder or under the Agreement.
(ii) Nothing contained herein shall be deemed to limit
or to expand any waivers, covenants or indemnities made by Borrower in
favor of any L/C Issuer in any letter of credit application,
reimbursement agreement or similar document, instrument or agreement
between Borrower and such L/C Issuer.
ANNEX C (Section 1.8)
to
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Borrower shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination
Date, Borrower shall deposit and cause its Subsidiaries to deposit or
cause to be deposited promptly, and in any event no later than the
first Business Day after the date of receipt thereof, all cash, checks,
drafts or other similar items of payment relating to or constituting
payments made in respect of any and all Collateral (whether or not
otherwise delivered to a Lock Box) into bank accounts in Borrower's
name or any such Subsidiary's name (collectively, the "Borrower
Accounts") at banks set forth on Disclosure Schedule (3.19) (each, a
"Relationship Bank"). On or before the Closing Date, Borrower shall
have established a concentration account in its name (the
"Concentration Account") at the bank which shall be designated as the
Concentration Account Bank for Borrower on Disclosure Schedule (3.19)
(the "Concentration Account Bank") which bank shall be satisfactory to
Agent. Notwithstanding the foregoing, Borrower shall be permitted to
retain cash in the amount of $38,000 per Store (and in the case of the
Store located at 426 Washington Street, Boston, Massachusetts, the
amount of $120,000) for purposes of maintaining cash in the cash
registers in the ordinary course of its business operations.
(b) On or before the Closing Date (or such later date as
Agent shall consent to in writing), the Concentration Account Bank
shall have entered into a tri-party blocked account agreement with
Agent, for the benefit of itself and Lenders, and Borrower and
Subsidiaries thereof, as applicable, in form and substance acceptable
to Agent, which shall become operative on or prior to the Closing Date.
Such blocked account agreement shall provide, among other things, that
(i) all amounts deposited in such Concentration Account are held by
such bank as agent or bailee-in-possession for Agent, on behalf of
Lenders, (ii) the Concentration Account Bank has no rights of setoff or
recoupment or any other claim against such account, as the case may be,
other than for payment of its service fees and other charges directly
related to the administration of such account, for returned checks or
other items of payment and for any indemnification rights of the
Concentration Account Bank against Borrower pursuant to Section 9 of
the blocked account agreement, and (iii) from and after the Closing
Date (A) with respect to banks at which a Borrower Account is located,
such bank has been given irrevocable instructions by Borrower and Agent
to forward immediately all collected amounts in each Borrower Account
to the Concentration Account Bank and to commence the process of daily
sweeps from such Borrower Account into the Concentration Account, (B)
each Credit Card Provider referenced on Disclosure Schedule 3.26 has
been given irrevocable instructions by Borrower and Agent to forward
immediately all amounts held by such Credit Card Provider for Borrower
to the Concentration Account Bank and commence daily sweeps from such
Credit Card Provider to the Concentration Account, and (C) with
respect to the Concentration Account Bank, such bank agrees to
immediately forward all amounts received in the Concentration Account
to the Collection Account through daily sweeps from such Concentration
Account into the Collection Account. Borrower shall not, and shall not
cause or permit any Subsidiary thereof to, accumulate or maintain cash
in disbursement or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and
amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred
and is continuing, Borrower may amend Disclosure Schedule (3.19) to add
or replace a Relationship Bank or Borrower Account or to replace any
Concentration Account or any Disbursement Account; provided, however,
that (i) Agent shall have consented in writing in advance to the
opening of such account with the relevant bank and (ii) prior to the
time of the opening of such account (A) with respect to any new
Concentration Account, Borrower and/or the Subsidiaries thereof, as
applicable, and such bank shall have executed and delivered to Agent a
tri-party blocked account agreement, in form and substance satisfactory
to Agent and (B) with respect to any new Relationship Bank or Borrower
Account, such bank shall have been given irrevocable instructions as
set forth in paragraph (b)(iii)(A) of this Annex C. So long as no
Default or Event of Default has occurred and is continuing, Borrower
may amend Disclosure Schedule 3.26 to add or replace a Credit Card
Provider; provided, however, that (i) Agent shall have consented in
writing in advance to the engagement of such Credit Card Provider
(other than Household Bank (SB), N.A.) (ii) prior to the time of the
engagement of such Credit Card Provider, such Credit Card Provider
shall have been given irrevocable instructions as set forth in
paragraph (b)(iii)(B) of this Annex C. Borrower shall close any of its
accounts (and establish replacement accounts in accordance with the
foregoing sentence) or replace any Credit Card Provider, as the case
may be, promptly and in any event within thirty (30) days of notice
from Agent that the creditworthiness of any bank holding an account or
Credit Card Provider is no longer acceptable in Agent's reasonable
judgment, or as promptly as practicable and in any event within sixty
(60) days of notice from Agent that the operating performance, funds
transfer and/or availability procedures or performance with respect to
accounts of the bank holding such accounts or the Credit Card Provider
or Agent's liability under any tri-party blocked account agreement with
such bank is no longer acceptable in Agent's reasonable judgment.
(d) The amounts held by the Credit Card Providers, Borrower
Accounts, Disbursement Accounts and the Concentration Account shall be
cash collateral accounts, with all cash, checks and other similar items
of payment in such accounts securing payment of the Loans and all other
Obligations, and in which Borrower and each Subsidiary thereof shall
have granted a Lien to Agent, on behalf of itself and Lenders, pursuant
to the Security Agreement.
