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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MAY 1, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20035
NATURAL WONDERS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0141610
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4209 TECHNOLOGY DRIVE, FREMONT, CALIFORNIA 94538
(Address of principal executive offices)
(Zip code)
510-252-9600
(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
Common stock outstanding as of May 29, 1999: 7,951,392 shares of common stock.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 10.28.4 Amended and Restated Loan and Security Agreement
entered into on June 15, 1999 among the Company, Wells Fargo Bank,
National Association and Foothill Capital Corporation.
Exhibit 11.1 Computation of Per Share Loss (previously filed)
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the first quarter of fiscal 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 17, 1999
NATURAL WONDERS, INC.
(Registrant)
/s/ Peter G. Hanelt
--------------------------------------
Peter G. Hanelt,
Chief Executive Officer
President
Chief Financial Officer
(Signing on behalf of the registrant and
as Principal Accounting and Financial Officer)
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
NATURAL WONDERS, INC.,
AS BORROWER,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
AS LENDERS,
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS AGENT,
FOOTHILL CAPITAL CORPORATION,
AS ADMINISTRATIVE AGENT
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . .16
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .16
1.5 Schedules and Exhibits.. . . . . . . . . . . . . . . . . . . . . .16
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Revolving Advances . . . . . . . . . . . . . . . . . . . . . . . .16
2.2 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . .24
2.3 [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . .27
2.4 [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . .27
2.5 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
2.6 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.7 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.. . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.8 Collection of Accounts . . . . . . . . . . . . . . . . . . . . . .30
2.9 Crediting Payments; Application of Collections . . . . . . . . . .30
2.10 Designated Account . . . . . . . . . . . . . . . . . . . . . . . .31
2.11 Maintenance of Loan Account; Statements of Obligations . . . . . .31
2.12 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
2.13 Eurodollar Rate Loans. . . . . . . . . . . . . . . . . . . . . . .32
2.14 Illegality.. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.15 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . .35
2.16 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 37
3.1 Conditions Precedent to the Initial Advance or the Initial Letter
of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
3.2 Conditions Precedent to all Advances and all Letters of Credit.. .38
3.3 Condition Subsequent . . . . . . . . . . . . . . . . . . . . . . .39
3.4 Term; Automatic Renewal. . . . . . . . . . . . . . . . . . . . . .39
3.5 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .39
3.6 Early Termination by Borrower. . . . . . . . . . . . . . . . . . .39
3.7 Termination Upon Event of Default. . . . . . . . . . . . . . . . .40
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . 40
4.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . . . .40
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . . . . . . . .40
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral.. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
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4.4 Delivery of Additional Documentation Required. . . . . . . . . . .41
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . .41
4.6 Right to Inspect.. . . . . . . . . . . . . . . . . . . . . . . . .42
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 42
5.1 No Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . .42
5.2 [Intentionally Deleted]. . . . . . . . . . . . . . . . . . . . . .42
5.3 Eligible Inventory.. . . . . . . . . . . . . . . . . . . . . . . .42
5.4 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
5.5 Location of Inventory and Equipment. . . . . . . . . . . . . . . .42
5.6 Inventory Records. . . . . . . . . . . . . . . . . . . . . . . . .42
5.7 Location of Chief Executive Office; FEIN.. . . . . . . . . . . . .42
5.8 Due Organization and Qualification; Subsidiaries.. . . . . . . . .43
5.9 Due Authorization; No Conflict.. . . . . . . . . . . . . . . . . .43
5.10 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
5.11 No Material Adverse Change. . . . . . . . . . . . . . . . . . . .44
5.12 Solvency.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
5.13 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . .44
5.14 Environmental Condition. . . . . . . . . . . . . . . . . . . . . .44
6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Accounting System. . . . . . . . . . . . . . . . . . . . . . . . .45
6.2 Collateral Reporting.. . . . . . . . . . . . . . . . . . . . . . .45
6.3 Financial Statements, Reports, Certificates. . . . . . . . . . . .45
6.4 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
6.5 Guarantor Reports. . . . . . . . . . . . . . . . . . . . . . . . .47
6.6 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
6.7 Title to Equipment.. . . . . . . . . . . . . . . . . . . . . . . .47
6.8 Maintenance of Equipment.. . . . . . . . . . . . . . . . . . . . .47
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
6.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
6.11 No Setoffs or Counterclaims. . . . . . . . . . . . . . . . . . . .49
6.12 Location of Inventory and Equipment. . . . . . . . . . . . . . . .49
6.13 Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . . .49
6.14 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . .50
6.15 Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
6.16 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . .50
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . . .50
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
7.3 Restrictions on Fundamental Changes. . . . . . . . . . . . . . . .51
7.4 Disposal of Assets.. . . . . . . . . . . . . . . . . . . . . . . .51
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
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7.7 Nature of Business.. . . . . . . . . . . . . . . . . . . . . . . .51
7.8 Prepayments and Amendments.. . . . . . . . . . . . . . . . . . . .51
7.9 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . .51
7.10 Consignments.. . . . . . . . . . . . . . . . . . . . . . . . . . .51
7.11 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . .52
7.12 Accounting Methods.. . . . . . . . . . . . . . . . . . . . . . . .52
7.13 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
7.14 Transactions with Affiliates.. . . . . . . . . . . . . . . . . . .52
7.15 Suspension.. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
7.16 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . .52
7.17 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .52
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.. . . . . . . . . . . . . . . . . . . . . .52
7.19 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . .53
7.20 Financial Covenant.. . . . . . . . . . . . . . . . . . . . . . . .53
7.21 Capital Expenditures.. . . . . . . . . . . . . . . . . . . . . . .53
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
9. THE LENDER GROUP'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . 55
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . .55
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .57
10. TAXES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 58
11.1 Demand; Protest; etc.. . . . . . . . . . . . . . . . . . . . . . .58
11.2 The Lender Group's Liability for Collateral. . . . . . . . . . . .58
11.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .58
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . . . 60
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . . . 60
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS. . . . . . . . . . . . . . . 61
15.1 Assignments and Participations.. . . . . . . . . . . . . . . . . .61
15.2 Successors.. . . . . . . . . . . . . . . . . . . . . . . . . . . .63
16. AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 63
16.1 Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . . .63
16.2 No Waivers; Cumulative Remedies. . . . . . . . . . . . . . . . . .65
17. ADMINISTRATIVE AGENT; THE LENDER GROUP. . . . . . . . . . . . . . . . . 65
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17.1 Appointment and Authorization of Administrative Agent. . . . . . .65
17.2 Delegation of Duties.. . . . . . . . . . . . . . . . . . . . . . .66
17.3 Liability of Administrative Agent-Related Persons. . . . . . . . .66
17.4 Reliance by Administrative Agent.. . . . . . . . . . . . . . . . .66
17.5 Notice of Default or Event of Default. . . . . . . . . . . . . . .67
17.6 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . . .68
17.7 Costs and Expenses; Indemnification. . . . . . . . . . . . . . . .68
17.8 Agents in Individual Capacity. . . . . . . . . . . . . . . . . . .69
17.9 Successor Administrative Agent.. . . . . . . . . . . . . . . . . .69
17.10 Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . .70
17.11 Collateral Matters.. . . . . . . . . . . . . . . . . . . . . . . .71
17.12 Restrictions on Actions by Lenders; Sharing of Payments. . . . . .72
17.13 Agency for Perfection. . . . . . . . . . . . . . . . . . . . . . .73
17.14 Payments by Administrative Agent to the Lenders. . . . . . . . . .73
17.15 Concerning the Collateral and Related Loan Documents.. . . . . . .73
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers
by Lenders; Other Reports and Information. . . . . . . . . . . . .74
17.17 Several Obligations; No Liability. . . . . . . . . . . . . . . . .75
18. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
18.1 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . .75
18.2 Section Headings.. . . . . . . . . . . . . . . . . . . . . . . . .75
18.3 Interpretation.. . . . . . . . . . . . . . . . . . . . . . . . . .76
18.4 Severability of Provisions.. . . . . . . . . . . . . . . . . . . .76
18.5 Counterparts; Telefacsimile Execution. . . . . . . . . . . . . . .76
18.6 Revival and Reinstatement of Obligations.. . . . . . . . . . . . .76
18.7 Amendment and Replacement. . . . . . . . . . . . . . . . . . . . .76
18.8 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . .76
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SCHEDULES AND EXHIBITS
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Schedule C-1 Commitments on Closing Date
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 5.8 Subsidiaries
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"),
is entered into as of June 15, 1999, among NATURAL WONDERS, INC., a Delaware
corporation ("Borrower"), with its chief executive office located at 4209
Technology Drive, Fremont, California 94538, on the one hand, and the financial
institutions listed on the signature pages hereof (such financial institutions,
together with their respective successors and assigns, are referred to
hereinafter each individually as a "Lender" and collectively as the "Lenders"),
and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), as Agent and
FOOTHILL CAPITAL CORPORATION a California corporation ("Foothill"), as
Administrative Agent, on the other hand.
R E C I T A L S
A. Borrower has entered into that certain Credit Agreement, dated as of
July 1, 1998 with Wells Fargo, as amended by amendments one through four (as
amended, the "Existing Loan Agreement");
B. Wells Fargo, Foothill and Borrower have agreed to amend and restate
the Existing Loan Agreement in accordance with the terms and conditions set
forth herein.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"ACCOUNTS" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"ADJUSTED EURODOLLAR RATE" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next whole multiple of 1/16 of 1% per annum)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to (i) 100% minus (ii) the Reserve Percentage. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
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"ADMINISTRATIVE AGENT" means Foothill, solely in its capacity
as Administrative Agent for the Lenders, and shall include any successor
Administrative Agent.
"ADMINISTRATIVE AGENT'S ACCOUNT" has the meaning set forth in
SECTION 2.8.
"ADMINISTRATIVE AGENT ADVANCE" has the meaning set forth in
SECTION 2.1(h).
"ADMINISTRATIVE AGENT LOAN" has the meaning set forth in
SECTION 2.1(g).
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"AFFILIATE" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled by, is under common control
with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"AGENT" means Wells Fargo, solely in its capacity as Agent for
the Lenders, and shall include any successor Agent.
"AGENT-RELATED PERSONS" means Agent, together with its
Affiliates, and the officers, directors, employees, counsel, agents and
attorneys-in-fact of Agent and such Affiliates and Administrative Agent,
together with its Affiliates, and the officers, directors, employees, counsel,
agents, and attorneys-in-fact of Administrative Agent and such Affiliates.
"AGENTS" means the Agent and the Administrative Agent.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ASSIGNEE" has the meaning set forth in SECTION 15.1.
"ASSIGNMENT AND ACCEPTANCE" has the meaning set forth in
SECTION 15.1 (a) and shall be in the form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or other employee of
Borrower.
"AVAILABILITY" means, as of the date of determination, the
result (so long as such result is a positive number) of (a) the lesser of the
Borrowing Base or the Maximum Amount, LESS (b) the Revolving Facility Usage.
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"AVAILABILITY RESERVE" means a reserve for outstanding gift
certificates.
"AVERAGE UNUSED PORTION OF MAXIMUM AMOUNT" means, as of any
date of determination, (a) the Maximum Amount (or $15,000,000 for months in
which the average Daily Balance of Advances and undrawn Letters of Credit is
less than $15,000,000), LESS (b) the sum of (i) the average Daily Balance of
Advances that were outstanding during the immediately preceding month, PLUS (ii)
the average Daily Balance of the undrawn Letters of Credit that were outstanding
during the immediately preceding month.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 ET SEQ.), as amended, and any successor statute.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"BORROWING" means a borrowing hereunder consisting of Advances
made on the same day by the Lenders, or by Administrative Agent in the case of
an Administrative Agent Loan or an Administrative Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"BUSINESS DAY" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in Los Angeles, California, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any
day that is a Business Day pursuant to clause (a) above and that is also a day
on which trading in Dollars is carried on by and between banks in the London
interbank market.
"BUSINESS PLAN" means Borrower's and its Subsidiaries'
business plans attached hereto as EXHIBIT B-1, together with any amendment,
modification, or revision to such business plan approved by Administrative
Agent.
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"CHANGE OF CONTROL" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 25% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"CLOSING DATE" means the date of the first to occur of the
making of the initial Advance or the issuance of the initial Letter of Credit.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) [intentionally deleted]
(i) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of the Lender Group, and
(j) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Investment Property, Negotiable
Collateral, Real Property, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests
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in the Equipment or Inventory, in each case, in form and substance satisfactory
to Administrative Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMITMENT" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on SCHEDULE C-1 or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of SECTION 15.1, as such Commitment may be adjusted from
time to time in accordance with the provisions of SECTION 15.1 and "Commitments"
means, collectively, the aggregate amount of the commitments of all of the
Lenders which shall at all times total the Maximum Amount.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C-1 and delivered by the chief accounting officer of
Borrower to Administrative Agent.
"DAILY BALANCE" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" has the meaning set forth in SECTION 2.1
(f)(ii).
"DEFAULTING LENDERS RATE" means the Reference Rate for the
first three days from and after the date the relevant payment is due and
thereafter at the interest rate then applicable to Advances.
"DESIGNATED ACCOUNT" means account number 4296905763 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Administrative
Agent.
"DESIGNATED ACCOUNT BANK" means Wells Fargo, whose office is
located at 121 Park Center Plaza, San Jose, California.
"DISBURSEMENT LETTER" means an instructional letter executed
and delivered by Borrower to Administrative Agent regarding the extensions of
credit to be made on the Closing Date, the form and substance of which shall be
satisfactory to Administrative Agent.
"DOLLARS OR $" means United States dollars.
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"EARLY TERMINATION PREMIUM" has the meaning set forth in
SECTION 3.6.
"ELIGIBLE INVENTORY" means Inventory consisting of first
quality finished goods held for sale in the ordinary course of Borrower's
business (less reserves for mark downs and shrinkage) that are located at or
in-transit between Borrower's premises identified on SCHEDULE E-1, that strictly
comply with each and all of the representations and warranties respecting
Inventory made by Borrower to the Lender Group in the Loan Documents, and that
are and at all times continue to be reasonably acceptable to the Administrative
Agent in all respects; PROVIDED, HOWEVER, that standards of eligibility may be
fixed and revised from time to time by the Administrative Agent in the
Administrative Agent's reasonable credit judgment. An item of Inventory shall
not be included in Eligible Inventory if:
(a) it is not owned solely by Borrower or Borrower does not
have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
SCHEDULE E-1;
(c) it is not located on property owned or leased by
Borrower or in a contract warehouse, subject to a Collateral Access Agreement
executed by the warehouseman, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of the Lender Group;
(e) it consists of goods (other than goods returned and
restocked in ordinary course of Borrower's business) returned or rejected by
Borrower's customers or goods in transit; and
(f) it is obsolete or slow moving, a restrictive or custom
item, raw materials, work-in-process, marked out of stock or return to vendor,
designated as a component that is not part of finished goods, or constitutes
spare parts, packaging and shipping materials, supplies used or consumed in
Borrower's business, Inventory subject to a Lien in favor of any third Person,
bill and hold goods, defective goods, "seconds," or Inventory acquired on
consignment.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $5,000,000,000, or the asset based lending Affiliate of such
bank, (b) a commercial bank organized under the laws of any other country which
is a member of the Organization for Economic Cooperation and Development or a
political subdivision of any such country, and
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having total assets in excess of $5,000,000,000, or the asset based lending
Affiliate of such bank; provided that such bank is acting through a branch or
agency located in the United States, (c) a finance company, insurance or other
financial institution, or fund that is engaged in making, purchasing, or
otherwise investing in commercial loans in the ordinary course of its business
and having total assets in excess of $500,000,000, (d) any Affiliate (other than
individuals) of an existing Lender, and (e) any other Person approved by
Administrative Agent and Borrower.