(e) All amounts deposited in the Collection Account shall be
deemed received by Agent in accordance with Section 1.10 of the
Agreement and shall be applied (and allocated) by Agent in accordance
with Section 1.11 of the Agreement. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(f) Borrower may maintain, in its name, an account (each a
"Disbursement Account") and collectively, the "Disbursement Accounts")
at a bank acceptable to Agent into which Agent shall, from time to
time, deposit proceeds of Revolving Credit Advances and Swing Line
Advances made to Borrower pursuant to Section 1.1 for use by Borrower
solely in accordance with the provisions of Section 1.4.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert
with Borrower (each a "Related Person") to (i) hold in trust for Agent,
for the benefit of itself and Lenders, all checks, cash and other items
of payment received by Borrower or any such Related Person, and (ii)
within one (1) Business Day after receipt by Borrower or any such
Related Person of any checks, cash or other items or payment, deposit
the same into a Borrower Account. Borrower and each Related Person
thereof acknowledges and agrees that all cash, checks or items of
payment constituting proceeds of Collateral are the property of Agent
and Lenders. All proceeds of the sale or other disposition of any
Collateral, shall be deposited directly into Borrower Accounts.
ANNEX D (Section 2.1(a))
to
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described
in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the
following items must be received by Agents in form and substance
reasonably satisfactory to Agents on or prior to the Closing Date (each
capitalized term used but not otherwise defined herein shall have the
meaning ascribed thereto in Annex A to the Agreement):
1. Appendices. All Appendices to the Agreement, in form and
substance reasonably satisfactory to Agents.
2. Revolving Notes and Swing Line Note. Duly executed originals
of the Revolving Notes and Swing Line Note for each applicable Lender,
dated the Closing Date.
3. Security Agreement. Duly executed originals of the Security
Agreements, dated the Closing Date, and all instruments, documents and
agreements executed pursuant thereto.
4. Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured
clauses or endorsements, as requested by Agents, in favor of Agent, on
behalf of Lenders.
5. Security Interests and Code Filings. Evidence reasonably
satisfactory to Agents that Agent (for the benefit of itself and
Lenders) has a valid and perfected first priority security interest in
the Collateral, including (i) such documents duly executed by each
Credit Party (including financing statements under the Code and other
applicable documents under the laws of any jurisdiction with respect to
the perfection of Liens) as Agents may request in order to perfect its
security interests in the Collateral and (ii) copies of Code search
reports listing all effective financing statements that name any Credit
Party as debtor, together with copies of such financing statements,
none of which shall cover the Collateral, except for those relating to
the Prior Lender Obligations (all of which shall be terminated on the
Closing Date).
(a) Evidence satisfactory to Agents, including copies, of
all UCC-1 and other financing statements filed in favor of any Credit
Party with respect to each location, if any, at which Inventory may be
consigned.
6. [Intentionally Deleted.]
7. Intellectual Property Security Agreements. Duly executed
originals of the Intellectual Property Security Agreements dated the
Closing Date and signed by each Credit Party which owns Trademarks,
Copyrights and/or Patents, as applicable, all in form and substance
satisfactory to Agents, together with all instruments, documents and
agreements executed pursuant thereto.
8. Holdings Guaranty. Duly executed originals of the Holdings
Guaranty, dated the Closing Date, and all documents, instruments and
agreements executed pursuant thereto.
9. Subsidiary Guaranties. Guaranties executed by and each direct
and indirect Subsidiary of Borrower in favor of Agent, for the benefit of
Lenders.
10. Initial Borrowing Base Certificate. Duly executed originals
of an initial Borrowing Base Certificate from Borrower, dated the Closing
Date, reflecting information concerning Eligible Accounts and Eligible
Inventory of Borrower as of a date not more than seven (7) days prior
to the Closing Date.
11. Initial Notice of Revolving Credit Advance/Borrowing Base
Certificate. Duly executed originals of a Notice of Revolving Credit
Advance/Borrowing Base Certificate, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by
Borrower on the Closing Date.
12. Letter of Direction. Duly executed originals of a letter of
direction from Borrower addressed to Agent, on behalf of itself and
Lenders, with respect to the disbursement on the Closing Date of the
proceeds of the initial Revolving Credit Advance.
13. Cash Management System; Blocked Account Agreements. Evidence
reasonably satisfactory to Agents that, as of the Closing Date, Cash
Management Systems complying with Annex C to the Agreement have been
established and are currently being maintained in the manner set forth
in such Annex C, together with evidence that Borrower has notified each
bank and financial institution maintaining such accounts as described
in Section 3.19.
14. Charter and Good Standing. For each Credit Party, such
Person's (a) charter and all amendments thereto, (b) good standing
certificates (including verification of tax status) in its state of
incorporation and (c) good standing certificates (including verification of
tax status) and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification, each dated a recent date
prior to the Closing Date and certified by the applicable Secretary of
State or other authorized Governmental Authority.
15. Bylaws and Resolutions. For each Credit Party, (a) such
Person's bylaws, together with all amendments thereto and (b) resolutions of
such Person's Board of Directors and stockholders, approving and
authorizing the execution, delivery and performance of the Loan
Documents to which such Person is a party and the transactions to be
consummated in connection therewith, each certified as of the Closing
Date by such Person's corporate secretary or an assistant secretary as
being in full force and effect without any modification or amendment.
16. Incumbency Certificates. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing
any of the Loan Documents, certified as of the Closing Date by such
Person's corporate secretary or an assistant secretary as being true,
accurate, correct and complete.
17. Opinions of Counsel. Duly executed originals of opinions of
(i) Chappell White LLP, counsel for the Credit Parties, (ii) Hale and Dorr
LLP, counsel for the Credit Parties, and (iii) Steven Siegel, Esq.,
General Counsel for the Credit Parties, each in form and substance
reasonably satisfactory to Agents and their counsel, dated the Closing
Date, and each accompanied by a letter addressed to such counsel from
the Credit Parties, authorizing and directing such counsel to address
its opinion to Agent, on behalf of Lenders, and to include in such
opinion an express statement to the effect that Agent and Lenders are
authorized to rely on such opinion.
18. Pledge Agreements. Duly executed originals of each of the
Pledge Agreements accompanied by (as applicable) (a) share certificates
representing all of the outstanding Stock being pledged pursuant to
such Pledge Agreement and stock powers for such share certificates
executed in blank and (b) the original Intercompany Notes and other
instruments evidencing Indebtedness being pledged pursuant to such
Pledge Agreement, duly endorsed in blank.
19. [Intentionally Deleted.]
20. Appointment of Agent for Service. An appointment of CSC Corp.
as each Credit Party's agent for service of process.
21. [Intentionally Deleted.]
22. Fee Letter. Duly executed originals of the GE Capital Fee
Letter and the Paragon Fee Letter.
23. Officer's Certificate. Agent shall have received duly executed
originals of a certificate of the Chief Financial Officer of Borrower,
dated the Closing Date, stating that, since January 30, 1999 (a) except
as disclosed in Disclosure Schedule 3.5 no event or condition has
occurred or is existing which could reasonably be expected to have a
Material Adverse Effect; (b) no Litigation has been commenced which, if
successful, would have a Material Adverse Effect or could challenge any
of the transactions contemplated by the Agreement and the other Loan
Documents; (c) there have been no Restricted Payments made by any
Credit Party; and (d) except as provided in the consolidated balance
sheet and related statement of income and cash flow of Holdings and its
Subsidiaries for the fiscal month ended May 29, 1999 there has been no
material increase in liabilities, liquidated or contingent, and no
material decrease in assets of Borrower or any of its Subsidiaries.
24. [Intentionally Deleted.].
25. [Intentionally Deleted.]
26. [Intentionally Deleted.]
27. Audited Financials; Financial Condition. Agents shall have
received Holdings' and Borrower's final Financial Statements for its
Fiscal Year ended January 31, 1999 audited by Arthur Andersen LLP.
Borrower and Holdings shall have provided Agent with its current
operating statements, a consolidated balance sheet and statement of
cash flows, Projections and a Notice of Revolving Credit
Advance/Borrowing Base Certificate with respect to Borrower certified
by its Chief Financial Officer, in each case in form and substance
reasonably satisfactory to Agents, and Agents shall be satisfied, in
their reasonable discretion, with all of the foregoing. Agents shall
have further received a certificate of the Chief Executive Officer
and/or the Chief Financial Officer of Borrower, based on such
Projections, to the effect that the Projections are based upon
estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions and
current facts known to Borrower and, as of the Closing Date, reflect
Borrower's good faith and reasonable estimates of its future financial
performance and of the other information projected therein for the
period set forth therein.
28. Credit Card Notices. Each Credit Party shall execute Credit
Card Notices to each Credit Card Provider in favor of Agents.
29. Closing Date Budget. Agents shall have received a true and
correct copy of the Budget in form and substance satisfactory to Agents
(a form of which is attached as Exhibit A-1) for the period from the
Petition Date through the entry of the Final Order.
30. Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Agents may, in their
reasonable discretion, request.
ANNEX E (Section 4.1(a))
to
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agents or to Agent
and Lenders, as indicated, the following:
(a) Monthly Financials. To Agents, within thirty-one (31)
days after the end of each Fiscal Month, financial information
regarding Borrower and its Subsidiaries, certified by the Chief
Financial Officer of Borrower, consisting of consolidated (i) unaudited
balance sheets as of the close of such Fiscal Month and the related
statements of income and cash flow for that portion of the Fiscal Year
ending as of the close of such Fiscal Month; (ii) unaudited statements
of income and cash flows for such Fiscal Month, setting forth in
comparative form the figures for the corresponding period in the prior
year and the figures contained in the Projections for such Fiscal Year,
all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (iii) a summary of the outstanding balance of all
Intercompany Notes as of the last day of that Fiscal Month. Such
financial information shall be accompanied by (A) a statement in
reasonable detail (each, a "Compliance Certificate") showing the
calculations used in determining compliance with each financial
covenant set forth on Annex G which is tested on a monthly basis, and
(B) the certification of the Chief Financial Officer of Borrower that
(i) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position and
results of operations of Borrower and its Subsidiaries, on a
consolidated basis, in each case as at the end of such month and for
the period then ended and (ii) any other information presented is true,
correct and complete in all material respects and that there was no
Default or Event of Default in existence as of such time or, if a
Default or Event of Default shall have occurred and be continuing,
describing the nature thereof and all efforts undertaken to cure such
Default or Event of Default;
(b) Quarterly Financials. To Agents, within forty-eight
(48) days after the end of each Fiscal Quarter, consolidated financial
information regarding Borrower and its Subsidiaries, certified by the
Chief Financial Officer of Borrower, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related
statements of income and cash flow for that portion of the Fiscal Year
ending as of the close of such Fiscal Quarter and (ii) unaudited
statements of income and cash flows for such Fiscal Quarter, in each
case setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP
(subject to normal year-end adjustments). Such financial information
shall be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") showing the calculations used in determining
compliance with a Compliance Certificate in respect of each of the
financial covenants set forth on Annex G which is tested on a quarterly
basis and (B) the certification of the Chief Financial Officer of
Borrower that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the
financial position, results of operations and statements of cash flows
of Borrower and its Subsidiaries, on a consolidated basis, as at the