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including any interest of Borrower in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 ET SEQ., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any party subject to ERISA that is a party to an
arrangement with Borrower and whose employees are aggregated with the employees
of Borrower under IRC Section 414(o).
"EURODOLLAR RATE" means, with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum (rounded upwards, if
necessary, to the next whole multiple of 1/16 of 1% per annum) at which United
States dollar deposits are offered to Wells Fargo (or its Affiliates) by major
banks in the London interbank market (or other Eurodollar Rate market selected
by Administrative Agent) on or about 11:00 a.m. (California time) two Business
Days prior to the commencement of such Interest Period in amounts comparable to
the amount of the Eurodollar Rate Loans requested by and available to Borrower
in accordance with this Agreement and for a period of three months from the date
of such offer.
"EURODOLLAR RATE LOANS" means any Advance (or any portion
thereof) made or outstanding hereunder during any period when interest on such
Advance (or portion thereof) is payable based on the Adjusted Eurodollar Rate.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
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"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means has the meaning set forth in the first
paragraph of this Agreement.
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTOR" means NW Capital Management, Inc., a California
corporation.
"GUARANTOR SECURITY AGREEMENTS" means that certain Security
Agreement and that certain Intellectual Property Security Agreement, each, of
even date herewith, between Guarantor and Administrative Agent.
"GUARANTY" means that certain Continuing Guaranty, of even
date herewith, by Guarantor in favor of Administrative Agent and the Lenders.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources,
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(c) any flammable substances or explosives or any radioactive materials, and
(d) asbestos in any form or electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million; PROVIDED, HOWEVER, that Hazardous Materials shall not include
cleaning and office supplies used by Borrower in the ordinary course of its
business and in compliance with applicable law.
"INDEBTEDNESS" means: (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person; PROVIDED, HOWEVER, that
Indebtedness shall not include ordinary trade debt payable by Borrower within 60
days of its due date.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means that certain
Intellectual Property Security Agreement, of even date herewith, between
Borrower and Administrative Agent.
"INTEREST PERIOD" means, for any Eurodollar Rate Loan, the
period commencing on the Business Day such Eurodollar Rate Loan is disbursed or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date that is one, two or three
months thereafter, as selected by Borrower and notified to Administrative Agent
as provided in SECTIONS 2.12(a) AND (b).
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
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"INVESTMENT PROPERTY" means all of Borrower's presently
existing and hereafter acquired or arising investment property (as that term is
defined in Section 9115 of the Code).
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in SECTION 2.2(a).
"L/C GUARANTY" has the meaning set forth in SECTION 2.2(a).
"LENDER" and "LENDERS" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 15.1.
"LENDER GROUP" means, individually and collectively, each of
the individual Lenders and Administrative Agent.
"LENDER GROUP EXPENSES" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group under
the terms of the Loan Documents; fees or charges paid or incurred by the Lender
Group in connection with the Lender Group's transactions with Borrower,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals), costs and expenses incurred by Administrative Agent in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Administrative Agent resulting from the dishonor of checks; costs
and expenses paid or incurred by Administrative Agent to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by the Lender Group in examining Borrower's Books; costs and expenses
of third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or the Lender Group's relationship with
Borrower or any guarantor; and the Lender Group's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing, defending, or concerning the Loan Documents
(including attorneys fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning Borrower or any
guarantor of the Obligtions), irrespective of whether suit is brought.
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"LETTER OF CREDIT" means an L/C or an L/C Guaranty, as the
context requires.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.11.
"LOAN DOCUMENTS" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Restricted Account Agreements, the
Intellectual Property Security Agreement, the Guaranty, the Guaranty Security
Agreements, any note or notes executed by Borrower and payable to the Lender
Group, and any other agreement entered into, now or in the future, in connection
with this Agreement.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on the
value of the Collateral or the amount that the Lender Group would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material impairment
of the priority of the Lender Group's Liens with respect to the Collateral.
"MAXIMUM AMOUNT" means $30,000,000.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, securities (including the
shares of stock of Subsidiaries of Borrower), documents, personal property
leases (wherein Borrower is the lessor), and chattel paper except for a
certificate of deposit in the amount of $450,000 payable to Ken Norton.
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"NET RETAIL LIQUIDATION PERCENTAGE" means the percentage of
book value estimated to be recoverable in an orderly liquidation of the
Inventory, such percentage to be determined by a qualified auctioneering or
appraisal company selected by Administrative Agent.
"OBLIGATIONS" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Lender Group Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy Code, would
have accrued), guaranties, covenants, and duties owing by Borrower to the Lender
Group of any kind and description (whether pursuant to or evidenced by the Loan
Documents or pursuant to any other agreement between the Lender Group and
Borrower, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and further including all interest not paid when due and all
Lender Group Expenses that Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"ORIGINATING LENDER" has the meaning set forth in
SECTION 15.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.6.
"PARTICIPANT" has the meaning set forth in SECTION 15.1(c).
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"PERMITTED LIENS" means (a) Liens held by the Lender Group,
(b) Liens for unpaid taxes that either (i) are not yet due and payable or
(ii) are the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1,
(d) the interests of lessors under operating leases and purchase money security
interests and Liens of lessors under capital leases to the extent that the
acquisition or lease of the underlying asset is permitted under SECTION 7.21 and
so long as the Lien only attaches to the asset purchased or acquired and only
secures the purchase price of the asset, (e) Liens arising by operation of law
in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet due and payable, or (ii) are the subject of Permitted Protests,
(f) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, (h) Liens arising by reason of security
for surety or appeal bonds in the ordinary course of business of Borrower,
(i) Liens of or resulting from any judgment or award that would not cause a
Material Adverse Change and as to which the time for the
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appeal or petition for rehearing of which has not yet expired, or in respect of
which Borrower is in good faith prosecuting an appeal or proceeding for a
review, and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (j) [intentionally deleted], and
(k) with respect to any Real Property, easements, rights of way, zoning and
similar covenants and restrictions, and similar encumbrances that customarily
exist on properties of Persons engaged in similar activities and similarly
situated and that in any event do not materially interfere with or impair the
use or operation of the Collateral by Borrower or the value of the Lender
Group's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of Borrower.
"PERMITTED PROTEST" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Administrative Agent, (b) any such protest is
instituted and diligently prosecuted by Borrower in good faith, and
(c) Administrative Agent is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Liens of the Lender Group in and to the Collateral.
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PLAN" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"PRO-RATA SHARE" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments.
"REAL PROPERTY" means any estates or interests in real
property now owned or hereafter acquired by Borrower.
"REFERENCE RATE" means the variable rate of interest, per
annum, most recently announced by Wells Fargo, or any successor thereto, as its
"base rate," irrespective of whether such announced rate is the best rate
available from such financial institution.
"REFERENCE RATE LOAN" means any Advance (or portion thereof)
made or outstanding hereunder during any period when interest on such Advance
(or portion thereof) is payable based on the Reference Rate.
"RENEWAL DATE" has the meaning set forth in SECTION 3.4.
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"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"REQUIRED LENDERS" means, at any time, Administrative Agent
together with such other Lenders whose Pro Rata Shares together with
Administrative Agent aggregate 50.1% or more of the Commitments.
"REQUIREMENT OF LAW" means, as to any Person: (a) (i) all
statutes and regulations and (ii) court orders and injunctions, arbitrators'
decisions, and/or similar rulings, in each instance by any Governmental
Authority or arbitrator applicable to or binding upon such Person or any of such
Person's property or to which such Person or any of such Person's property is
subject; and (b) that Person's organizational documents, by-laws and/or other
instruments which deal with corporate or similar governance, as applicable.
"RESERVE PERCENTAGE" for any Interest Period means, as of the
date of determination thereof, the maximum percentage (rounded upward, if
necessary to the nearest 1/100th of 1%), as determined by Administrative Agent
(or its Affiliates) in accordance with its (or their) usual procedures (which
determination shall be conclusive in the absence of manifest error), that is in
effect on such date as prescribed by the Board of Governors of the Federal
Reserve System for determining the reserve requirements (including supplemental,
marginal, and emergency reserve requirements) with respect to eurocurrency
fundings (currently referred to as "eurocurrency liabilities") by Administrative
Agent having a term equal to such Interest Period.
"RESTRICTED ACCOUNT" shall mean a depositary account
established pursuant to one of the Restricted Account Agreements.
"RESTRICTED ACCOUNT AGREEMENTS" means those certain Depository
Account Agreements, in form and substance satisfactory to Administrative Agent,
each of which is among Borrower, Administrative Agent, and one of the Restricted
Account Banks.
"RESTRICTED ACCOUNT BANKS" means Wells Fargo and such other
banks as may be agreed to by Administrative Agent and Borrower from time to
time.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"REVOLVING FACILITY USAGE" means, as of any date of
determination, the aggregate amount of Advances and undrawn or unreimbursed
Letters of Credit outstanding.
"SETTLEMENT" has the meaning set forth in SECTION 2.1(i)(i).
"SETTLEMENT DATE" has the meaning set forth in
SECTION 2.1(i)(i).
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"SOLVENT" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"TANGIBLE NET WORTH" means, as of any date of determination,
the difference of (a) Borrower's total stockholder's equity, MINUS (b) the sum
of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid
expenses, and (iii) all amounts due to Borrower from Affiliates.
"VALUE" means, with respect to Inventory, the lower of cost or
market value, on a basis consistent with Borrower's historical accounting
practices.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.8.
"WELLS FARGO" has the meaning set forth in the first paragraph
of this Agreement.
"YEAR 2000 COMPLIANT" means, with regard to any Person, that
substantially all software in goods produced or sold by, or utilized by and
material to the business operations or financial condition of, such entity are
able to interpret and manipulate data on and involving all calendar dates
correctly and without causing any abnormal ending scenario, including in
relation to dates in and after the year 2000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial
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statements" shall include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related definition,
it shall be understood to mean Borrower on a consolidated basis unless the
context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by the requisite members of the Lender Group. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall, as permitted by
this Agreement, include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
20 LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
each Lender agrees to make advances ("Advances") to Borrower in an amount at any
one time outstanding not to exceed such Lender's Pro Rata Share of an amount
equal to the lesser of (i) the Maximum Amount LESS the outstanding balance of
all undrawn or unreimbursed Letters of Credit, or (ii) the Borrowing Base LESS
the outstanding balance of all undrawn or unreimbursed Letters of Credit. For
purposes of this Agreement, "Borrowing Base", as of any date of determination,
shall mean the result of:
(y) THE LESSER OF (1) 60% TIMES the Value of Eligible
Inventory, and (2) 80% TIMES the Net Retail Liquidating Percentage
TIMES the Value of Eligible Inventory, LESS
(z) the Availability Reserve PLUS the aggregate amount
of reserves, if any, established by Administrative Agent under
SECTIONS 2.1(b), 6.15 AND 10.
(b) Anything to the contrary in this SECTION 2.1
notwithstanding, Administrative Agent may (i) reduce the advance rates based
upon Eligible Inventory without
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declaring an Event of Default if it determines that there has occurred a
Material Adverse Change; and (ii) establish reserves against the Borrowing Base
in such amounts as Administrative Agent in its reasonable judgment (from the
perspective of an asset-based lender) shall deem necessary or appropriate,
including reserves on account of (y) sums that Borrower is required to pay (such
as taxes, assessments, insurance premiums, or, in the case of leased assets,
rents or other amounts payable under such leases) and has failed to pay under
any section of this Agreement or any other Loan Document and (z) without
duplication of the foregoing, amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any of the Collateral, which Lien or
trust, in the reasonable determination of Administrative Agent (from the
perspective of an asset-based lender), would be likely to have a priority
superior to the Liens of Administrative Agent (such as landlord liens, ad
valorem taxes, or sales taxes where given priority under applicable law) in and
to such item of the Collateral.
(c) Amounts borrowed pursuant to this SECTION 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement. Notwithstanding anything to the
contrary in this Agreement, Borrower agrees that it shall not have any Advances
(other than undrawn Letters of Credit issued hereunder) outstanding for 30
consecutive days between January 1st and February 15th of each year during the
term of this Agreement.
(d) PROCEDURE FOR BORROWING. Each Borrowing shall be made
upon Borrower's irrevocable request therefor delivered to Administrative Agent
(which notice must be received by Administrative Agent no later than 10:00 a.m.
(California time) on the Funding Date if such advance is for $5,000,000 or less
or no later than 10:00 a.m. (California time) on the Business Day immediately
preceding the requested Funding Date if such advance is for more than
$5,000,000) specifying (i) the amount of the Borrowing; and (ii) the requested
Funding Date, which shall be a Business Day.
(e) ADMINISTRATIVE AGENT'S ELECTION. Promptly after receipt
of a request for a Borrowing pursuant to SECTION 2.1(d) in excess of $5,000,000,
the Administrative Agent shall elect, in its discretion, (i) to have the terms
of SECTION 2.1(f) apply to such requested Borrowing, or (ii) to make an
Administrative Agent Loan pursuant to the terms of SECTION 2.1(g) in the amount
of the requested Borrowing. Any requested Borrowing of $5,000,000 or less shall
be made as an Administrative Agent Loan pursuant to the terms of SECTION 2.1(g).
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(f) MAKING OF ADVANCES.
(i) In the event that the Administrative Agent shall
elect to have the terms of this SECTION 2.1(f) apply to a requested Borrowing in
excess of $5,000,000 as described in SECTION 2.1(e), then promptly after receipt
of a request for a Borrowing pursuant to SECTION 2.1(d), the Administrative
Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on
the Business Day immediately preceding the Funding Date applicable thereto, by
telephone and promptly followed by telecopy, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to the
Administrative Agent in same day funds, to such account of the Administrative
Agent as the Administrative Agent may designate, not later than 12:00 p.m.