end of such Fiscal Quarter and for the period then ended, (ii) any
other information presented is true, correct and complete in all
material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default. In
addition, Borrower shall deliver to Agents and Lenders, within forty-
eight (48) days after the end of each Fiscal Quarter, a management
discussion and analysis which includes a comparison to budget for that
Fiscal Quarter and a comparison of performance for that Fiscal Quarter
to the corresponding period in the prior year;
(c) Operating Plan. To Agents, as soon as available, but not
later than thirty (30) days after the end of each Fiscal Year, an
annual operating plan for Borrower, approved by the Board of Directors
of Borrower, for the following year, which will include a statement of
all of the material assumptions on which such plan is based, will
include monthly balance sheets and a monthly budget for the following
year and will integrate sales, gross profits, operating expenses,
operating profit, cash flow projections and Borrowing Availability
projections all prepared on the same basis and in similar detail as
that on which operating results are reported (and in the case of cash
flow projections, representing management's good faith estimates of
future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Agents, within ninety-
three (93) days after the end of each Fiscal Year, audited Financial
Statements for Borrower and its Subsidiaries on a consolidated basis,
consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case
the figures for the previous Fiscal Year, which Financial Statements
shall be prepared in accordance with GAAP, certified without
qualification (except qualifications as may relate to the Chapter 11
Case), by Arthur Andersen LLP or another independent certified public
accounting firm of national standing or otherwise reasonably acceptable
to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used
in determining compliance with each of the financial covenants set
forth on Annex G, (ii) a report from such accounting firm to the effect
that, in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of
Default has occurred (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or
Events of Default, (iii) a letter addressed to Agent, on behalf of
itself and Lenders, in form and substance reasonably satisfactory to
Agent and subject to standard qualifications taken by nationally
recognized accounting firms under similar circumstances, signed by such
accounting firm acknowledging that Agent and Lenders are entitled to
rely upon such accounting firm's certification of such audited
Financial Statements, (iv) the annual letters to such accountants in
connection with their audit examination detailing contingent
liabilities and material litigation matters, and (v) the certification
of the Chief Executive Officer or Chief Financial Officer of Borrower
that all such Financial Statements present fairly in accordance with
GAAP (subject to bankruptcy restructuring year-end adjustments made in
accordance with GAAP) the financial position, results of operations and
statements of cash flows of Borrower and its Subsidiaries on a
consolidated basis, as at the end of such year and for the period then
ended, and that there was no Default or Event of Default in existence
as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default;
(e) Management Letters. To Agents, within five (5) Business
Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports
received by such Credit Party from its independent certified public
accountants;
(f) Default Notices. To Agents, as soon as practicable, and
in any event within five (5) Business Days after an executive officer
of Borrower has actual knowledge of the existence of any Default, Event
of Default or other event which has had a Material Adverse Effect,
telephonic or telecopied notice specifying the nature of such Default
or Event of Default or other event, including the anticipated effect
thereof, which notice, if given telephonically, shall be promptly
confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Agents, promptly
upon their becoming available, copies of: (i) all Financial
Statements, reports, notices and proxy statements made publicly
available by any Credit Party to its security holders; (ii) all regular
and periodic reports and all registration statements and prospectuses,
if any, filed by any Credit Party with any securities exchange or with
the Securities and Exchange Commission or any governmental or private
regulatory authority; and (iii) all press releases and other statements
made available by any Credit Party to the public concerning material
changes or developments in the business of any such Person;
(h) Equity Notices. To Agents, as soon as practicable,
copies of all material written notices given or received by any Credit
Party with respect to any Stock of such Person that are otherwise not
disclosed pursuant to item (g) of this Annex E.
(i) Supplemental Schedules. To Agents, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;
(j) Litigation. To Agents in writing, promptly upon
learning thereof, notice of any Litigation commenced against any Credit
Party that (i) seeks damages in excess of $500,000, (net of any claims
Borrower in good faith believes is covered by insurance), (ii) seeks
injunctive relief, (iii) is asserted or instituted against any Plan,
its fiduciaries or its assets or against any Credit Party or ERISA
Affiliate in connection with any Plan, (iv) alleges criminal misconduct
by any Credit Party, (v) alleges the violation of any law regarding, or
seeks remedies in connection with, any Environmental Liabilities; or
(vi) involves any product recall;
(k) Insurance Notices. To Agents, disclosure of losses or
casualties required by Section 5.4 of the Agreement;
(l) Lease Default Notices. To Agents, copies of (i) any and
all default notices received under or with respect to any leased
location or public warehouse where Collateral is located, and (ii) such
other notices or documents as Agent may request in its reasonable
discretion; and
(m) Lease Amendments. To Agents, copies of all material
amendments to real estate leases.
(n) Other Documents. To Agents and Lenders, such other
financial and other information respecting any Credit Party's business
or financial condition as Agent or any Lender shall, from time to time,
request, provided, however, that if any Credit Party forms a Subsidiary
as permitted under this Agreement, any documents required to be
delivered pursuant to this Annex E or otherwise in this Agreement on a
consolidated basis shall be delivered also on a consolidating basis.
(o) Delivery of Documents to Lenders. Agent shall deliver
to the Tranche A Revolving Lenders copies of the information set forth
in clauses (a), (b), (c), (d) and (f) above after receipt of such
information from Borrower. Oversight Agent shall deliver to the
Tranche B Revolving Lenders copies of the information set forth above
after receipt of such information from Borrower.