(California time) on the Funding Date applicable thereto. After the
Administrative Agent's receipt of the proceeds of such Advances, upon
satisfaction of the applicable conditions precedent set forth in SECTIONS 3.1
and 3.2, the Administrative Agent shall make the proceeds of such Advances
available to Borrower on the applicable Funding Date by transferring same day
funds equal to the proceeds of such Advances received by the Administrative
Agent to the Designated Deposit Account; PROVIDED, HOWEVER, that, subject to the
provisions of SECTION 2.1(l), the Administrative Agent shall not request any
Lender to make, and no Lender shall have the obligation to make, any Advance if
the Administrative Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that (A) one or more of the applicable
conditions precedent set forth in SECTIONS 3.1 or 3.2 will not be satisfied on
the requested Funding Date for the applicable Borrowing, or (B) the requested
Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Administrative Agent receives notice from
a Lender on or prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, at least one Business Day prior to the date of such Borrowing,
that such Lender will not make available as and when required hereunder to
Administrative Agent for the account of Borrower the amount of that Lender's Pro
Rata Share of the Borrowing, Administrative Agent may assume that each Lender
has made or will make such amount available to Administrative Agent in
immediately available funds on the Funding Date and Administrative Agent may
(but shall not be so required), in reliance upon such assumption, make available
to Borrower on such date a corresponding amount. If and to the extent any
Lender shall not have made its full amount available to Administrative Agent in
immediately available funds and Administrative Agent in such circumstances has
made available to Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Administrative Agent,
together with interest at the Defaulting Lenders Rate for each day during such
period. A notice from Administrative Agent submitted to any Lender with respect
to amounts owing under this subsection shall be conclusive, absent manifest
error. If such amount is paid to Administrative Agent such payment to
Administrative Agent shall constitute such Lender's Advance on the date of
Borrowing for all purposes of this Agreement. If such amount is not paid to
Administrative Agent on the Business Day following the Funding Date,
Administrative Agent will notify Borrower of such failure to fund and, upon
demand by Administrative Agent, Borrower shall pay such amount
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to Administrative Agent for Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make any Advance on any
Funing Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on any Funding Date. Any Lender that fails to make any Advance that it is
required to make hereunder on any Funding Date and that has not cured such
failure by making such Advance within one Business Day after written demand upon
it by Administrative Agent to do so, shall constitute a "Defaulting Lender" for
purposes of this Agreement until such Advance is made.
(iii) Administrative Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrower to Administrative
Agent for the Defaulting Lender's benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder. Amounts payable to a
Defaulting Lender shall instead be paid to or retained by Administrative Agent.
Administrative Agent may hold and, in its discretion, re-lend to Borrower the
amount of all such payments received or retained by it for the account of such
Defaulting Lender. Solely for the purposes of voting or consenting to matters
with respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such Defaulting
Lender's Commitment shall be deemed to be zero. This section shall remain
effective with respect to such Defaulting Lender until (A) the Obligations under
this Agreement shall have been declared or shall have become immediately due and
payable or (B) the requisite non-Defaulting Lenders, Administrative Agent, and
Borrower shall have waived such Defaulting Lender's default in writing. The
operation of this section shall not be construed to increase or otherwise affect
the Commitment of any non-Defaulting Lender, or relieve or excuse the
performance by Borrower of their duties and obligations hereunder.
(g) MAKING OF ADMINISTRATIVE AGENT LOANS.
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(i) In the event the Administrative Agent shall
elect to have the terms of this SECTION 2.1(g) apply to a requested Borrowing in
excess of $5,000,000 as described in SECTION 2.1(e) or in the event of any
requested Borrowing of $5,000,000 or less, Administrative Agent shall make an
Advance in the amount of such Borrowing (any such Advance made solely by
Administrative Agent pursuant to this SECTION 2.1(g) being referred to as an
"Administrative Agent Loan" and such Advances being referred to collectively as
"Administrative Agent Loans") available to Borrower on the Funding Date
applicable thereto by transferring same day funds to Borrower's Designated
Deposit Account. Each Administrative Agent Loan is an Advance hereunder and
shall be subject to all the terms and conditions applicable to other Advances,
except that all payments thereon shall be payable to Administrative Agent solely
for its own account (and for the account of the holder of any participation
interest with respect to such Advance). Subject to the provisions of
SECTION 2.1(l), the Administrative Agent shall not make any Administrative Agent
Loan if the Administrative Agent shall have received written notice from any
Lender, or otherwise has actual knowledge, that (i) one or more of the
applicable conditions precedent set forth in SECTIONS 3.1 or 3.2 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (ii)
the requested Borrowing would exceed the Availability on such Funding Date.
Administrative Agent shall not otherwise be required to determine whether the
applicable conditions precedent set forth in SECTIONS 3.1 or 3.2 have been
satisfied on the Funding Date applicable thereto prior to making, in its sole
discretion, any Administrative Agent Loan.
(ii) The Administrative Agent Loans shall be secured
by the Collateral and shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to Obligations
pursuant to SECTION 2.7.
(h) ADMINISTRATIVE AGENT ADVANCES.
(i) Administrative Agent hereby is authorized by
Borrower and the Lenders, from time to time in Administrative Agent's sole
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 3.1 or 3.2 have not been satisfied, to make Advances to Borrower on
behalf of the Lenders which Administrative Agent, in its reasonable business
judgment, deems necessary or desirable (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
Lender Group Expenses and the costs, fees, and expenses described in SECTION 10
(any of the Advances described in this SECTION 2.1(h) being hereinafter referred
to as "Administrative Agent Advances"); PROVIDED, that Administrative Agent
shall not make any Administrative Agent Advances to Borrower without the consent
of the Required Lenders if the amount thereof would exceed $2,000,000 in the
aggregate at any one time.
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(ii) Administrative Agent Advances shall be repayable
on demand and secured by the Collateral, shall constitute Advances and
Obligations hereunder, and shall bear interest at the rate applicable from time
to time to the Obligations pursuant to SECTION 2.7.
(i) SETTLEMENT. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, the Administrative Agent and the Lenders agree (which agreement
shall not be for the benefit of or enforceable by Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Advances, the Administrative Agent Loans, and
the Administrative Agent Advances shall take place on a periodic basis in
accordance with the following provisions:
(i) The Administrative Agent shall request
settlement ("Settlement") with the Lenders on a weekly basis, or on a more
frequent basis if so determined by the Administrative Agent, (1) for itself,
with respect to each Administrative Agent Loan and Administrative Agent Advance,
and (2) with respect to Collections received, as to each by notifying the
Lenders by telephone and promptly followed by telecopy, or other similar form of
transmission, of such requested Settlement, no later than 1:00 p.m. (California
time) on the Business Date immediately preceding the date of such requested
Settlement (the "Settlement Date"). Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances,
Administrative Agent Loans, and Administrative Agent Advances for the period
since the prior Settlement Date, the amount of repayments received in such
period, and the amounts allocated to each Lender of the principal, interest,
fees, and other charges for such period. Subject to the terms and conditions
contained herein (including SECTION 2.1(i)(ii)): (y) if a Lender's balance of
the Advances, Administrative Agent Loans, and Administrative Agent Advances
exceeds such Lender's Pro Rata Share of the Advances, Administrative Agent
Loans, and Administrative Agent Advances as of a Settlement Date, then
Administrative Agent shall by no later than 1:00 p.m (California time) on the
Settlement Date transfer in same day funds to the account of such Lender as
Lender may designate, an amount such that each such Lender shall, upon receipt
of such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances, Administrative Agent Loans, and Administrative Agent Advances; and (z)
if a Lender's balance of the Advances, Administrative Agent Loans, and
Administrative Agent Advances is less than such Lender's Pro Rata Share of the
Advances, Administrative Agent Loans, and Administrative Agent Advances as of a
Settlement Date, such Lender shall no later than 1:00 p.m. (California time) on
the Settlement Date transfer in same day funds to such account of the
Administrative Agent as the Administrative Agent may designate, an amount such
that each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Administrative Agent Loans,
and Administrative Agent Advances. Such amounts made available to the
Administrative Agent under clause (z) of the immediately preceding sentence
shall be applied against the amounts of the applicable Administrative Agent Loan
or Administrative Agent Advance and, together with the portion of such
Administrative Agent Loan or Administrative Agent Advance representing
Foothill's
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Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to the Administrative Agent by any Lender on the
Settlement Date applicable thereto to the extent required by the terms hereof,
the Administrative Agent shall be entitled to recover for its account such
amount on demand from such Lender together with interest thereon at the
Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of the
Advances, Administrative Agent Loans, and Administrative Agent Advances is less
than, equal to, or greater than such Lender's Pro Rata Share of the Advances,
Administrative Agent Loans, and Administrative Agent Advances as of a Settlement
Date, Administrative Agent shall, as part of the relevant Settlement, apply to
such balance the portion of payments actually received by Administrative Agent
with respect to principal, interest, fees payable by Borrower and allocable to
the Lenders hereunder, and proceeds of Collateral. To the extent that a net
amount is owed to any such Lender after such application, such net amount shall
be distributed by Administrative Agent to that Lender as part of such
Settlement; PROVIDED, HOWEVER, that the closing fee payable by Borrower under
SECTION 2.12(a) shall be distributed to the Lenders within three Business Days
following the Administrative Agent's receipt thereof without regard to the
netting of amounts owing to or owed by any Lender as part of a Settlement.
(iii) Between Settlement Dates, the Administrative
Agent, to the extent no Administrative Agent Advances or Administrative Agent
Loans are outstanding, may pay over to Foothill any payments received by the
Administrative Agent, which in accordance with the terms of the Agreement would
be applied to the reduction of the Advances, for application to Foothill's Pro
Rata Share of the Advances. If, as of any Settlement Date, Collections received
since the then immediately preceding Settlement Date have been applied to
Foothill's Pro Rata Share of the Advances other than to Administrative Agent
Loans or Administrative Agent Advances, as provided for in the previous
sentence, Foothill shall pay to the Administrative Agent for the accounts of the
Lenders, and Administrative Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each Lender shall,
upon receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, the
Administrative Agent with respect to Administrative Agent Loans and
Administrative Agent Advances, and each Lender with respect to the Advances
other than Administrative Agent Loans and Administrative Agent Advances, shall
be entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by the Administrative Agent or
the Lenders, as applicable.
(j) NOTATION. The Administrative Agent shall record on its
books the principal amount of the Advances owing to each Lender, including the
Administrative Agent Loans and Administrative Agent Advances owing to the
Administrative Agent, and the interests therein of each Lender, from time to
time. In addition, each Lender is authorized, at such Lender's option, to note
the date and amount of each payment or prepayment of principal of such Advances
in its books and records, including computer records, such books
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and records constituting rebuttably presumptive evidence, absent manifest error,
of the accuracy of the information contained therein.
(k) LENDERS' FAILURE TO PERFORM. All Advances (other than
Administrative Agent Loans and Administrative Agent Advances) shall be made by
the Lenders simultaneously and in accordance with their Pro Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Advances hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligation to make any Advances hereunder, and
(ii) no failure by any Lender to perform its obligation to make any Advances
hereunder shall excuse any other Lender from its obligation to make any Advances
hereunder.
(l OVERADVANCES. Administrative Agent may make voluntary
Overadvances without the written consent of the Required Lenders for amounts
charged to the applicable Loan Account for interest, fees or Lender Group
Expenses pursuant to SECTION 2.1(h)(i)(2)(C). If the conditions for borrowing
under SECTION 3.2(d) cannot be fulfilled, the Administrative Agent may, but is
not obligated to, knowingly and intentionally continue to make Advances
(including Administrative Agent Loans) to Borrower such failure of condition
notwithstanding, so long as, at any time, (i) either (A) the outstanding
Revolving Facility Usage would not exceed the Borrowing Base by more than 10% or
(B) (y) the outstanding Revolving Facility Usage would not exceed the Borrowing
Base by more than the amount proposed by Administrative Agent and agreed to by
the Required Lenders, and (z) such Advances are made pursuant to a plan
(proposed by Administrative Agent and agreed to by the Required Lenders) for the
elimination of the outstanding Revolving Facility Usage in excess of the
Borrowing Base, and (ii) the outstanding Revolving Facility Usage (except for
and excluding amounts charged to the applicable Loan Account for interest, fees,
or Lender Group Expenses) does not exceed the Maximum Amount. The foregoing
provisions are for the sole and exclusive benefit of the Administrative Agent
and the Lenders and are not intended to benefit Borrower in any way. The
Advances and Administrative Agent Loans, as applicable, that are made pursuant
to this SECTION 2.1(l) shall be subject to the same terms and conditions as any
other Administrative Agent Advance or Administrative Agent Loan, as applicable,
except that the rate of interest applicable thereto shall be the rates set forth
in SECTION 2.7(c)(i) without regard to the presence or absence of a Default or
Event of Default; PROVIDED, that the Required Lenders may, at any time, revoke
Administrative Agent's authorization contained in this SECTION 2.1(l) to make
Overadvances (except for and excluding amounts charged to the applicable Loan
Account for interest, fees, or Lender Group Expenses), any such revocation to be
in writing and to become effective upon Administrative Agent's receipt thereof;
PROVIDED FURTHER, HOWEVER, that the making of such Overadvances shall not
constitute a waiver of such Event of Default arising therefrom.
In the event Administrative Agent obtains actual
knowledge that Revolving Facility Usage exceeds the amount permitted by the
preceding paragraph, regardless of the amount of or reason for such excess,
Administrative Agent shall notify Lenders as soon as practicable (and prior to
making any (or any further) intentional
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Overadvances (except for and excluding amounts charged to the applicable Loan
Account for interest, fees, or Lender Group Expenses) unless Administrative
Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and Lenders thereupon shall, together with
Administrative Agent, jointly determine the terms of arrangements that shall be
implemented with Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrower to an amount permitted
by the preceding paragraph. In the event any Lender disagrees over the terms of
reduction and/or repayment of any Overadvance, the terms of reduction and/or
repayment thereof shall be implemented according to the determination of the
Required Lenders.
Each Lender shall be obligated to settle with
Administrative Agent as provided in SECTION 2.1(i) for the amount of such
Lender's Pro Rata Share of any unintentional Overadvances by Administrative
Agent reported to such Lender, any intentional Overadvances made as permitted
under this SECTION 2.1(l), and any Overadvances resulting from the charging to
the applicable Loan Account of interest, fees, or Lender Group Expenses.
(m EFFECT OF BANKRUPTCY. If a case is commenced by or
against any Borrower under the Bankruptcy Code, or other statute providing for
debtor relief, then, without the approval of Required Lenders the Lender Group
shall not make additional loans or provide additional financial accommodations
under the Loan Documents to such Borrower as debtor or debtor-in-possession, or
to any trustee for such Borrower, nor consent to the use of cash collateral
(PROVIDED that the applicable Loan Account shall continue to be charged, to the
fullest extent permitted by law, for accruing interest, fees, and Lender Group
Expenses).