(p) Pleadings, Motions, Etc. To Agents, as soon as
practicable, copies of all pleadings, motions, applications, monthly
reports, projections or other information regarding Borrower's and
Holdings' business or financial condition filed on or behalf of
Borrower and Holdings with the Bankruptcy Court or the United States
Trustee in the Chapter 11 Case, or distributed by or on behalf of
Borrower and Holdings to any Committee appointed in the Chapter 11
Case.
(q) Budgets. On the Closing Date, Borrower shall deliver to
Agents a Budget covering the ten-week period commencing on the Petition
Date, which shall be in form and substance reasonably satisfactory to
Agents. Thereafter, on the first day of each month, Borrower shall
deliver to Agents a Budget covering the ten-week period commencing on
such date, which shall be in form and substance reasonably satisfactory
to Agents.
(r) Short-Term Projections. On or before the day occurring
thirty (30) days after the entry of the Final Order, Borrower shall
deliver to Agents forecasted consolidated profit and loss statements
(hereinafter, the "Short-Term Projections") which integrate the Budget
and reflect management's good faith estimate of Borrower's future
financial performance on a month to month basis for the period
beginning on October 31, 1999 and ending on January 31, 2000.
(s) Long-Term Projections. Within ninety (90) days after
the Petition Date, Borrower shall deliver Projections reflecting
Borrower's good faith and reasonable estimates of the financial
performance of Borrower through February 28, 2001. Such Projections
shall be based upon estimates and assumptions which Borrower believes
to be reasonable and fair in light of current conditions and current
facts known to Borrower.
ANNEX F (Section 4.1(b))
to
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agents, on a daily basis, a Notice of Revolving
Credit Advance/Borrowing Base Certificate with respect to Borrower,
accompanied by such supporting detail and documentation as shall be
requested by Agents in their reasonable discretion;
(b) To Agents, upon their request, and in no event less
frequently than ten (10) Business Days after the end of each Fiscal
Month (together with a copy of all or any part of such delivery
requested by any Lender in writing after the Closing Date), each of the
following:
(i) with respect to Borrower, a summary of Inventory by
location and type with a supporting perpetual Inventory report, in each
case accompanied by such supporting detail and documentation as shall
be requested by Agents in their reasonable discretion; and
(ii) with respect to Borrower, a monthly trial balance
showing Accounts outstanding aged from invoice due date as follows: 1
to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more,
accompanied by such supporting detail and documentation as shall be
requested by Agents in their reasonable discretion.
(c) To Agents, on a weekly basis or at such more frequent
intervals as Agents may request from time to time (together with a copy
of all or any part of such delivery requested by any Lender in writing
after the Closing Date), collateral reports with respect to Borrower,
including all additions and reductions (cash and non-cash) with respect
to Accounts of Borrower, in each case accompanied by such supporting
detail and documentation as shall be requested by Agents in their
reasonable discretion;
(d) To Agents, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to Annex E, a
reconciliation of the Accounts trial balance and month-end Inventory
reports of Borrower to Borrower's general ledger and monthly Financial
Statements delivered pursuant to such Annex E, in each case accompanied
by such supporting detail and documentation as shall be requested by
Agents in their reasonable discretion;
(e) To Agents, at the time of delivery of each of the
quarterly or annual Financial Statements delivered pursuant to Annex E,
(i) a listing of government contracts of Borrower subject to the
Federal Assignment of Claims Act of 1940; and (ii) a list of any
applications for the registration of any Patent, Trademark or Copyright
with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency which any Credit Party
thereof has filed in the prior Fiscal Quarter;
(f) Borrower, at its own expense, shall obtain, or shall
permit Agents to obtain (at Borrower's expense) financial or SKU based
physical counts and/or inventories of the Collateral, conducted by such
inventory takers as are satisfactory to Agents and following such
methodology as may be required by Agents, each of which physical counts
and/or financial or SKU based inventories shall be observed by
Borrower's accountants. Borrower shall conduct one (1) such count
and/or inventories during each twelve (12) month period this Agreement
is in effect, and shall deliver to Agents the results of each physical
counts and/or inventories immediately upon receipt thereof.
Additionally, if an Event of Default shall have occurred and be
continuing, Borrower shall, upon the request of Agents, conduct, and
deliver the results of, additional physical counts and/or inventories
as Agents may require);
(g) Borrower, at its own expense, shall deliver to Agents
such appraisals of its assets as Agents may reasonably request at any
time after the occurrence and during the continuance of a Default or an
Event of Default, such appraisals to be conducted by an appraiser, and
in form and substance, reasonably satisfactory to Agents;
(h) All reporting information set forth on the Required
Reporting List attached hereto as Annex F-1 and in the time frames
specified therein and such other reports, statements and
reconciliations with respect to the Borrowing Base or Collateral of any
or all Credit Parties as Agents shall from time to time request in its
reasonable discretion;
(i) To Agents, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to Annex E, a schedule
of gift certificates and merchandise credits issued to, or claimed
from, Borrower during such Fiscal Month; and
(j) Delivery of Documents to Lenders. Agent shall deliver
to the Tranche A Revolving Lenders, and Oversight Agent shall deliver
to the Tranche B Revolving Lenders, respectively, copies of information
set forth in this Annex F and Annex F-1 as such information is
reasonably requested by such Lenders.