2.2 LETTERS OF CREDIT.
(a AGREEMENT TO CAUSE ISSUANCE; AMOUNTS; OUTSIDE EXPIRATION
DATE. Subject to the terms and conditions of this Agreement, Administrative
Agent agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty")
with respect to letters of credit issued by an issuing bank for the account of
Borrower. Administrative Agent shall have no obligation to issue a Letter of
Credit if any of the following would result:
(i the aggregate amount of all undrawn or
unreimbursed Letters of Credit would exceed the lowest of: (x) the Maximum
Amount LESS the amount of outstanding Advances (including any Administrative
Agent Advances and Administrative Agent Loans); (y) the Borrowing Base LESS the
amount of outstanding Advances (including any Administrative Agent Advances and
Administrative Agent Loans); or (z) $5,000,000; or
(ii the outstanding Obligations would exceed the
Maximum Amount.
Borrower expressly understands and agrees that Administrative Agent shall have
no obligation to arrange for the issuance by issuing banks of the letters of
credit that are to be the subject
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of L/C Guarantees. Borrower and the Lender Group acknowledge and agree that
certain of the letters of credit that are to be the subject of L/C Guarantees
may be outstanding on the Closing Date. Each Letter of Credit shall have an
expiry date no later than 60 days prior to the date on which this Agreement is
scheduled to terminate under SECTION 3.4 (without regard to any potential
renewal term) and all such Letters of Credit shall be in form and substance
acceptable to Administrative Agent in its sole discretion. If the Lender Group
is obligated to advance funds under a Letter of Credit, Borrower immediately
shall reimburse such amount to Administrative Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances under SECTION 2.7.
(b INDEMNIFICATION. Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, including payments made by the Lender Group, expenses, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit. Borrower agrees to be bound by the
issuing bank's regulations and interpretations of any letters of credit
guarantied by the Lender Group and opened to or for Borrower's account or by
Administrative Agent's interpretations of any Letter of Credit issued by
Administrative Agent to or for Borrower's account, even though this
interpretation may be different from Borrower's own, and Borrower understands
and agrees that the Lender Group shall not be liable for any error, negligence,
or mistake, whether of omission or commission, in following Borrower's
instructions or those contained in the Letter of Credit or any modifications,
amendments, or supplements thereto. Borrower understands that the L/C
Guarantees may require the Lender Group to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under any
L/C Guaranty as a result of the Lender Group's indemnification of any such
issuing bank.
(c SUPPORTING MATERIALS. Borrower hereby authorizes and
directs any bank that issues a letter of credit guaranteed by an L/C Guaranty to
deliver to Administrative Agent all instruments, documents, and other writings
and property received by the issuing bank pursuant to such letter of credit, and
to accept and rely upon Administrative Agent's instructions and agreements with
respect to all matters arising in connection with such letter of credit and the
related application. Borrower may or may not be the "applicant" or "account
party" with respect to such letter of credit.
(d COSTS OF LETTERS OF CREDIT. Any and all charges,
commissions, fees, and costs incurred by Administrative Agent relating to the
letters of credit guaranteed by an L/C Guaranty shall be considered Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Administrative Agent.
(e INDEMNIFICATION. Immediately upon the termination of
this Agreement, Borrower agrees to either (i) provide cash collateral to be held
by Administrative Agent in an amount equal to 102% of the maximum amount of the
Lender Group's
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obligations under outstanding Letters of Credit, or (ii) cause to be delivered
to Administrative Agent releases of all of the Lender Group's obligations under
outstanding Letters of Credit. At Administrative Agent's discretion, any
proceeds of Collateral received by Administrative Agent after the occurrence and
during the continuation of an Event of Default may be held as the cash
collateral required by this SECTION 2.2(e).
(f INCREASED COSTS. If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any governmental authority of any such applicable law, treaty,
rule, or regulation, or (ii) compliance by the issuing bank or the Lender Group
with any direction, request, or requirement (irrespective of whether having the
force of law) of any governmental authority or monetary authority including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect (and any successor thereto):
(i any reserve, deposit, or similar requirement is
or shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(ii there shall be imposed on the issuing bank or
the Lender Group any other condition regarding any letter of credit, or Letter
of Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, Administrative Agent may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts as the issuing bank or Administrative Agent may specify to be necessary
to compensate the issuing bank or Administrative Agent for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate set forth in SECTION 2.7(a) OR
(c)(i), as applicable. The determination by the issuing bank or Administrative
Agent, as the case may be, of any amount due pursuant to this SECTION 2.2(f), as
set forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.
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(g PARTICIPATIONS.
(i PURCHASE OF PARTICIPATIONS. Immediately upon
issuance of any Letter of Credit in accordance with this SECTION 2.2, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in the credit support or enhancement provided through the Administrative Agent
to such issuer in connection with the issuance of such Letter of Credit, equal
to such Lender's Pro Rata Share of the face amount of such Letter of Credit
(including, without limitation, all obligations of Borrower with respect
thereto, and any security therefor or guaranty pertaining thereto).
(ii DOCUMENTATION. Upon the request of any Lender,
the Administrative Agent shall furnish to such Lender copies of any Letter of
Credit, reimbursement agreements executed in connection therewith, application
for any Letter of Credit and credit support or enhancement provided through the
Administrative Agent in connection with the issuance of any Letter of Credit,
and such other documentation as may reasonably by requested by such Lender.
(iii OBLIGATIONS IRREVOCABLE. The obligations of
each Lender to make payments to the Administrative Agent with respect to any
Letter of Credit or with respect to any credit support or enhancement provided
through the Administrative Agent with respect to a Letter of Credit, and the
obligations of Borrower to make payments to the Administrative Agent, for the
account of the Lenders, shall be irrevocable, not subject to any qualification
or exception whatsoever, including, without limitation, any of the following
circumstances:
(A any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(B the existence of any claim, setoff,
defense, or other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
the Administrative Agent, the issuer of such Letter of Credit, or any other
Person, whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transactions between such Borrower or any other Person and the
beneficiary named in any Letter of Credit);
(C any draft, certificate, or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or
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(E the occurrence of any Default or Event of
Default.
2.3 [INTENTIONALLY DELETED].
2.4 [INTENTIONALLY DELETED].
2.5 PAYMENTS.
(a PAYMENTS BY BORROWER.
(i All payments to be made by Borrower shall be
made without set-off, recoupment, deduction, or counterclaim, except as
otherwise required by law. Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Administrative Agent for the account of
the Lenders or Administrative Agent, as the case may be, at Administrative
Agent's address set forth in SECTION 12, and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date
specified herein. Any payment received by Administrative Agent later than 11:00
a.m. (California time), at the option of Administrative Agent, shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue until such following Business Day.
(ii Whenever any payment is due on a day other than
a Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(iii Unless Administrative Agent receives notice from
Borrower prior to the date on which any payment is due to the Lenders that
Borrower will not make such payment in full as and when required, Administrative
Agent may assume that Borrower has made such payment in full to Administrative
Agent on such date in immediately available funds and Administrative Agent may
(but shall not be so required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent Borrower has not made such payment in full to
Administrative Agent, each Lender shall repay to Administrative Agent on demand
such amount distributed to such Lender, together with interest thereon at the
Reference Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(b APPORTIONMENT AND APPLICATION OF PAYMENTS. Except as
otherwise provided with respect to Defaulting Lenders, aggregate principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Advances to which such payments relate held
by each Lender) and payments of the fees (other than fees designated for
Administrative Agent's separate account) shall, as applicable, be apportioned
ratably among the Lenders. All payments shall be remitted to Administrative
Agent and all such payments not relating to specific Advances, or not
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constituting payment of specific fees and all proceeds of Collateral received by
Administrative Agent, shall be applied, FIRST, to pay any fees or expense
reimbursements then due to Administrative Agent from Borrower; SECOND, to pay
any fees or expense reimbursements then due to the Lenders from Borrower; THIRD,
to pay interest due in respect of all Advances, including Administrative Agent
Loans and Administrative Agent Advances; FOURTH, to pay or prepay principal of
Administrative Agent Loans and Administrative Agent Advances; FIFTH, ratably to
pay principal of the Advances (other than Administrative Agent Loans and
Administrative Agent Advances) and unreimbursed obligations in respect of
Letters of Credit; and SIXTH, ratably to pay any other Obligations due to
Administrative Agent or any Lender by Borrower. Administrative Agent shall
promptly distribute to each Lender, pursuant to the applicable wire transfer
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided for in
SECTION 2.1(i).
2.6 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to the Lender Group pursuant to SECTIONS 2.1 AND
2.2 is greater than either the Dollar or percentage limitations set forth in
SECTIONS 2.1 OR 2.2 (an "Overadvance"), Borrower immediately shall pay to
Administrative Agent, in cash, the amount of such excess to be used by
Administrative Agent to reduce the Obligations pursuant to the terms of
SECTION 2.5(b).
2.7 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a INTEREST RATE. Except as provided in SECTION 2.7(c),
below, all Obligations (except for undrawn Letters of Credit) shall bear
interest as follows:
(i each Eurodollar Rate Loan shall bear interest at
a per annum rate of 2.25% above the Adjusted Eurodollar Rate; and
(ii all other Obligations shall bear interest at a
per annum rate equal to the Reference Rate.
(b LETTER OF CREDIT FEE. Borrower shall pay Administrative
Agent, for the benefit of the Lender Group, a fee (in addition to the charges,
commissions, fees, and costs set forth in SECTION 2.2(d)) equal to 1.25% per
annum times the aggregate undrawn amount of all Letters of Credit outstanding as
of the end of the day.
(c DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest on the Daily Balance at a per annum rate
equal to 4.00 percentage points above the Reference Rate, and (ii) the Letter of
Credit fee provided in SECTION 2.7(b) shall be increased to 5.25% per annum
times the aggregate undrawn amount of all Letters of Credit outstanding as of
the end of each day.
(d MINIMUM INTEREST. In no event shall the rate of
interest chargeable hereunder for any day be less than 7.0% per annum. To the
extent that interest
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accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
(e PAYMENTS. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Administrative Agent, at its
option, without prior notice to Borrower, to charge such interest and Letter of
Credit fees, all Lender Group Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in SECTION 2.2(d) (as and when accrued
or incurred), the fees and charges provided for in SECTION 2.12 (as and when
accrued or incurred), and all installments or other payments due under any Loan
Document to the applicable Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(f COMPUTATION. The Reference Rate as of the date of this
Agreement is 7.75% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, IPSO FACTO as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.8 COLLECTION OF ACCOUNTS. Borrower shall at all times maintain
one or more Restricted Accounts. Borrower, Administrative Agent, and the
Restricted Account Banks shall enter into the Restricted Account Agreements,
which among other things shall provide for the opening of a Restricted Account
for the deposit of Collections at a Restricted Account Bank. Borrower agrees
that all Collections and other amounts received by Borrower from any Account
Debtor or any other source immediately upon receipt shall be deposited into a
Restricted Account. No Restricted Account Agreement or arrangement contemplated
thereby shall be modified by Borrower without the prior written consent of
Administrative Agent. Upon the terms and subject to the conditions set forth in
the Restricted Account
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Agreements, all amounts received in each Restricted Account shall be wired each
Business Day into an account (the "Administrative Agent's Account") maintained
by Administrative Agent at a depositary selected by Administrative Agent.
2.9 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt
of any Collections by Administrative Agent (whether from transfers to
Administrative Agent by the Restricted Account Banks pursuant to the Restricted
Account Agreements or otherwise) immediately shall be applied provisionally to
reduce the Obligations outstanding under SECTION 2.1, but shall not be
considered a payment on account unless such Collection item is a wire transfer
of immediately available federal funds and is made to the Administrative Agent's
Account or unless and until such Collection item is honored when presented for
payment. From and after the Closing Date, Administrative Agent shall be
entitled to charge Borrower for one Business Day of "clearance" or "float" at
the rate set forth in SECTION 2.7(a)(i) or SECTION 2.7(c)(i), as applicable, on
all Collections that are received by Administrative Agent (regardless of whether
forwarded by the Restricted Account Banks to Administrative Agent, whether
provisionally applied to reduce the Obligations under SECTION 2.1, or
otherwise). This across-the-board one Business Day clearance or float charge on
all Collections is acknowledged by the parties to constitute an integral aspect
of the pricing of the Lender Group's financing of Borrower, and shall apply
irrespective of the characterization of whether receipts are owned by Borrower
or Administrative Agent, and whether or not there are any outstanding Advances,
the effect of such clearance or float charge being the equivalent of charging
one Business Day of interest on such Collections. Should any Collection item
not be honored when presented for payment, then Borrower shall be deemed not to
have made such payment, and interest shall be recalculated accordingly.
Anything to the contrary contained herein notwithstanding, any Collection item
shall be deemed received by Administrative Agent only if it is received into the
Administrative Agent's Account on a Business Day on or before 11:00 a.m.
California time. If any Collection item is received into the Administrative
Agent's Account on a non-Business Day or after 11:00 a.m. California time on a
Business Day, it shall be deemed to have been received by Administrative Agent
as of the opening of business on the immediately following Business Day. In the
event that Borrower has a credit balance in its Loan Account, Foothill shall
automatically pay such monies to Borrower so long as no Event of Default has
occurred and is continuing.
2.10 DESIGNATED ACCOUNT. Administrative Agent and the Lender Group
is authorized to make the Advances and the Letters of Credit under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
SECTION 2.7(e). Borrower agrees to establish and maintain the Designated
Account with the Designated Account Bank for the purpose of receiving the
proceeds of the Advances requested by Borrower and made by the Lender Group
hereunder. Unless otherwise agreed by Administrative Agent and Borrower, any
Advance requested by Borrower and made by the Lender Group hereunder shall be
made to the Designated Account.
2.11 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Administrative Agent shall maintain an account on its books in the name of
Borrower (the
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"Loan Account") on which Borrower will be charged with all Advances made by the
Lender Group to Borrower or for Borrower's account, including, accrued interest,
Lender Group Expenses, and any other payment Obligations of Borrower. In
accordance with SECTION 2.9, the Loan Account will be credited with all payments
received by Administrative Agent from Borrower or for Borrower's account,
including all amounts received in the Administrative Agent's Account from any
Restricted Account Bank. Administrative Agent shall render statements regarding
the Loan Account to Borrower, including principal, interest, fees, and including
an itemization of all charges and expenses constituting the Lender Group
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrower and the Lender
Group unless, within 30 days after receipt thereof by Borrower, Borrower shall
deliver to Administrative Agent written objection thereto describing the error
or errors contained in any such statements.
2.12 FEES. Borrower shall pay to Administrative Agent for the
ratable benefit of the Lender Group (except where otherwise indicated) the
following fees:
(a CLOSING FEE. A closing fee of $112,500 which shall be
fully earned on the Closing Date; one -half of such fee shall be payable on the
Closing Date, and one-quarter of such fee shall be payable on each of the first
and second anniversaries of the Closing Date or on any termination of this
Agreement, if earlier;
(b UNUSED LINE FEE. On the first day of each month during
the term of this Agreement, an unused line fee in an amount equal to 0.125% per
annum times the Average Unused Portion of the Maximum Amount;
(c SERVICING FEE. On the first day of each month during
the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $3,000 or $1,000 if Borrower
utilizes electronic reporting to Administrative Agent; and
(d FINANCIAL EXAMINATION, DOCUMENTATION, AND APPRAISAL
FEES. For the sole account of Administrative Agent: (i) fee of $750 per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by personnel employed by
Administrative Agent; (ii) an appraisal fee of $1,500 per day per appraiser,
plus out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Administrative Agent; and (iii) the actual charges paid or
incurred by Administrative Agent if it elects to employ the services of one or
more third Persons to perform such financial analyses and examinations (i.e.,
audits) of Borrower or to appraise the Collateral; PROVIDED, HOWEVER, that prior
to the occurrence of an Event of Default and the continuation thereof, Borrower
shall not be responsible to pay for more than two appraisals of the Collateral
and four financial examinations of Borrower in any 12 month period.
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2.13 EURODOLLAR RATE LOANS. Any other provisions herein to the
contrary notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a BORROWING; CONVERSION; CONTINUATION. Borrower may from
time to time, on or after the Closing Date (and subject to the satisfaction of
the requirements of SECTIONS 3.1 AND 3.2), request in a written or telephonic
communication with Administrative Agent: (i) Advances made up of Eurodollar
Rate Loans; (ii) that Reference Rate Loans be converted into Eurodollar Rate
Loans; or (iii) that existing Eurodollar Rate Loans continue for an additional
Interest Period. Any such request shall specify the aggregate amount of the
requested Eurodollar Rate Loans, the proposed Funding Date therefor (which shall
be a Business Day, and with respect to continued Eurodollar Rate Loans shall be
the last day of the Interest Period of the existing Eurodollar Rate Loans being
continued), and the proposed Interest Period (in each case subject to the
limitations set forth below). Eurodollar Rate Loans may only be made,
continued, or extended if, as of the proposed Funding Date therefor, each of the
following conditions is satisfied:
(v) no Event of Default exists;
(w) no more than five Interest Periods would be in
effect at any one time;
(x) the amount of each Eurodollar Rate Loan
borrowed, converted, or continued must be in an amount not less than
$500,000 and integral multiples of $500,000 in excess thereof;
(y) Administrative Agent shall have determined that
the Interest Period or Adjusted Eurodollar Rate is available to it and
can be readily determined as of the date of the request for such
Eurodollar Rate Loan by Borrower; and
(z) Administrative Agent shall have received such
request at least two Business Days prior to the proposed Funding Date
therefor.
Any request by Borrower to borrow Eurodollar Rate Loans, to
convert Reference Rate Loans to Eurodollar Rate Loans, or to continue any
existing Eurodollar Rate Loans shall be irrevocable, except to the extent that
Administrative Agent shall determine under SECTIONS 2.13(a), 2.14 OR 2.15 that
such Eurodollar Rate Loans cannot be made or continued.
(b DETERMINATION OF INTEREST PERIOD. By giving notice as
set forth in SECTION 2.13(a), Borrower shall select an Interest Period for such
Eurodollar Rate Loan. The determination of the Interest Period shall be subject
to the following provisions:
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(i in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on which
the next preceding Interest Period expires;
(ii if any Interest Period would otherwise expire on
a day which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; PROVIDED, HOWEVER, that if the
next succeeding Business Day occurs in the following calendar month, then
such Interest Period shall expire on the immediately preceding Business
Day;
(iii if any Interest Period begins on the last
Business Day of a month, or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period,
then the Interest Period shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iv Borrower may not select an Interest Period which
expires later than the Maturity Date.
(c AUTOMATIC CONVERSION; OPTIONAL CONVERSION BY
ADMINISTRATIVE AGENT. Any Eurodollar Rate Loan shall automatically convert to a
Reference Rate Loan upon the last day of the applicable Interest Period, unless
Administrative Agent has received a request to continue such Eurodollar Rate
Loan at least two Business Days prior to the end of such Interest Period in
accordance with the terms of SECTION 2.13(a). Any Eurodollar Rate Loan shall,
at Administrative Agent's option, upon notice to Borrower, immediately convert
to a Reference Rate Loan in the event that (i) an Event of Default shall have
occurred and be continuing or (ii) this Agreement shall terminate, and Borrower
shall pay to Administrative Agent, for the benefit of the Lenders, any amounts
required by SECTION 2.16 as a result thereof.
2.14 ILLEGALITY. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date shall make it unlawful for any Lender to make or
maintain Eurodollar Rate Loans as contemplated by this Agreement, (a) the
obligation of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such, and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be suspended and (b) such Lender's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier period as required by law; PROVIDED,
HOWEVER, that before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or regulatory manner) to
designate a different lending office if the making of such a designation would
allow such Lender or its lending office to continue to perform its obligations
to make Eurodollar Rate Loans. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then
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current Interest Period with respect thereto, Borrower shall pay to such Lender
such amounts, if any, as may be required pursuant to SECTION 2.15. If
circumstances subsequently change so that such Lender shall determine that it is
no longer so affected, such Lender will promptly notify Administrative Agent and
Borrower, and upon receipt of such notice, the obligations of such Lender to
make or continue Eurodollar Rate Loans or to convert Reference Rate Loans into
Eurodollar Rate Loans shall be reinstated.
2.15 REQUIREMENTS OF LAW.
(a If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof by a Governmental Authority
made subsequent to the Closing Date or compliance by any Lender with any request
or directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the Closing Date
(i shall subject such Lender to any tax, levy,
charge, fee, reduction, or withholding of any kind whatsoever with respect
to Eurodollar Rate Loans, or change the basis of taxation of payments to
such Lender in respect thereof (except for the establishment of a tax based
on the net income of such Lender or changes in the rate of tax on the net
income of such Lender);
(ii shall in respect of Eurodollar Rate Loans
impose, modify or hold applicable any reserve, special deposit, compulsory
loan, or similar requirement against assets held by, deposits or other
liabilities in or for the account of, Advances or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender;
or
(iii shall impose on such Lender any other condition
with respect to Eurodollar Rate Loans;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing, or maintaining Eurodollar Rate Loans or to increase the cost to such
Lender in respect of Eurodollar Rate Loans, by an amount which such Lender deems
to be material, or to reduce any amount receivable hereunder in respect of
Eurodollar Rate Loans, or to forego any other sum payable thereunder or make any
payment on account thereof in respect of Eurodollar Rate Loans, then, in any
such case, Borrower shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable; PROVIDED, HOWEVER, that before making any such
demand, each Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it, in its reasonable discretion, in any
legal, economic, or regulatory manner) to designate a different Eurodollar
lending office if the making of such designation would allow such Lender or its
Eurodollar lending office to continue to perform its obligations to make
Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans
and avoid the need for, or
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materially reduce the amount of, such increased cost. If a Lender becomes
entitled to claim any additional amounts pursuant to this SECTION 2.15, such
Lender shall promptly notify Administrative Agent and Borrower of the event by
reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to this SECTION 2.15 submitted in reasonable detail by
such Lender to Administrative Agent and Borrower shall be conclusive in the
absence of manifest error. Within five Business Days after a Lender notifies
Borrower and Administrative Agent of any increased cost pursuant to the
foregoing provisions of this SECTION 2.15, Borrower may convert all Eurodollar
Rate Loans then outstanding into Reference Rate Loans in accordance with
SECTION 2.13 and, additionally, reimburse such Lender for any cost in accordance
with SECTION 2.16. This covenant shall survive the termination of this
Agreement and the payment of the Advances and all other amounts payable
hereunder for nine months following such termination and repayment.
(b If a Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date or compliance by such Lender or any Person
controlling such Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the Closing Date does or shall have the effect of increasing the
amount of capital required to be maintained or reducing the rate of return on
such Lender's or such Person's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such Person could have
achieved but for such change or compliance (taking into consideration such
Lender's or such Person's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to Borrower of a prompt written request therefor,
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender or such Person for such reduction. This covenant shall
survive the termination of this Agreement and the payment of the Advances and
all other amounts payable hereunder for nine months following such termination
and repayment.
2.16 INDEMNITY. Borrower agrees to indemnify Administrative Agent
and each Lender and to hold Administrative Agent and Lenders harmless from any
loss or expense which Administrative Agent or any Lender may sustain or incur as
a consequence of (a) default by Borrower in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b) default by Borrower in
making a Borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrower in making any prepayment
of a Eurodollar Rate Loan after Borrower has given a notice thereof in
accordance with the provisions of this Agreement, or (d) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto (whether due to the termination of this
Agreement, upon an Event of Default, or otherwise), including, in each case, any
such loss or expense (but excluding loss of margin or anticipated profits)
arising from the reemployment of funds obtained by it or from fees payable to
terminate the deposits from which such funds were obtained; PROVIDED, HOWEVER,
that Administrative Agent or any Lender, if requesting indemnification, shall
have delivered
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to the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error. Calculation of
all amounts payable to any such Lender under this SECTION 2.16 shall be made as
though such Lender had actually funded the relevant Eurodollar Rate Loan through
the purchase of a deposit bearing interest at the Eurodollar Rate in an amount
equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period; PROVIDED, HOWEVER, that each Lender
may fund each of the Eurodollar Rate Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this SECTION 2.16. This covenant shall survive the termination of
this Agreement and the payment of the Obligations hereunder.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE OR THE INITIAL
LETTER OF CREDIT. The obligation of the Lender Group to make the initial
Advance or to issue the initial Letter of Credit, is subject to the fulfillment,
to the satisfaction of Administrative Agent and its counsel, of each of the
following conditions on or before the Closing Date:
(a the Closing Date shall occur on or before June 15, 1999;
(b Administrative Agent shall have received all necessary
UCC-1 financing statements and amendments;
(c Administrative Agent shall have received each of the
following documents, duly executed, and each such document shall be in full
force and effect:
a. the Restricted Account Agreements;
b. the Disbursement Letter;
c. the Intellectual Property Security Agreement;
and
d. amendments to Wells Fargo's existing financing
statements with Borrower; and
e. the Guaranty and the Guaranty Security
Agreements;
(d Administrative Agent shall have received a certificate
from the Secretary of Borrower attesting to the resolutions of Borrower's Board
of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which Borrower is a party and
authorizing specific officers of Borrower to execute the same;
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(e Administrative Agent shall have received copies of
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of Borrower;
(f Administrative Agent shall have received a certificate
of status with respect to Borrower, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;
(g Administrative Agent shall have received certificates of
status with respect to Borrower, each dated within 15 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
in which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that Borrower is in
good standing in such jurisdictions;
(h Administrative Agent shall have received a certificate
of insurance, together with the endorsements thereto, as are required by SECTION
6.10, the form and substance of which shall be satisfactory to Administrative
Agent and its counsel;
(i Intentionally Omitted;
(j Administrative Agent shall have received a reaffirmation
of the existing Collateral Access Agreement from the lessor of Borrower's
warehouse facility in Kentucky;
(k Administrative Agent shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Administrative Agent in
its sole discretion;
(l Administrative Agent shall have received satisfactory
evidence that all tax returns required to be filed by Borrower have been timely
filed and all taxes upon Borrower or its properties, assets, income, and
franchises (including real property taxes and payroll taxes) have been paid
prior to delinquency, except such taxes that are the subject of a Permitted
Protest;
(m) Borrower must have not less than $3,000,000 of
Availability and cash or cash equivalents after payment of the closing fee to
Lenders after reserving for accounts payable that are past due beyond Borrower's
historical business practices; and
(n) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Administrative Agent and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF
CREDIT. The following shall be conditions precedent to all Advances and all
Letters of Credit hereunder:
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(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Event of Default (after giving effect to any grace
periods) shall have occurred and be continuing on the date of such extension of
credit, nor shall either result from the making thereof; and
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, the Lender Group or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to
Administrative Agent the certified copies of the policies of insurance, together
with the endorsements thereto, as are required by SECTION 6.10, the form and
substance of which shall be satisfactory to Administrative Agent and its
counsel.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become
effective upon the execution and delivery hereof by Borrower and the Lender
Group and shall continue in full force and effect for a term ending three years
from the Closing Date (the "Renewal Date") and automatically shall be renewed
for successive one year periods thereafter, unless sooner terminated pursuant to
the terms hereof. Either Borrower or Administrative Agent (on behalf of the
Lender Group) may terminate this Agreement effective on the Renewal Date or on
any anniversary of the Renewal Date by giving the other party at least 90 days
prior written notice. The foregoing notwithstanding, Administrative Agent (on
behalf of the Lender Group) shall have the right to terminate the Lender Group's
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default (after giving
effect to any grace periods).
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and the Lender Group's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and the Lender Group's obligation to provide
additional credit hereunder is terminated. If Borrower has sent a notice of
termination pursuant to the provisions of SECTION 3.4, but fails to pay the
Obligations in full on the date set forth in said
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notice, then Administrative Agent (on behalf of the Lender Group) may, but shall
not be required to, renew this Agreement for an additional term of one year.
3.6 EARLY TERMINATION BY BORROWER. The provisions of SECTION 3.4
that allow termination of this Agreement by Borrower only on the Renewal Date
and certain anniversaries thereof notwithstanding, Borrower has the option, at
any time upon 90 days prior written notice to Administrative Agent, to terminate
this Agreement by paying to Administrative Agent (for the ratable benefit of the
Lender Group), in cash, the Obligations (including an amount equal to 102% of
the undrawn amount of the Letters of Credit), in full, together with a premium
(the "Early Termination Premium") equal to: (i) 3.0% of the Maximum Amount if
Borrower terminates this Agreement prior to the first anniversary of the Closing
Date, (ii) 2.0% of the Maximum Amount if Borrower terminates this Agreement
during the second year after the Closing Date, and (iii) 1.0% of the Maximum
Amount if Borrower terminates this Agreement at any time during the third year
after the Closing Date; PROVIDED, HOWEVER, that the Early Termination Premium
shall be waived if Borrower terminates this Agreement with financing provided by
a commercial banking Affiliate of Wells Fargo.
3.7 TERMINATION UPON EVENT OF DEFAULT. If the Lender Group
terminates this Agreement upon the occurrence of an Event of Default, in view of
the impracticability and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of the Lender
Group's lost profits as a result thereof, Borrower shall pay to Administrative
Agent (for the ratable benefit of the Lender Group) upon the effective date of
such termination, a premium in an amount equal to the Early Termination Premium.
The Early Termination Premium shall be presumed to be the amount of damages
sustained by the Lender Group as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this SECTION 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to
Administrative Agent for the benefit of the Lender Group a continuing security
interest in all currently existing and hereafter acquired or arising Collateral
in order to secure prompt repayment of any and all Obligations and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents. The security interests of Administrative Agent for the
benefit of the Lender Group in the Collateral shall attach to all Collateral
without further act on the part of the Lender Group or Borrower. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for: (a) the sale of Inventory to buyers in the ordinary
course of business, (b) return of Inventory to suppliers in the ordinary course
of business if such Inventory is defective or is replaced by such suppliers and
(c) donation to charities of unsaleable or out of season Inventory prior to the
occurrence and continuation of an Event of Default, Borrower has no authority,
express or implied, to dispose of any item or portion of the Collateral.