ANNEX F-1
to
CREDIT AGREEMENT
REQUIRED REPORTING
Daily:
Notice of Revolving Credit Advance/Borrowing Base Certificate with
summary backup information
Weekly:
Sales Audit Report
Sales By Day Flash
Collateral Activity Report
Current Inventory v. Planned EOM Inventory
Monthly:
On the 15th Day following month-end
Stock Ledger by Department from the RSL
Summary Open-to-Buy
On-Order Report - "Order Analysis by PO - Report POM251"
Merchandise By Season
A/P Open Invoices by Vendor
Purchases and A/P Aging Analysis Form with A/P Aging (Lender
format)
Rent, Tax and Insurance Compliance Certificate (Lender
format)
On the 30th Day following month-end
Financial Statements (inclusive of Income Statement, Balance
Sheet, Cash Flow)
Reconciliation of the Stock Ledger Inventory Report to
Availability and to
the G/L (Lender format)
Credit Cart A/R Aging
Charge Back System Report
Sales vs Plan Report (UN03)
Summary Chain Plan Report - MTD
Statement of Store Activity (Lender format)
Inventory Certificate (Lender format)
Officer's Compliance Certificate (Lender format)
Annually:
Audited Final year-end financial statements within 90 days
after fiscal year-end Interim "draft" financial statements
within 60 days after year-end (inclusive of subsequent
periods until the year-end statements are finalized).
Accountant's Certificate.
ANNEX G (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its
Subsidiaries on a consolidated basis shall not make Capital
Expenditures that exceed as of each Fiscal Month the amounts set forth
below for the immediately preceding four (4) Fiscal Months, including
the Fiscal Month then ended (or with respect the Fiscal Months ending
on or before August 31, 2000, the period commencing on August 1, 1999
and ending on the last day of such Fiscal Month):
Maximum Aisle 3 New Maximum Other
Month Store Capital Capital
Expenditures Expenditures
September 30, 1999 3,025,000 1,932,000
October 31, 1999 4,185,000 2,898,000
November 30, 1999 4,606,000 3,859,000
December 31, 1999 3,577,000 3,854,000
January 31, 2000 2,002,000 4,337,000
; thereafter, Borrower and its Subsidiaries shall make no Capital
Expenditures unless and until Borrower shall have delivered a schedule
of projected Capital Expenditures satisfactory to Agents, and Borrower
and Agents have established applicable maximum Capital Expenditure
levels. Borrower and Agents shall act reasonably and in good faith in
establishing such levels. Upon such levels being agreed to in writing
by Borrower and Agents, they shall be deemed to be incorporated by
reference herein as part of this document as if fully stated herein.
(b) Minimum EBITDA. Borrower and Agents shall use their
reasonable best efforts to establish Minimum EBITDA levels within one
week after receipt of the Short-Term Projections (which Short-Term
Projections shall in no event be delivered later than thirty (30) days
after the entry of the Final Order). Borrower and Agents shall act
reasonably and in good faith in establishing such levels. Upon such
levels being agreed to in writing by Borrower and Agents, they shall be
deemed to be incorporated by reference herein as part of this document
as if fully stated herein.
(c) [Intentionally Deleted.]
(d) Minimum Eligible Inventory Level. Holdings and Borrower
will not permit the average weekly cost of all of Borrower's Eligible
Inventory for (x) the three-week period ending September 11, 1999, and
(y) each four-week period ending on each Saturday thereafter, in each
such case, to be less than 90% of the cost of all Eligible Inventory
for such three or four week period, as the case may be, then ended as
set forth in the Budget.
(e) Total Outstandings to Eligible Inventory Ratio. (i) On
each Saturday through and including October 30, 1999, the percentage
obtained by dividing (x) the sum of the aggregate outstanding principal
amount of all Loans (other than Tranche B Real Estate Advances) by (y)
the aggregate cost of all of Borrower's Eligible Inventory for the week
then ended, shall not exceed by more than 6% the applicable percentage
set forth in the Budget.
(ii) On the last Saturday of each month commencing on
November 27, 1999, the percentage obtained by dividing (x) the sum
of the aggregate outstanding principal amount of all Loans (other
than Tranche B Real Estate Advances) by (y) the aggregate cost of
all of Borrower's Eligible Inventory for the month then ending,
shall not exceed by more than 6% the applicable percentage set
forth in the Budget.
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such
term in accordance with GAAP, and all financial computations hereunder
shall be computed in accordance with GAAP consistently applied. That
certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the
foregoing. If any "Accounting Changes" (as defined below) occur and
such changes result in a change in the calculation of the financial
covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into
negotiations in order to amend such provisions of the Agreement so as
to equitably reflect such Accounting Changes with the desired result
that the criteria for evaluating Borrower's and its Subsidiaries'
financial condition shall be the same after such Accounting Changes as
if such Accounting Changes had not been made; provided, however, that
the agreement of those Lenders having the right to consent to any
required amendments of such provisions under Section 11.2 shall be
sufficient to bind all Lenders. "Accounting Changes" means (a) changes
in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar
functions), (b) changes in accounting principles concurred in by
Borrower's certified public accountants; (c) purchase accounting
adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and the
application of the accounting principles set forth in FASB 109,
including the establishment of reserves pursuant thereto and any
subsequent reversal (in whole or in part) of such reserves; and (d) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made
subsequent to the Closing Date (including capitalization of costs and
expenses or payment of pre-Closing Date liabilities) shall be treated
as expenses in the period the expenditures are made and deducted as
part of the calculation of EBITDA in such period. If Agent, Borrower
and required Lenders (determined under Section 11.2) agree upon the
required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has
been implemented, any reference to GAAP contained in the Agreement or
in any other Loan Document shall, only to the extent of such Accounting
Change, refer to GAAP, consistently applied after giving effect to the
implementation of such Accounting Change. If Agent and required
Lenders (determined under Section 11.2) cannot agree upon the required
amendments within thirty (30) days following the date of implementation
of any Accounting Change, then all Financial Statements delivered and
all calculations of financial covenants and other standards and terms
in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying
Accounting Change. For purposes of Section 8.01, a breach of a
Financial Covenant contained in this Annex G shall be deemed to have
occurred as of any date of determination by Agent as of the last day of
any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.