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4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Administrative Agent, shall endorse
and deliver physical possession of such Negotiable Collateral to Administrative
Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence of an Event of Default and during
the continuation thereof, Administrative Agent or Administrative Agent's
designee may (a) notify customers or Account Debtors of Borrower that the
Accounts, General Intangibles, or Negotiable Collateral have been assigned to
Administrative Agent for the benefit of the Lender Group or that Administrative
Agent for the benefit of the Lender Group has a security interest therein, and
(b) collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the collection costs and expenses to the Loan Account.
Borrower agrees that it will hold in trust for the Lender Group, as the Lender
Group's trustee, any Collections that it receives and immediately will deposit
said Collections to a Restricted Account.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Administrative Agent, Borrower shall execute and deliver to
Administrative Agent all financing statements, continuation financing
statements, fixture filings, security agreements, pledges, assignments, control
agreements, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents that Administrative Agent reasonably may request, in form
satisfactory to Administrative Agent, to perfect and continue perfected the
Liens of the Lender Group in the Collateral, and in order to fully consummate
all of the transactions contemplated hereby and under the other the Loan
Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Administrative Agent (and any of Administrative
Agent's officers, employees, or Administrative Agents designated by
Administrative Agent) as Borrower's true and lawful attorney, with power to (a)
if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in SECTION 4.4, sign the name of Borrower on any of the
documents described in SECTION 4.4, (b) at any time that an Event of Default has
occurred and is continuing, sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors, (c) send requests for verification of Accounts, (d) endorse Borrower's
name on any Collection item that may come into the Lender Group's possession,
(e) at any time that an Event of Default has occurred and is continuing, notify
the post office authorities to change the address for delivery of Borrower's
mail to an address designated by Administrative Agent, to receive and open all
mail addressed to Borrower, and to retain all mail relating to the Collateral
and forward all other mail to Borrower, (f) at any time that an Event of Default
has occurred and is continuing, make, settle, and adjust all claims under
Borrower's policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (g) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts directly with Account Debtors, for amounts and upon
terms that Administrative Agent determines to be reasonable, and Administrative
Agent may cause to be executed and
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delivered any documents and releases that Administrative Agent determines to be
necessary. The appointment of Administrative Agent as Borrower's attorney, and
each and every one of Administrative Agent's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
and finally repaid and performed and the Lender Group's obligation to extend
credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Administrative Agent (through any of its
officers, employees, or Administrative Agents) shall have the right, during
normal business hours, from time to time hereafter to inspect Borrower's Books
and to check, test, and appraise the Collateral in order to verify Borrower's
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties which shall be true,
correct, and complete in all respects as of the date hereof, and shall be true,
correct, and complete in all respects as of the Closing Date, and at and as of
the date of the making of each Advance or Letter of Credit made thereafter, as
though made on and as of the date of such Advance or Letter of Credit (except to
the extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens except for Permitted Liens.
5.2 [INTENTIONALLY DELETED].
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects.
5.4 EQUIPMENT. Substantially all of the Equipment is used or held
for use in Borrower's business and is substantially fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Administrative Agent's prior written consent) and are located only at the
locations identified on SCHEDULE 6.12 or otherwise permitted by SECTION 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrower's cost therefor.
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5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 77-0141610.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to cause a
Material Adverse Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower. All of the outstanding capital stock of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(c) Except as set forth on SCHEDULE 5.8, no capital stock
(or any securities, instruments, warrants, options, purchase rights, conversion
or exchange rights, calls, commitments or claims of any character convertible
into or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
(including Regulations T, U, and X of the Federal Reserve Board) applicable to
Borrower, the Governing Documents of Borrower, or any order, judgment, or decree
of any court or other Governmental Authority binding on Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation or material lease of
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of stockholders or any approval or
consent of any Person under any material contractual obligation of Borrower.
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(c) Other than the filing of appropriate financing
statements, and, if applicable, fixture filings, and mortgages, the execution,
delivery, and performance by Borrower of this Agreement and the Loan Documents
to which Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any federal,
state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Administrative Agent
(for the benefit of the Lender Group) in and to its properties and assets
pursuant to this Agreement and the other Loan Documents are validly created,
perfected, and first priority Liens (upon filing of UCC-1 financing statements
or amendments), subject only to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; and (b) matters arising
after the date hereof that, if decided adversely to Borrower, would not cause a
Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.
5.12 SOLVENCY. Borrower is Solvent. No transfer of property is
being made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
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5.14 ENVIRONMENTAL CONDITION. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge
without independent inquiry, by previous owners or operators in the disposal of,
or to produce, store, handle, treat, release, or transport, any Hazardous
Materials. To the best of Borrower's knowledge without independent inquiry,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a Hazardous
Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. To the best of Borrower's knowledge without
independent inquiry, no Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by Borrower resulting in
the releasing or disposing of Hazardous Materials into the environment.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be reasonably requested by Administrative
Agent. Borrower also shall keep a modern inventory reporting system that shows
all additions, sales, claims, returns, and allowances with respect to the
Inventory.
6.2 COLLATERAL REPORTING. Provide Administrative Agent with the
following documents at the following times in form satisfactory to
Administrative Agent: (a) on a monthly basis and, in any event, by no later
than the 10th day of each month during the term of this Agreement, a detailed
calculation of the Borrowing Base, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Administrative
Agent, a reconciliation of Borrower's stock ledger to its general ledger and a
trend report, (b) on a monthly basis and, in any event, by no later than the
10th Business Day of each month during the term of this Agreement, a summary
aging, by vendor, of Borrower's accounts payable and any book overdraft, (c) on
a daily basis, Inventory reports specifying the Value of Borrower's Inventory by
category, with additional detail showing additions to and deletions from the
Inventory, (d) on a quarterly basis and, in any event, by no later than the 10th
Business Day after the end of each of Borrower's fiscal quarters, a reserve
adjustment report reflecting markdowns, and (e) such other reports as to the
Collateral or the financial condition of Borrower as Administrative Agent may
reasonably request from time to time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Administrative Agent: (a) as soon as available, but in any event within 30 days
after the end
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of each month during each of Borrower's fiscal years, a company prepared balance
sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Administrative Agent and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP, together with a certificate of such accountants
addressed to Administrative Agent stating that such accountants do not have
knowledge of the existence of any Default or Event of Default. Such audited
financial statements shall include a balance sheet, profit and loss statement,
and statement of cash flow and, if prepared, such accountants' letter to
management. If Borrower is a parent company of one or more Subsidiaries, or
Affiliates, or is a Subsidiary or Affiliate of another company, then, in
addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on a consolidating basis so as to present
Borrower and each such related entity separately, and on a consolidated basis.
Borrower also shall deliver to Administrative Agent Borrower's
Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current
Reports, and any other filings made by Borrower with the Securities and Exchange
Commission, as soon as the same are filed, or any other information that is
provided by Borrower to its shareholders, and any other report reasonably
requested by Administrative Agent relating to the financial condition of
Borrower.
Each month, together with the financial statements provided
pursuant to SECTION 6.3(a), Borrower shall deliver to Administrative Agent a
Compliance Certificate signed by its chief financial officer to the effect that:
(i) all financial statements delivered or caused to be delivered to
Administrative Agent hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of Borrower, (ii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (iii) for each
month that also is the date on which a financial covenant in SECTION 7.20 is to
be tested, Borrower is in compliance at the end of such period with the
applicable financial covenants contained in SECTION 7.20 (and demonstrating such
compliance in reasonable detail), and (iv) on the date of delivery of such
certificate to Administrative Agent there does not exist any condition or event
that constitutes a Default or Event of Default (or, in the case of clauses (i),
(ii), or (iii), to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall, upon Administrative Agent's prior written
request, issue written instructions to its independent certified public
accountants authorizing them to communicate with Administrative Agent and to
release to Administrative Agent whatever
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financial information concerning Borrower that Administrative Agent may
request. Upon Administrative Agent's prior written request, Borrower shall
authorize and direct all auditors, accountants, or other third parties to
deliver to Administrative Agent, at Borrower's expense, copies of Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Administrative Agent any
information they may have regarding Borrower's business affairs and financial
conditions.
6.4 TAX RETURNS. Deliver to Administrative Agent copies of each
of Borrower's future federal income tax returns, and any amendments thereto,
within 30 days of the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the
Obligations to deliver its annual financial statements at the time when Borrower
provides its audited financial statements to Administrative Agent and copies of
all federal income tax returns as soon as the same are available and in any
event no later than 30 days after the same are required to be filed by law to
the extent they are not consolidated with Borrower's financial statements set
forth in SECTION 6.3.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. Except for ordinary Inventory returns
by Borrower's retail customers, if, at a time any Account Debtor returns any
Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Borrower accepts such return, issue a credit memorandum (with a
copy to be sent to Administrative Agent) in the appropriate amount to such
Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Administrative Agent's request,
Borrower immediately shall deliver to Administrative Agent, properly endorsed,
any and all evidences of ownership of, certificates of title, or applications
for title to any items of Equipment having a value in excess of $100,000 in the
aggregate.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower shall make due and timely payment or deposit of all such
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federal, state, and local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Administrative Agent, on demand,
appropriate certificates attesting to the payment thereof or deposit with
respect thereto. Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Administrative Agent
with proof satisfactory to Administrative Agent indicating that Borrower has
made such payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) [Intentionally Deleted]
(c) [Intentionally Deleted]
(d) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Administrative Agent. All insurance required herein shall be written by
companies which are authorized to do insurance business in the State of
California. All hazard insurance and such other insurance as Administrative
Agent shall specify, shall contain a California Form 438BFU (NS) mortgagee
endorsement, or an equivalent endorsement satisfactory to Administrative Agent,
showing Administrative Agent (for the ratable benefit of the Lenders) as sole
loss payee thereof, and shall contain a waiver of warranties. Every policy of
insurance referred to in this SECTION 6.10 shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days prior written
notice to Administrative Agent (for the ratable benefit of the Lenders) and that
any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrower or the Lender Group which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment. Borrower
shall deliver to Administrative Agent certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof satisfactory
to Administrative Agent evidencing such insurance shall be delivered to
Administrative Agent at least 30 days prior to the expiration of the existing or
preceding policies. Borrower shall give Administrative Agent prompt notice of
any loss covered by such insurance, and Administrative Agent shall have the
right to adjust any loss. Administrative Agent shall have the exclusive right
to adjust all losses payable under any such insurance policies without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy including the
insurance policies mentioned
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above, shall be paid over to Administrative Agent (for the ratable benefit of
Lenders) to be applied at the option of Administrative Agent either to the
prepayment of the Obligations without premium, in such order or manner as
Administrative Agent may elect, or shall be disbursed to Borrower under stage
payment terms satisfactory to Administrative Agent for application to the cost
of repairs, replacements, or restorations; PROVIDED, HOWEVER, that prior to the
occurrence of an Event of Default and the continuation thereof, Borrower shall
have the right to use up to $200,000 of insurance proceeds to rebuild, replace
or repair any casualty. All repairs, replacements, or restorations shall be
effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Administrative Agent
shall have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Administrative Agent shall determine.
(f) Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this SECTION 6.10, unless Administrative Agent is included
thereon as named insured with the loss payable to Administrative Agent (for the
ratable benefit of Lenders) under a standard California 438BFU (NS) Mortgagee
endorsement, or its local equivalent. Borrower immediately shall notify
Administrative Agent whenever such separate insurance is taken out, specifying
the insurer thereunder and full particulars as to the policies evidencing the
same, and originals of such policies immediately shall be provided to
Administrative Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.12; PROVIDED, HOWEVER,
that Borrower may amend SCHEDULE 6.12 so long as such amendment occurs by
written notice to Administrative Agent not less than 30 days prior to the date
on which the Inventory or Equipment is moved to such new location or concurrent
with execution of a lease of new space, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected (the Lien of Administrative Agent
for the benefit of the Lender Group), security interests in such assets and also
provides to Administrative Agent a Collateral Access Agreement.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to cause a Material Adverse Change.
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6.14 INTENTIONALLY OMITTED.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent that Borrower fails timely to make payment of such rents
and other amounts payable when due under its leases, Administrative Agent shall
be entitled, in its discretion, to reserve an amount equal to such unpaid
amounts against the Borrowing Base.
6.16 YEAR 2000 COMPLIANCE. Borrower shall be Year 2000 Compliant
on or before September 30, 1999.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that is the subject of L/C
Guarantees;
(b) Indebtedness set forth in SCHEDULE 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original
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Indebtedness is refinanced under SECTION 7.1(d) and so long as the
replacement Liens only encumber those assets or property that secured the
original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than:
(a) sales of Inventory to buyers in the ordinary course of Borrower's business
as currently conducted, (b) return of Inventory to suppliers in the ordinary
course of business if such Inventory is defective or is replaced by such
suppliers and (c) donation to charities of unsaleable or out of season Inventory
prior to the occurrence and continuation of an Event of Default.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity, or
add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Administrative Agent.
7.7 NATURE OF BUSINESS. Make any change in the general nature of
Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase,
or change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(b), (c), OR (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale.
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7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding; PROVIDED, HOWEVER, that Borrower may
purchase outstanding shares of its capital stock for an aggregate price not to
exceed $1,100,000 so long as: (a) no Event of Default has occurred and is
continuing and (b) after giving effect to such purchase Borrower has not less
than $4,000,000 of Availability if such purchase occurs in August, September,
October or November and not less than $10,000,000 of Availability if such
purchase occurs in any other month.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Administrative Agent
information regarding the Collateral or Borrower's financial condition.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur
any liabilities (including contingent obligations) for or in connection with (a)
the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions, or transfers
of property to a Person, or (c) the acquisition of all or substantially all of
the properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for: (a) transactions with Guarantor and (b) transactions with other
Affiliates that are in the ordinary course of Borrower's business, upon fair and
reasonable terms, that are fully disclosed to Administrative Agent, and that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Own and operate fewer than 170 permanent stores
at any time.
7.16 INTENTIONALLY OMITTED.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any
purpose other than, consistent with the terms and conditions hereof, for its
working capital and to fund capital expenditures.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Administrative
Agent and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Lien of Administrative Agent (for the benefit of the
Lender Group). The Inventory and Equipment shall not at any time now or
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hereafter be stored with a bailee, warehouseman, or similar party without
Administrative Agent's prior written consent.