ANNEX H (Section 1.1(d))
to
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
Bankers Trust Company
New York, New York
Account No. 50-232-854
ABA Number: 021-001-033
Account Name: GE Capital
Reference: Filene's Basement
ANNEX I (Section 11.10)
to
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7500
with copies to:
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E. - Suite 2400
Atlanta, Georgia 30308
Attention: Jesse H. Austin, III, Esq.
Telecopier No.: (404) 815-2424
Telephone No.: (404) 815-2400
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, Connecticut 06901
Attention: Leslie Plaskon, Esq.
Telecopier No.: (203) 359-3031
Telephone No.: (203) 961-7400
(B) If to Oversight Agent or Paragon, at
Paragon Capital LLC
75 Second Avenue
Suite 400
Needham, Massachusetts 02494-2800
Attention: Andrew H. Moser
Telecopier No.: (781) 707-2107
Telephone No.: (781) 707-2121
with copies to:
Shapiro, Israel & Weiner
100 North Washington Street #6
Boston, Massachusetts 02114
Attention: Joel Rosenthal, Esq.
Telecopier No.: (617) 742-2355
Telephone No.: (617) 314-4260
(C) If to Borrower, at
Filene's Basement, Inc.
40 Walnut Street
Wellesley, Massachusetts 02481
Attention: Steven R. Siegel
Telecopier No.: (617) 348-7130
Telephone No.: (617) 348-7000
with copies to:
Chappell White LLP
99 Summer Street
Boston, Massachusetts 02108
Attention: Robert C. Zinnershine, Esq.
Telecopier No.: (617) 772-9696
Telephone No.: (617) 772-9600
with copies to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Paul P. Daly, Esq.
Telecopier No.: (617) 526-5000
Telephone No.: (617) 526-6000
ANNEX J (from Annex A - Commitments definition)
to
CREDIT AGREEMENT
Tranche A Lender(s):
General Electric Capital Corporation
Tranche A Revolving Loan Commitment
(including a Swing Line Commitment
of $10,000,000): $85,000,000
Tranche B Lender(s)
Paragon Capital LLC $10,000,000
B III Capital Partners, L.P. $40,000,000
Schedules to Credit Agreement
DISCLOSURE SCHEDULE 1.1
Responsible Individual
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Telephone No.: (203) 316-7500
Telecopier No.: (203) 316-7893
Attention: Account Manager - Filene's Basement
Paragon Capital LLC
Hillsite Office Building
75 Second Avenue
Suite 400
Needham, MA 02494
Telephone No.: (781) 707-2121
Telecopier No.: (781) 707-2107
Attention: Andrew H. Moser
President & COO
DEBTOR IN POSSESSION CREDIT AGREEMENT
Dated as of August 23, 1999
among
FILENE'S BASEMENT, INC.,
DEBTOR AND DEBTOR IN POSSESSION,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
PARAGON CAPITAL LLC,
as Oversight Agent,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
TABLE OF CONTENTS
Page
1. AMOUNT AND TERMS OF CREDIT 2
1.1. Credit Facilities 2
1.2. Letters of Credit 7
1.3. Prepayments 7
1.4. Use of Proceeds 9
1.5. Interest and Applicable Margins 10
1.6. Eligible Accounts 12
1.7. Eligible Inventory 13
1.8. Cash Management Systems 14
1.9. Fees and Other Compensation 14
1.10. Receipt of Payments 14
1.11. Application and Allocation of Payments; Subordination 15
1.12. Loan Account and Accounting 17
1.13. Indemnity 17
1.14. Access; Appraisals; Mystery Shopping 19
1.15. Taxes 20
1.16. Capital Adequacy; Increased Costs; Illegality 21
1.17. Single Loan 22
1.18. Priority of Obligations and Lenders' Liens 22
2. CONDITIONS PRECEDENT 24
2.1. Conditions to the Initial Loans 24
2.2. Further Conditions to Each Loan 25
3. REPRESENTATIONS AND WARRANTIES 26
3.1. Corporate Existence; Compliance with Law 26
3.2. Executive Offices; FEIN 27
3.3. Corporate Power, Authorization, Enforceable Obligations27
3.4. Financial Statements and Projections 28
3.5. Material Adverse Effect 28
3.6. Ownership of Property; Liens 28
3.7. Labor Matters 29
3.8. Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness 30
3.9. Government Regulation 30
3.10. Margin Regulations 30
3.11. Taxes 31
3.12. ERISA 31
3.13. No Litigation 32
3.14. Brokers 32
3.15. Intellectual Property 32
3.16. Full Disclosure 32
3.17. Environmental Matters 33
3.18. Insurance 34
3.19. Deposit and Disbursement Accounts 34
3.20. Government Contracts 34
3.21. [Intentionally Deleted 34
3.22. Agreements and Other Documents 34
3.23. [Intentionally Deleted 35
3.24. Year 2000 Representations 35
3.25. Status of Holdings 35
3.26. Credit Card Providers 35
4. FINANCIAL STATEMENTS AND INFORMATION 35
4.1. Reports and Notices 35
4.2. Communication with Accountants 35
5. AFFIRMATIVE COVENANTS 36
5.1. Maintenance of Existence and Conduct of Business 36
5.2. Payment of Obligations 36
5.3. Books and Records 37
5.4. Insurance; Damage to or Destruction of Collateral 37
5.5. Compliance with Laws 39
5.6. Supplemental Disclosure 39
5.7. Intellectual Property 39
5.8. Environmental Matters 39
5.9. Landlords' Agreements, Mortgagee Agreements and
Bailee Letters 40
5.10. Further Assurances 41
5.11. Year 2000 Problems 41
5.12. Credit Card Notices 41
5.13. Point of Sale System 41
5.14. Leasehold Mortgages 41
5.15. Reclamation Claims 41
5.16. Financial Advisor 41
6. NEGATIVE COVENANTS 42
6.1. Mergers, Subsidiaries, Etc. 42
6.2. Investments; Loans and Advances 42
6.3. Indebtedness 43
6.4. Employee Loans and Affiliate Transactions 44
6.5. Capital Structure and Business 45
6.6. Guaranteed Indebtedness 45
6.7. Liens 45
6.8. Sale of Stock and Assets 46
6.9. ERISA 47
6.10. Financial Covenants 47
6.11. Hazardous Materials 47
6.12. Sale-Leasebacks 47
6.13. Cancellation of Indebtedness 47
6.14. Restricted Payments 47
6.15. Change of Corporate Name or Location; Change of
Fiscal Year 47
6.16. No Impairment of Intercompany Transfers 48
6.17. No Speculative Transactions 48
6.18. Credit Parties Other than Borrower 48
6.19. Amendments to Material Agreements 48
6.20. Credit Card Notices 49
6.21. Amendments to Interim Order; Final Order; Pre-Petition
Indebtedness 49
6.22. No Return of Inventory 49
7. TERM 49
7.1. Termination 49
7.2. Survival of Obligations Upon Termination of Financing
Arrangements 49
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES 50
8.1. Events of Default 50
8.2. Remedies 54
8.3. Waivers by Credit Parties 55
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS 56
9.1. Assignment and Participations 56
9.2. Appointment of Agents 58
9.3. Agents' Reliance, Etc. 59
9.4. GE Capital, Paragon and Affiliates 60
9.5. Lender Credit Decision 60
9.6. Indemnification 60
9.7. Successor Agents 61
9.8. Setoff and Sharing of Payments 61
9.9. Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert 62
10. SUCCESSORS AND ASSIGNS 65
10.1. Successors and Assigns 65
11. MISCELLANEOUS 65
11.1. Complete Agreement; Modification of Agreement 65
11.2. Amendments and Waivers 66
11.3. Fees and Expenses 68
11.4. No Waiver 70
11.5. Remedies 70
11.6. Severability 70
11.7. Conflict of Terms 70
11.8. Confidentiality 71
11.9. GOVERNING LAW 71
11.10.Notices 72
11.11.Section Titles 72
11.12.Counterparts 73
11.13.WAIVER OF JURY TRIAL 73
11.14.Press Releases 73
11.15.Reinstatement 73
11.16.Advice of Counsel 74
11.17.Entities Related to Paragon. 74
11.18.Entire Agreement. 74
11.19.Disclosure. 74
11.20.Parties Including Trustees; Bankruptcy Court
Proceedings 74
11.21.Pre-Petition Loan Agreement 75
11.22.Termination of Letter Agreement 75
11.23.Post-Closing Matters 75
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit
Advance/Borrowing Base Certificate
Exhibit 1.1(a)(iv) - Form of Tranche A Revolving Note
Exhibit 1.1(a)(v) - Form of Tranche B Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 5.9(a) - Form of Landlord Waiver
Exhibit 5.9(b) - Alternative Form of Landlord Waiver
Exhibit 5.12 - Form of Credit Card Provider Notice
Exhibit 9.1(a) - Form of Assignment Agreement
Exhibit A-1 - Form of Budget
Exhibit A-2 - Form of Interim Order
Exhibit B-1 - Form of GE Fee Letter
Exhibit B-2 - Form of Paragon Fee Letter
Schedule 1.1 - Responsible Individual
Schedule 1.1(c) - Authorized Signatories
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.5 - Pre-Closing Materially Adverse Events
Schedule 3.6(a) - Real Estate and Leases
Schedule 3.6(b) - Leases in Default
Schedule 3.6(c) - Leases (Borrower as Lessor, Sublessor or
Assignor)
Schedule 3.6(d) - Leased Department License Agreements
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Agreements and Other Documents
Schedule 3.26 - Credit Card Providers
Schedule 5.1 - Trade Names
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.4(b) - Employee Loans
Schedule 6.7(a) - Existing Liens
Schedule 6.7(b) - Existing Capital Leases
Schedule 6.8(c) - Permitted Dispositions
Schedule 6.19 - Material Agreements
Schedule 10 - Fiscal Quarters
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections
-- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex F-1 - Required Reporting List
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A-
Commitments definition)- Commitments as
of Closing Date
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<FISCAL-YEAR-END> JAN-29-1999
<PERIOD-END> JUL-31-1999
<CASH> 871
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<RECEIVABLES> 8,808
<ALLOWANCES> 1,217
<INVENTORY> 95,593
<CURRENT-ASSETS> 110,220
<PP&E> 146,419
<DEPRECIATION> 82,259
<TOTAL-ASSETS> 200,185
<CURRENT-LIABILITIES> 141,629
<BONDS> 2,374
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<COMMON> 211
<OTHER-SE> 51,190
<TOTAL-LIABILITY-AND-EQUITY> 200,185
<SALES> 280,800
<TOTAL-REVENUES> 280,800
<CGS> 221,317
<TOTAL-COSTS> 221,317
<OTHER-EXPENSES> 76,568
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<INCOME-PRETAX> (21,393)
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