7.19 INTENTIONALLY OMITTED.
7.20 FINANCIAL COVENANT. Fail to maintain Tangible Net Worth of at
least the following amounts, measured on a fiscal quarter-end basis:
<TABLE>
<CAPTION>
QUARTER ENDING EACH YEAR ON OR ABOUT MINIMUM TANGIBLE NET WORTH
------------------------------------ ---------------------------
<S> <C>
July 31 $43,000,000
October 31 $40,500,000
January 31 $52,000,000
April 30 $45,000,000
</TABLE>
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any of the
following fiscal years in excess of the following amounts:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING ON OR ABOUT MINIMUM CAPITAL EXPENDITURES
------------------------------ ----------------------------
<S> <C>
January 31, 2000 $7,000,000
January 31, 2001 and
January 31, 2002 $10,000,000
</TABLE>
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 If Borrower fails to perform, keep, or observe: (a) any term,
provision, condition, covenant, or agreement contained in SECTION 6.2 and such
failure continues for a period of five days after the date of such failure;
(b) any term, provision, condition, covenant, or agreement contained in
SECTION 6.3, SECTION 6.4, SECTION 6.5, SECTION 6.9, SECTION 6.12 or
SECTION 6.15 and such failure continues for a period of 10 days after the date
of such failure; or (c) any other term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between Borrower and Foothill;
8.3 If there is a Material Adverse Change;
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8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon for
an amount of $100,000 or more, or comes into the possession of any third Person
and such attachment, seizure, levy or possession is not released or bonded
within 15 days of the date thereof;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; PROVIDED, HOWEVER, that, during the pendency of such period,
the Lender Group shall be relieved of its obligation to extend credit hereunder;
(d) an interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower; or (e) an order for relief shall have been
issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs and such injunction, restraint or order is not released within
30 days of the date thereof;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance in
an amount of $100,000 or more upon any material portion of Borrower's properties
or assets and such judgment or Lien is not released, satisfied or bonded within
15 days of the date thereof;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now
or hereafter in any warranty, representation, statement, or report made to the
Lender Group by
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Borrower or any officer, employee, Administrative Agent, or director of
Borrower, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default (after given effect to any grace periods)
Administrative Agent may, pursuant to SECTIONS 17.4 AND 17.5, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting the Lender Group's rights and security interests in the
Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Administrative Agent considers
advisable, and in such cases, Administrative Agent will credit Borrower's Loan
Account with only the net amounts received by Administrative Agent in payment of
such disputed Accounts after deducting all Lender Group Expenses incurred or
expended in connection therewith;
(e) Subject to Borrower's right to resell returned Inventory
in the ordinary course of business, cause Borrower to hold all returned
Inventory in trust for the Lender Group, segregate all returned Inventory from
all other property of Borrower or in Borrower's possession and conspicuously
label said returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Administrative Agent considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Collateral if Administrative Agent so requires,
and to make the Collateral available to Administrative Agent as Administrative
Agent may designate. Borrower authorizes Administrative Agent to enter the
premises where the Collateral is located, to take and
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<PAGE>
maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or Lien that in
Administrative Agent's determination appears to conflict with the Liens of
Administrative Agent (for the benefit of the Lender Group) in the Collateral
and to pay all expenses incurred in connection therewith. With respect to
any of Borrower's owned or leased premises, Borrower hereby grants
Administrative Agent a license to enter into possession of such premises and
to occupy the same, without charge, for up to 120 days in order to exercise
any of the Lender Group's rights or remedies provided herein, at law, in
equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by the Lender Group (including any amounts received in the Restricted Account
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in the
Restricted Account Accounts, to secure the full and final repayment of all of
the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Administrative Agent is hereby granted a license or
other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to the Lender Group's benefit;
(j) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as
Administrative Agent determines is commercially reasonable. It is not necessary
that the Collateral be present at any such sale;
(k) Administrative Agent shall give notice of the
disposition of the Collateral as follows:
(A) Administrative Agent shall give Borrower and
each holder of a security interest in the Collateral who has filed with
Administrative Agent a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition is to be made;
(B) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in SECTION 12, at least five
days before the date fixed for the sale, or at least five days before the date
on or after which the private sale or
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<PAGE>
other disposition is to be made; no notice needs to be given prior to the
disposition of any portion of the Collateral that is perishable or threatens
to decline speedily in value or that is of a type customarily sold on a
recognized market. Notice to Persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses as they have
furnished to Administrative Agent;
(C) If the sale is to be a public sale,
Administrative Agent also shall give notice of the time and place by
publishing a notice one time at least five days before the date of the sale
in a newspaper of general circulation in the county in which the sale is to
be held;
(l) Administrative Agent may credit bid and purchase at
any public sale; and
(m) Subject to the applicable Uniform Commercial Code law,
any deficiency that exists after disposition of the Collateral as provided
above will be paid immediately by Borrower. Any excess will be returned,
without interest and subject to the rights of third Persons, by
Administrative Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The Lender Group's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an
election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
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If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that
Administrative Agent determines that such failure by Borrower could result in
a Material Adverse Change, in its discretion and without prior notice to
Borrower, Administrative Agent may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in
Borrower's Loan Account as Administrative Agent deems necessary to protect
the Lender Group from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described in SECTION 6.10, and take
any action with respect to such policies as Administrative Agent deems
prudent. Any such amounts paid by Administrative Agent shall constitute
Lender Group Expenses. Any such payments made by Administrative Agent shall
not constitute an agreement by the Lender Group to make similar payments in
the future or a waiver by the Lender Group of any Event of Default under this
Agreement. Administrative Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Except as otherwise expressly provided
in this Agreement where Borrower is required to receive notice, Borrower waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by the Lender Group on which Borrower may in any way
be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. So long as the
Lender Group complies with its obligations, if any, under Section 9207 of the
Code, the Lender Group shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and
hold each Agent-Related Person, each Administrative Agent-Related Person, each
Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other
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Loan Documents or the transactions contemplated herein, and with respect to
any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided
hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this
SECTION 11.3 or under any other indemnity in this Agreement with respect to
any Indemnified Liability that a court of competent jurisdiction finally
determines to have resulted from the gross negligence or willful misconduct
of such Indemnified Person. This provision shall survive the termination of
this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Administrative Agent, as the case may be, at its address set forth below:
IF TO BORROWER: NATURAL WONDERS, INC.
4209 Technology Drive
Fremont, California 94538
Attn: Catherine Klein, Controller
Fax No. 510.252.6791
WITH COPIES TO: SHEPPARD, MULLIN, RICHTER &
HAMPTON LLP
4 Embarcadero Center, 17th Floor
San Francisco, California 94111
Attn: A. John Murphy, Esq.
Fax No. 415.252.6791
IF TO ADMINISTRATIVE AGENT OR FOOTHILL CAPITAL CORPORATION
THE LENDER GROUP IN CARE 11111 Santa Monica Boulevard
OF ADMINISTRATIVE AGENT: Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
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WITH COPIES TO: BUCHALTER, NEMER, FIELDS &
YOUNGER
601 South Figueroa Street, Suite 2400
Los Angeles, California 90017-5704
Attn: Robert C. Colton, Esq.
Fax No. 213.896.0400
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Administrative Agent in connection with Sections 9504 or 9505 of
the Code, shall be deemed received on the earlier of the date of actual receipt
or three days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Administrative Agent in connection with Sections
9504 or 9505 of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted by telefacsimile
or other similar method set forth above.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN
WHICH THE LENDER GROUP SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND
EACH MEMBER OF THE LENDER GROUP WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13. BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVES
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND EACH MEMBER
OF THE LENDER GROUP REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Administrative Agent may be destroyed or otherwise disposed of by
Administrative Agent four months after they are delivered to or received by
Administrative Agent, unless Borrower requests, in writing, the return of said
documents, schedules, or other papers and makes arrangements, at Borrower's
expense, for their return.
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15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of
Administrative Agent, assign and delegate to one or more Eligible Transferees
(each an "Assignee") all, or any ratable part, of the Obligations, the
Commitments, and the other rights and obligations of such Lender hereunder and
under the other Loan Documents, in a minimum amount of $5,000,000; PROVIDED,
HOWEVER, that Borrower and Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
shall have been given to Borrower and Administrative Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have delivered to Borrower
and Administrative Agent a fully executed Assignment and Acceptance ("Assignment
and Acceptance") in the form of EXHIBIT A-1; and (iii) the assignor Lender or
Assignee has paid to Administrative Agent for Administrative Agent's sole and
separate account a processing fee in the amount of $2,500. Anything contained
herein to the contrary notwithstanding, the consent of Administrative Agent
shall not be required (and payment of any fees shall not be required) if such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of such Lender.
(b) From and after the date that Administrative Agent
notifies the assignor Lender that it has received a fully executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or any guarantor or the performance or observance by Borrower or any
guarantor of any of its obligations under this
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Agreement or any other Loan Document furnished pursuant hereto; (3) such
Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (4) such Assignee will, independently and without reliance upon
Administrative Agent, such assigning Lender, 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; (5) such Assignee appoints and authorizes
Administrative Agent to take such action as Administrative Agent on its
behalf and to exercise such powers under this Agreement as are delegated to
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments of the
Assignor and Assignee arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitment of the assigning Lender PRO TANTO.
(e) Any Lender may at any time, with the written consent of
Administrative Agent, which consent shall not be unreasonably withheld, sell to
one or more Persons (a "Participant") participating interests in the
Obligations, the Commitment, and the other rights and interests of that Lender
(the "Originating Lender") hereunder and under the other Loan Documents;
PROVIDED, HOWEVER, that (i) the Originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrower and
Administrative Agent shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no
Originating Lender shall transfer or grant any participating interest under
which the Participant has the sole and exclusive right to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such participant is
participating; (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating; (C) release all or a
material portion of the Collateral (except to the extent expressly provided
herein or in any of the Loan Documents) supporting the Obligations hereunder in
which such Participant is participating; (D) postpone the payment of, or reduce
the amount of, the interest or fees hereunder in which such Participant is
participating; or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums in respect of the Obligations hereunder in
which such Participant is participating; and (v) all amounts payable by Borrower
hereunder shall be determined as if such Originating Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared
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or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement
to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement; PROVIDED, HOWEVER, that no
Participant may exercise any such right of setoff without the notice to and
consent of Administrative Agent. The rights of any Participant shall only be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any direct rights as to the other
Lenders, Administrative Agent, Borrower, the Collections, the Collateral, or
otherwise in respect of the Advances or the Letters of Credit. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. The provisions of this SECTION
15.1(e) are solely for the benefit of the Lender Group, and Borrower shall
have no rights as a third party beneficiary of any of such provisions.
(f) In connection with any such assignment or participation
or proposed assignment or participation, a Lender may disclose to a third party
all documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(g) Notwithstanding any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
PROVIDED, HOWEVER, that Borrower may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void. No consent to assignment by the Lenders
shall release Borrower from its Obligations. A Lender may assign this Agreement
and its rights and duties hereunder pursuant to SECTION 15.1 and, except as
expressly required pursuant to SECTION 15.1, no consent or approval by Borrower
is required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by
Administrative Agent at the written request of the Required Lenders) and
Borrower and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Lenders and Borrower and acknowledged by Administrative Agent,
do any of the following:
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(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees, or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on, any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Advances which is required for the
Lenders or any of them to take any action hereunder;
(e) increase the advance rate with respect to Advances
(except for the restoration of an advance rate after the prior reduction
thereof), or change SECTION 2.1(b);
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by
SECTION 17.11 or any other section of this Agreement;
(h) change the definition of "Required Lenders";
(i) release Borrower from any Obligation for the payment of
money; or
(j) amend any of the provisions of ARTICLE 17.
and, PROVIDED FURTHER, that no amendment, waiver or consent shall, unless in
writing and signed by Administrative Agent, affect the rights or duties of
Administrative Agent under this Agreement or any other Loan Document; and,
PROVIDED FURTHER, that the limitation contained in clause (e) above shall not be
deemed to limit the ability of Administrative Agent to make Advances or
Administrative Agent Loans, as applicable, in accordance with the provisions of
SECTIONS 2.1(g), (h), OR (l). The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of or with respect to any
provision of this Agreement or any other Loan Document that relates only to the
relationship of the Lender Group among themselves, and that does not affect the
rights or obligations of Borrower, shall not require consent by or the agreement
of Borrower.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agents or any
Lender to exercise any right, remedy, or option under this Agreement, any other
Loan Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among Borrower and Agents and/or any Lender, or delay
by Agents or any
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Lender in exercising the same, will operate as a waiver thereof. No waiver
by Agents or any Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by Agents or the Lenders
on any occasion shall affect or diminish Agents' and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agents' and each Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right
or remedy which Agents or any Lender may have.
17. ADMINISTRATIVE AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. Each
Lender hereby designates and appoints Wells Fargo as its Agent and Foothill as
its Administrative Agent under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agents to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Agents agree to act as such on the
express conditions contained in this ARTICLE 17. The provisions of this ARTICLE
17 are solely for the benefit of Agents and the Lenders, and Borrower shall not
have any rights as a third party beneficiary of any of the provisions contained
herein nor shall Borrower have any liabilities which differ from other sections
of this Agreement; PROVIDED, HOWEVER, that the provisions of SECTIONS 17.10,
17.11, and 17.16(d) also shall be for the benefit of Borrowers. Any provision
to the contrary contained elsewhere in this Agreement or in any other Loan
Document notwithstanding, Agents shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall Agents have or be deemed to
have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against
Agents. Except as expressly otherwise provided in this Agreement, each Agent
shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions which such Agent is expressly entitled to take or assert
under or pursuant to this Agreement and the other Loan Documents, including
making the determinations contemplated by SECTION 2.1(b). Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agents, Lenders agree that Administrative
Agent shall have the right to exercise the following powers as long as this
Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Advances,
the Collateral, the Collections, and related matters; (b) execute and/or file
any and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim for Lenders, notices and
other written agreements with respect to the Loan Documents; (c) make Advances
for itself or on behalf of Lenders as provided in the Loan Documents;
(d) exclusively receive, apply, and distribute the Collections as provided in
the Loan Documents; (e) open and maintain such bank accounts and lock boxes as
Administrative Agent deems necessary and appropriate in accordance with the Loan
Documents for the foregoing purposes with respect to the Collateral and the
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Collections; (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrower, the Advances, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents; and (g) incur and pay such Lender Group Expenses as
Administrative Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.
17.2 DELEGATION OF DUTIES. Except as otherwise provided in this
Section, each Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees, or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Neither Agent shall be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects as long as such selection was made
in compliance with this Section and without gross negligence or willful
misconduct. The foregoing notwithstanding, neither Agent shall make any
material delegation of duties to subagents or non-employee delegees without the
prior written consent of Required Lenders (it being understood that routine
delegation of such administrative matters as filing financing statements, or
conducting appraisals or audits, is not viewed as a material delegation that
requires prior Required Lender approval).
17.3 LIABILITY OF ADMINISTRATIVE AGENT-RELATED PERSONS. None of
the Agent-Related Persons shall (i) be liable for any action taken or omitted to
be taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or, (ii) be responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
Borrower, or any Subsidiary or Affiliate of Borrower, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement, or other document referred to or provided for
in, or received by Administrative Agent or Agent under or in connection with,
this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrower or any other party to any Loan Document
to perform its obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books, or records of Borrower, or any of Borrower's Subsidiaries or Affiliates.
17.4 RELIANCE BY ADMINISTRATIVE AGENT. Each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex, or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent, or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to Borrower or counsel to any Lender),
independent accountants, and other experts selected by such Agent. Each Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document
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unless it shall first receive such advice or concurrence of the Required
Lenders or all Lenders, as applicable, and until such instructions are
received, each Agent shall act, or refrain from acting, as it deems advisable
so long as it is not grossly negligent or guilty of wilful misconduct. If
either Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Agents shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders or all Lenders, as applicable, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default, except with respect to defaults in the payment of
principal, interest, fees, and expenses required to be paid to Administrative
Agent for the account of Administrative Agent or the Lenders, except with
respect to actual knowledge of the existence of an Overadvance, and except with
respect to Defaults and Events of Default of which Administrative Agent has
actual knowledge, unless Administrative Agent shall have received written notice
from a Lender or Borrower referring to this Agreement, describing such Default
or Event of Default, and stating that such notice is a "notice of default."
Administrative Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Administrative Agent has, or is
deemed to have, actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and
Administrative Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
SECTION 17.4, Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders;
PROVIDED, HOWEVER, that:
(a) At all times, Administrative Agent may propose and, with
the consent of Required Lenders (which shall not be unreasonably withheld and
which shall be deemed to have been given by a Lender unless such Lender has
notified Administrative Agent to the contrary in writing within three days of
notification of such proposed actions by Administrative Agent) exercise, any
remedies on behalf of the Lender Group; and
(b) At all times, once Required Lenders or all Lenders, as
the case may be, have approved the exercise of a particular remedy or pursuit of
a course of action, Administrative Agent may, but shall not be obligated to,
make all administrative decisions in connection therewith or take all other
actions reasonably incidental thereto (for example, if the Required Lenders
approve the foreclosure of certain Collateral, Administrative Agent shall not be
required to seek consent for the administrative aspects of conducting such sale
or handling of such Collateral).
17.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by either Agent hereinafter taken, including any review of the affairs of
Borrower and its
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Subsidiaries or Affiliates, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender
represents to Agents that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrower and any other Person (other than the Lender
Group) party to a Loan Document, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to Borrower. Each Lender
also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals, and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations,
property, financial and other condition, and creditworthiness of Borrower,
and any other Person (other than the Lender Group) party to a Loan Document.
Except for notices, reports, and other documents expressly herein required to
be furnished to the Lenders by Administrative Agent, Administrative Agent
shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition, or creditworthiness of Borrower, and
any other Person party to a Loan Document that may come into the possession
of any of the Agent-Related Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Administrative Agent
may incur and pay Lender Group Expenses to the extent Administrative Agent
deems reasonably necessary or appropriate for the performance and fulfillment
of its functions, powers, and obligations pursuant to the Loan Documents,
including without limiting the generality of the foregoing, but subject to
any requirements of the Loan Documents that it obtain any applicable consents
or engage in any required consultation, court costs, reasonable attorneys
fees and expenses, costs of collection by outside collection agencies and
auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower are obligated to reimburse
Administrative Agent or Lenders for such expenses pursuant to the Loan
Agreement or otherwise. Administrative Agent is authorized and directed to
deduct and retain sufficient amounts from Collections to reimburse
Administrative Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Administrative Agent is
not reimbursed for such costs and expenses from Collections, each Lender
hereby agrees that it is and shall be obligated to pay to or reimburse
Administrative Agent for the amount of such Lender's Pro Rata Share thereof.
Whether or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrower and without limiting the
obligation of Borrower to do so), according to their Pro Rata Shares, from
and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no
Lender shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence, bad faith, or willful misconduct. Without limitation of
the foregoing, each Lender shall reimburse Administrative Agent upon demand
for its ratable share of any costs or
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out-of-pocket expenses (including attorney fees and expenses) incurred by
Administrative Agent 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, any other Loan Document,
or any document contemplated by or referred to herein, to the extent that
Administrative Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this SECTION 17.7 shall survive the payment of
all Obligations hereunder and the resignation or replacement of Agent.
17.8 AGENTS IN INDIVIDUAL CAPACITY. Each of Wells Fargo and
Foothill and their Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests, in and generally
engage in any kind of banking, trust, financial advisory, underwriting, or other
business with Borrower and its Subsidiaries and Affiliates and any other Person
party to any Loan Documents as though Wells Fargo and Foothill were not Agents
hereunder without notice to or consent of the Lenders. The Lenders acknowledge
that, pursuant to such activities, Wells Fargo and Foothill and their Affiliates
may receive information regarding Borrower or their Affiliates and any other
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agents will use their reasonable best efforts to
obtain), Agents shall be under no obligation to provide such information to
them. With respect to the Administrative Agent Loans and Administrative Agent
Advances, Foothill shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though it were not Administrative
Agent, and the terms "Lender" and "Lenders" include Foothill in its individual
capacity.
17.9 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may
resign as Administrative Agent following notice of such resignation ("Notice")
to the Lenders and Borrower, and effective upon the appointment of and
acceptance of such appointment by, a successor Administrative Agent. If
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint any Lender or Eligible Transferee as successor Administrative Agent for
the Lenders. If no successor Administrative Agent is appointed within 30 days
of such retiring Administrative Agent's Notice, Administrative Agent may appoint
a successor Administrative Agent, after consulting with the Lenders and
Borrower. In any such event, upon the acceptance of its appointment as
successor Administrative Agent hereunder, such successor Administrative Agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor Administrative Agent and the retiring Administrative Agent's
appointment, powers, and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this SECTION 17 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
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17.10 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Administrative Agent and Borrower, to deliver
to Administrative Agent and Borrower:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment of
any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the IRC or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify Administrative Agent and Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of Borrower, such Lender agrees to notify
Administrative Agent and Borrower of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrower to such Lender. To the
extent of such percentage amount, Administrative Agent and Borrower will treat
such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Administrative Agent may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding tax
after taking into account such
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reduction. If the forms or other documentation required by subsection (a) of
this Section are not delivered to Administrative Agent, then Administrative
Agent may withhold from any interest payment to such Lender not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Administrative Agent or
Borrower did not properly withhold tax from amounts paid to or for the account
of any Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Administrative Agent and
Borrower of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify Administrative Agent and Borrower fully for all amounts paid,
directly or indirectly, by Administrative Agent or Borrower as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to Administrative Agent or Borrower under
this Section, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders under this subsection shall survive
the payment of all Obligations and the resignation of Administrative Agent.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Administrative
Agent, to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrower of all Obligations;
and upon such termination and payment Administrative Agent shall deliver to
Borrower, at Borrower's sole cost and expense, all UCC termination statements
and any other documents necessary to terminate the Loan Documents and release
the Liens with respect to the Collateral; (ii) constituting property being sold
or disposed of if a release is required or desirable in connection therewith and
if Borrower certifies to Administrative Agent that the sale or disposition is
permitted under SECTION 7.4 of this Agreement or the other Loan Documents (and
Administrative Agent may rely conclusively on any such certificate, without
further inquiry); (iii) constituting property in which Borrower owned no
interest at the time the Lien was granted or at any time thereafter; or (iv)
constituting property leased to Borrower under a lease that has expired or been
terminated in a transaction permitted under this Agreement. Except as provided
above, Administrative Agent will not release any Lien on any Collateral without
the prior written authorization of the Lenders. Upon request by Administrative
Agent or Borrower at any time, the Lenders will confirm in writing
Administrative Agent's authority to release any such Liens on particular types
or items of Collateral pursuant to this SECTION 17.11; PROVIDED, HOWEVER, that
(i) Administrative Agent shall not be required to execute any document necessary
to evidence such release on terms that, in Administrative Agent's opinion, would
expose Administrative Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released), upon (or obligations of Borrower in respect of)
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all interests retained by Borrower, including, the proceeds of any sale, all
of which shall continue to constitute part of the Collateral.
(b) Administrative Agent shall have no obligation whatsoever
to any of the Lenders to assure that the Collateral exists or is owned by
Borrower, is cared for, protected, or insured or has been encumbered, or that
the Liens of the Administrative Agent (for the benefit of the Lender Group) have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure, or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Administrative Agent pursuant to any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, subject to the terms and conditions contained
herein, Administrative Agent may act in any manner it may deem appropriate, in
its sole discretion given Administrative Agent's own interest in the Collateral
in its capacity as one of the Lenders and that Administrative Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing,
except as otherwise provided herein.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without
the express consent of Administrative Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Administrative Agent, set off
against the Obligations any amounts owing by such Lender to Borrower or any
accounts of Borrower now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
by Administrative Agent, take or cause to be taken any action, including the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral the purpose of
which is, or could be, to give such Lender any preference or priority against
the other Lenders with respect to the Collateral.
(b) Subject to SECTION 17.8, if, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from Administrative Agent pursuant to the terms of this Agreement, or
(ii) payments from Administrative Agent in excess of such Lender's Pro Rata
Share of all such distributions by Administrative Agent, such Lender shall
promptly (1) turn the same over to Administrative Agent, in kind, and with such
endorsements as may be required to negotiate the same to Administrative Agent,
or in same day funds, as applicable, for the account of all of the Lenders and
for application to the Obligations in accordance with the applicable provisions
of this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if all or part of
such excess payment
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received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to
the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
17.13 AGENCY FOR PERFECTION. Administrative Agent and each Lender
hereby appoints each other Lender as Administrative Agent for the purpose of
perfecting the Liens of the Lender Group in assets which, in accordance with
Division 9 of the UCC can be perfected only by possession. Should any Lender
obtain possession of any such Collateral, such Lender shall notify
Administrative Agent thereof, and, promptly upon Administrative Agent's request
therefor shall deliver such Collateral to Administrative Agent or in accordance
with Administrative Agent's instructions.
17.14 PAYMENTS BY ADMINISTRATIVE AGENT TO THE LENDERS. All payments
to be made by Administrative Agent to the Lenders shall be made by bank wire
transfer or internal transfer of immediately available funds pursuant to the
instructions set forth on SCHEDULE C-1, or pursuant to such other wire transfer
instructions as each party may designate for itself by written notice to
Administrative Agent. Concurrently with each such payment, Administrative Agent
shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Administrative Agent to enter
into this Agreement and the other Loan Documents relating to the Collateral, for
the ratable benefit (subject to SECTIONS 2.3(b) AND 4.1) of the Lender Group.
Each member of the Lender Group agrees that any action taken by Administrative
Agent, Required Lenders, or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by Administrative Agent, Required Lenders, or all Lenders, as
applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this
Agreement, each Lender;
(a) is deemed to have requested that Administrative Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report (each a "Report" and collectively, "Reports")
prepared by Administrative Agent, and Administrative Agent shall so furnish each
Lender with such Reports;
(b) expressly agrees and acknowledges that Administrative
Agent (i) does not make any representation or warranty as to the accuracy of any
Report, and (ii) shall not be liable for any information contained in any
Report;
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(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Administrative Agent or other
party performing any audit or examination will inspect only specific information
regarding Borrower and will rely significantly upon Borrower's books and
records, as well as on representations of Borrower's personnel;
(d) agrees to keep all Reports and other material
information obtained by it pursuant to the requirements of this Agreement in
accordance with its reasonable customary procedures for handling confidential
information; it being understood and agreed by Borrower that in any event
such Lender may make disclosures (i) reasonably required by any BONA FIDE
potential or actual Assignee, transferee, or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an
interest herein or any participation interest in such Lender's rights
hereunder, (ii) of information that has become public by disclosures made by
Persons other than such Lender, its Affiliates, assignees, transferees, or
participants, or (iii) as required or requested by any court, governmental or
administrative agency, pursuant to any subpoena or other legal process, or by
any law, statute, regulation, or court order; PROVIDED, HOWEVER, that, unless
prohibited by applicable law, statute, regulation, or court order, such
Lender shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or
where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold
Administrative Agent and any such other Lender preparing a Report harmless from
any action the indemnifying Lender may take or conclusion the indemnifying
Lender may reach or draw from any Report in connection with any loans or other
credit accommodations that the indemnifying Lender has made or may make to
Borrower, or the indemnifying Lender's participation in, or the indemnifying
Lender's purchase of, a loan or loans of Borrower; and (ii) to pay and protect,
and indemnify, defend, and hold Administrative Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including, attorney costs) incurred
by Administrative Agent and any such other Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or part of
any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Administrative Agent in writing that Administrative Agent provide to such Lender
a copy of any report or document provided by Borrower to Administrative Agent,
and, upon receipt of such request, Administrative Agent shall provide a copy of
same to such Lender promptly upon receipt thereof; (y) to the extent that
Administrative Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrower, any Lender may, from
time to time, reasonably request Administrative Agent to exercise such right as
specified in such Lender's notice to Administrative Agent, whereupon
Administrative Agent promptly shall request of Borrower the additional reports
or information specified by such Lender, and, upon receipt thereof,
Administrative Agent promptly shall provide a copy of
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same to such Lender; and (z) any time that Administrative Agent renders to
Borrower a statement regarding the Loan Account, Administrative Agent shall
send a copy of such statement to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Administrative Agent in its capacity as such, and not by
or in favor of the Lenders, any and all obligations on the part of
Administrative Agent (if any) to make any Advances shall constitute the several
(and not joint) obligations of the respective Lenders on a ratable basis,
according to their respective Commitments, to make an amount of such Advances
not to exceed, in principal amount, at any one time outstanding, the amount of
their respective Commitments. Nothing contained herein shall confer upon any
Lender any interest in, or subject any Lender to any liability for, or in
respect of, the business, assets, profits, losses, or liabilities of any other
Lender. Each Lender shall be solely responsible for notifying its Participants
of any matters relating to the Loan Documents to the extent any such notice may
be required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender. Except as provided in SECTION 17.7, no member
of the Lender Group shall have any liability for the acts of any other member of
the Lender Group. No Lender shall be responsible to Borrower or any other
Person for any failure by any other Lender to fulfill its obligations to make
Advances, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and the Lender Group.
18.2 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
18.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
18.5 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which,
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when taken together, shall constitute but one and the same Agreement.
Delivery of an executed counterpart of this Agreement by telefacsimile shall
be equally as effective as delivery of an original executed counterpart of
this Agreement. Any party delivering an executed counterpart of this
Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.
18.6 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by any or all of such parties to the Lender Group of any property
of either or both of such parties should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
18.7 AMENDMENT AND REPLACEMENT. This Agreement amends, supersedes
and replaces in its entirety the Existing Loan Agreement.
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18.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Los Angeles, California.
Dated: June 15, 1999
NATURAL WONDERS, INC.,
a Delaware corporation
/s/ Pete Hanelt
-------------------------------------
Title: Chief Executive Officer
President
Chief Financial Officer
---------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent
and as a Lender
/s/ Karen Barone
-------------------------------------
Title: Vice President
---------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Administrative
Agent and as a Lender
/s/ Brian Duffy
-------------------------------------
Title: Vice President
---------------------------------
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COMMITMENTS ON CLOSING DATE
<TABLE>
<S> <C>
Wells Fargo $ 1,500,000
Foothill $28,500,000
-----------
Total $30,000,000
</TABLE>
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